Money Culture

Women’s Pay Gap Explained

Lower pay for women came up – where else! – in the foreign policy debate between President Obama and Governor Romney.  It affects women’s living standards, single mothers’ ability to care for their children, and everyone’s retirement – husbands and wives.

To understand why women earn 77 cents for every dollar earned by men, Squared Away interviewed Francine Blau of Cornell University, one of the nation’s top authorities on the matter.  A new collection of her academic work, Gender, Inequality, and Wages,” was published in September.

Q:  How has the pay gap changed over the years?

Blau: For a very long time, the gender-pay ratio, which is women’s pay divided by men’s pay, was around 60 percent – in the 1950s, 1960s and 1970s.  Around the 1980s, female wages started to rise relative to male wages.  In 1990, the ratio was 72 percent – that was quite a change, from 60 to 72 in 10 years.  We continued to progress but it is less dramatic.  In 2000, it was 73 percent. Now it’s 77 percent – that’s the figure that came up in the debate.

Q:  Why do women earn less?

Blau: There are two broad sets of factors: the first is human capital and the factors that contribute to productivity and the second is discrimination in the labor market.  Women have traditionally been less well qualified than men.  The biggest reason here is the experience gap between men and women.  Traditionally, women moved in and out of the labor force, and that lowered their wages relative to men.

But when we do elaborate studies – my recent study with Lawrence Kahn in 2006, for example – we find that when we take all those productivity factors into account we can’t fully explain the pay gap.  The unexplained portion is fairly substantial and is possibly due to discrimination, though it could be various types of unmeasured factors.  So in the 1998 data used in our 2006 article, women were making 20 percent less than men per hour.  When we take human capital into account, that figure falls to 19 percent.  When we add controls for occupation and industry – men and women tend to be in different occupations and industries – we can get a pay gap of 9 percent.  This unexplained gap of 9 percent is potentially due to discrimination in the workplace.

Q:  Does race matter?

Blau: Yes it does.  The general pattern among minorities like blacks and Latinos is that the wage gap is smaller.  What I would speculate is that if you look at the labor market as a whole, the top high-earning positions are held by white men.  Among blacks and Latinos, the fact that the male-female pay gap is smaller is partly because the males are not doing as well as white men.  Also, overall, college education is higher for women but this is more sharply true among blacks and Latinos.  Among Asians who have high earnings compared to whites, the gap is very similar to what it is among whites.

Q:  Why has the overall pay gap declined?

Blau: A factor that’s interesting and still works in women’s direction is education.  Traditionally, men were more likely to go to college than women but that’s actually reversed.  Women have also narrowed the experience gap, because they are more firmly attached to the labor force.  They still have less experience than men but the gap is much reduced.  And women have moved out of lower-paying clerical and service jobs and into management and formerly male professions like law and medicine. Interestingly, we also found that the unexplained gap – what might be discrimination – fell quite a bit, particularly over the 1980s.

Q:  This has always confused me: do women migrate to low-paying jobs, or are some professions low-paying because they are dominated by women?

Blau: It’s understandable you might be confused, because there are two schools of thought on this.  On the one hand, it could be that women, even though the qualifications are the same, are in jobs that are less productive or perhaps emphasize less on-the-job training.  It can also be true that they do pay less, because they are women’s jobs.

One factor that’s fascinating to think about is something Barbara Bergmann at American University calls the over-crowding model.  Women tend to be excluded from, or feel less comfortable in, male jobs so they crowd into the female jobs.  And that lowers the pay in these jobs.  Among sociologists there’s a view that employers devalue women’s work.  Among economists, it’s mentioned that non-wage aspects of the job may lower pay.  It might be that women gravitate to jobs where they can be at home to take care of the kids after school, or they don’t have to travel as much.

Q:  What impact, if any, did the Great Recession have on the pay gap?

Blau: Looking at the government statistics on pay, from what I can tell at this point, I don’t think it’s had a major impact.

Q:  Does the pay gap vary depending on how old the woman is?

Blau: Most people believe that there is a tendency for the pay gap to widen with age.  One reason is that when new people come into the labor market, they’re mostly in entry-level positions.  So as the men move up the hierarchy at a faster pace than women, the pay gap tends to widen.  Another reason we see a widening gap with age is because some women are moving in and out of the labor force – although this is less true than it was in the past.  As I mentioned before, women’s lower experience levels can contribute to the pay gap too.  In general, we find a very strong positive relationship between a person’s labor-force experience and their wages.  The way economists interpret that is that people tend to learn important things on the job.  But if you’re out of the labor force, you’re not getting that important training.  The other thing people may’ve noticed is there are certain rules in the workforce: often senior workers get more pay, and it goes up more each year.  But if you’re out, you’re not getting that either.

Q:  One study found that women do not earn as much as men, because they do not ask for raises.   Is this cultural aspect valid?

Blau: Yes.  This could be an important phenomenon.  A variety of factors could contribute to the unexplained gap, including negotiating skill or the willingness to negotiate.  However, other researchers have pointed out that women’s reluctance to negotiate could be influenced by social factors.  Women may learn that employers don’t respond as well to a woman’s request as to a man’s.  It doesn’t explain everything, but the reasons could be interrelated.

Q:  Will women ever achieve wage parity?

Blau: That is a very hard question.  I am certainly optimistic in terms of the progress we have made, and I think a long-term perspective does help.  Someone says on average women only make 77 cents compared with a man.  Yes, but it used to be 60 cents. Is it okay?  No, but it is an improvement.

There are some disquieting trends, however.  The pay gap is continuing to close but not at the pace that it did.  As for gender differences in occupations, we made a lot of progress in reducing the differences since 1970, but we haven’t been making as much progress recently.  A number of aspects of the gender revolution seem to be slowing.  I don’t know the long-run significance: is it going to pick up again?  I think unquestionably there’s much more opportunity for women today than there was in earlier years.  But for further really large improvements in the future, we may have to figure out more about work-family issues, specifically how individuals – women and increasingly men – can combine work with family.

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