The Gender Wage Gap Explained

Many famous individuals have used the quote “Women earn 79 cents for every dollar a man makes”, and although this fact is statistically true, there is a lot that is unexplained in it. The above fact only compares the two median wages of men and women and does not factor into account how the wage gap plays out in individuals with different education levels, different occupations or different ages. These factors are very important to take into account if we want to ever close the gender wage gap.

To explain much of the argument on the gender wage gap, I must first state that economists have modeled wages through the Mincer Wage Equation, which can be stated as:

The equation above can be interpreted as log wages is a function of the years of schooling, plus the amount of career experience, and career experience squared, and an error term and a constant term for other unaccounted for factors. In simpler words, employers reward employees for the amount of schooling and experience they hold.

Child-bearing responsibilities

June O’Neill wrote a paper in 2003 studying the gender wage gap in the US economy by looking at two population surveys. In his conclusion, he writes, “As I have shown in this paper, the unadjusted gender gap can be explained to a large extent by nondiscriminatory factors. Those factors are unlikely to change radically in the near future unless the roles of women and men in the home become more nearly identical.”

What June O’Neill meant to convey in her conclusive remarks is that much of the gender wage gap can be attributed to the fact that females are the only sex that is biologically able to produce offspring. It is not a discriminatory attribute that women have the ability to give birth, and this ability has continuously led to the difference in the amount men and women earn.

What usually tends to happen after college graduation in today’s labour market is after holding a stable job for a few years, when women are in their mid-twenties and thirties, they usually take some time off to give birth and nurture the child after birth. In a study conducted by Bertrand, Goldin and Katz to examine the gender wage gap in MBA graduates, they state that one of the principal reasons why there exists a big gender wage gap between men and women is that in the first fifteen years post-graduation, women take on more career interruptions and work shorter weeks because of household responsibilities. The study also finds that even though some women took modest breaks from work for parental leave, the labour market penalized these breaks greatly. The discontinuity in a professional career during this age is also the prime time to build one’s career.

Such discontinuity is penalized by a lower wage, and this is quite fair because the said individual took time off during a time where they could be obtaining prime experience in their careers. June O’Neill finds that 34% of women with children under the age of six were out of the work force between the ages of 25-44 compared to only 16% of women who were out of the workforce who did not have children. Making the choice to have a child is a quite strong indication of work discontinuity which will directly lead to a loss in experience gain and a lower wage.

Career choice

The science behind the labour market is centralized around human capital theory, where employees are rewarded with wages for their ability to demonstrate their knowledge and do so efficiently.

Again, it is no secret that some careers are better paid in today’s world than others. This is a harsh reality in some underpaid occupations, but in other cases, it is quite justifiable. Rewarding an occupation like a surgeon to perform life-saving operations is very fair in my opinion.

“The expectation of withdrawals from the labour force and the need to work fewer hours during the week are likely to influence the type of occupations that women train for and ultimately pursue” – O’Neill, 2003. This statement in his paper is given by examining the career choices that women have chosen and how they came to the decisions that they did through population surveys. Women tend to lean towards occupations where there is more leniency towards career discontinuity and careers where part-time worked is more readily available. A direct example of this is the nursing versus doctor industry, where most nurses are women. Nurses hold set shifts and know exact times when they will be working and so is more favourable to a mother who has to care for a child. As an emergency doctor that can be called in at any time during the day, your shifts can vary a lot and it would make life difficult to care for a child and be on-call at a hospital.

Conclusion

Much of the gender wage gap can be explained by the two factors that are outlined above. The fact that women take breaks during their working life to nurture children and build their households, and that women choose careers that are more flexible in the hours that employees are required to work, which is a result of the time off women need to take to have children.

Although this explains a lot of the gender wage gap, there is evidence to support that some of the wage gap is purely discriminatory. But there is some good news to accompany this, Pew Research Centre conducted a study that found that “The gender gap in pay has narrowed since 1980, particularly among younger workers…” and so there is some hope that someday we will be able to eliminate the gender wage gap completely.

References

Brown, A., & Patten, E. (2017, April 03). The narrowing, but persistent, gender gap in pay. Retrieved August 11, 2017, from http://www.pewresearch.org/fact-tank/2017/04/03/gender-pay-gap-facts/

O’Neill, J. (2003). The Gender Gap in Wages. The American Economic Review, 93(2), 309-314. Retrieved August 7, 2017, from http://www.jstor.org/stable/3132245

Bertand, M., Goldin, C., & Katz, L. F. (2010). Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors. American Economic Journal: Applied Economics, 2, 228-255. Retrieved August 04, 2017, from http://www.aeaweb.org/articles.php?doi=10.1257/app.2.3.228

This article was written by volunteer Mohammadali Saleh.

Opinions expressed are not necessarily those of Journey to Diversity Workplaces.