Equal Pay Day: What Does the Gender Pay Gap Actually Tell Us?

business_ethics_highlights_2Although polemical, this piece by American Enterprise Institute economist Mark J. Perry invites its reader to engage in critical thinking about what the gender pay gap – the percentage difference in median earnings between men and women – does and doesn’t show. Those who most emphatically invoke the gender pay gap at least imply (and sometimes state) that it means women work the same jobs as men for a wage that is on average 23% lower and that this difference is due to unjust discrimination on the part of employers. Perry offers a number of considerations (and links to relevant data) that cast doubt on the idea that women’s labor is purchased by employers at a 23% discount and that pay differences are easily attributable to unjust discrimination. Consequently, we are left with the question of what proportion of that 23% difference is due to unjust discrimination, to women’s propensity to seek safer and lower-paying (or men’s propensity to seek riskier and higher-paying) work, to differentials in hours worked (statistically, men tend to work longer hours than do women), or to differentials in propensity to leave the labor force (statistically, women tend to do it more frequently than do men).

With respect to business ethics, the upshot of Perry’s analysis isn’t that we should be unconcerned about genuine cases of gender discrimination; it’s that we shouldn’t misidentify as evidence of gender discrimination pay differences that are reasonably attributable to the different employment choices men (on average) and women (on average) make. That’s a point we should all be able to agree on, wherever we stand on the issue. >>>

LINK: Some thoughts on Equal Pay Day and the 23% gender pay gap myth (By Mark J. Perry for American Enterprise Institute)

Last April, AAUW executive director Linda D. Hallman sent a mass email that made this verifiably false statement (emphasis added):

“Think about it: Women have to work almost four months longer than men do to earn the same amount of money for doing the same job. What’s more, we have to set aside a day each year just to call the nation’s attention to it.”

Hallman’s statement is a statistical fairy tale because it’s based on the false assumption that women get paid 23% less than men for doing exactly the same work in the exact same occupations and careers, working side-by-side with men on the same job for the same organization, working the same number of hours per week, traveling the same amount of time for work obligations, with the same exact work experience and education, with exactly the same level of productivity, etc.

The reality is that you can only find a 23% gender pay gap by comparing raw, aggregate, unadjusted full-time median salaries, i.e. when you control for NOTHING that would help explain gender differences in salaries like: …

Most economic studies that control for all of those variables conclude that gender discrimination accounts for only a very small fraction of gender pay differences, and may not even be a statistically significant factor at all.

What do you think?


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