HICKS: Some additional clarity on gender and pay

October 27, 2012

It’s unlikely that anyone who watched the presidential debates found the discussion about pay and gender satisfying. It was stumbling at best, and I thought much of the talk was condescending to women who make difficult career and family choices in full knowledge of the costs and benefits. In short, the matter needs some clarification.

With regard to the data, there’s little debate. The average working woman earned 81 percent as much as the average working man in 2010. That gap is closing, especially for younger women, who see less than a 5-percent difference in pay. The facts by themselves offer no cause or understanding of the issue, much less an explanation of potential policy interventions. For that we need to analyze the data, a step much feared by demagogues.

Studies of the gender gap are typically performed using a statistical model that estimates how various factors—education, occupation, hours worked, age, time on the job and gender, for example—predict wages. It should not be surprising that the majority of wage differences between men and women can be explained by schooling, occupational choice and experience.

Early studies attributed about half of the wage gap to gender and “unexplained” factors. We cannot measure discrimination, but this is a pretty good proxy. However, over time, the best research points to an evaporation of unexplained factors, and a small (perhaps 2 percent to 5 percent, sometimes zero) wage gap attributable to gender. These issues are as well understood as the links between smoking and cancer (with clearer statistical inference), and roughly of the same vintage. So why does the issue still offer such misdiagnosis among political discourse?

Surely election-year politics and a philistine electoral base play some part in this tactic. It is of course banal to note that sexism is unworthy of a great republic, yet it still haunts us, even as the best research points to its shrinking influence. I think that in the flurry to score electoral points, most politicians have missed the bigger point, or at least spelled it out clumsily.

A disproportionate share of college students today are young women. So policies to force equal pay come at a time when markets will have finally adjusted (it only took a lifetime). Moreover, what is creating salary differences isn’t discrimination as much as women choosing occupations that are flexible enough to accommodate having and raising children. These occupations often pay less, which is quite natural given their higher non-wage benefits.

So, big financial gains for women (and their families) would come from introducing them to a wider variety of occupations.

We can urge businesses to be more flexible, but that won’t always be possible.

Of course, there’s no sweeping legislative agenda for a candidate to claim credit. It is a good bit harder than that, resting as it does on how we teach our sons and daughters to prepare for life.•

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Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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