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Diversity and inclusion September 27, 2021

Minding the gender wage gap

Hand reaching from left corner giving male a dollar note and hand reaching from right corner giving female less money in coins
The gender wage gap is a well-documented phenomenon. Many are familiar with the claim that women earn 80 cents on the dollar.

A more precise statement would be something like, “In the US, according to 2019 CPS data, the ratio of women’s to men’s median earnings for full-time, year-round workers, aged 15 years and older, was 82 cents.” Of course, the precise number of cents to the dollar will vary depending on the year of observation; whether you’re looking at median or mean earnings; what your age cut-offs are; and whether you’re including full- and part-time workers. But 80 cents to the dollar is memorable, and it’s not dramatically the mark for many wealthy countries in the Global North. According to Eurostat, the average gender earnings ratio across EU-27 countries is 86 cents; in Canada it is 87 cents. And it’s been stuck somewhere in the eighties for two decades now.

All of this has led to a demand for “equal pay for equal work,” which is something all reasonable people can rally behind. Governments have thrown considerable policy weight behind this idea for some time now. Equal pay for equal work is a founding principle of the EU. In the US, the Equal Pay Act prohibiting gender-based pay discrimination was introduced in 1963. Such legislation has been complemented by laws mandating pay transparency by requiring companies to publish data on their gender pay gap—the idea being that that pay secrecy perpetuates gender-based pay discrimination (for example, here and here, with some evidence that such legislation may have narrowed the gap a bit.)

As a woman in economics, I am painfully aware that there exists gender-based discrimination at work (feel my pain here and here). There is even evidence that the same person tends to get lower pay for the same job if he is a she. That’s unacceptable. Equal pay for equal work! The trouble is that most work is not equal. Work is deeply segregated along gender lines. The problem starts early on.

As I discuss in an earlier essay, girls tend not to do a lot of math in school. This means that, although—at least in wealthy countries—they graduate with university degrees at higher rates than men, their degrees tend to be in areas like education and psychology rather than computer science and engineering. Consequently, they wind up working as teachers in schools and social workers in government departments rather than as programmers at Google or engineers at BMW. In the US, these gender differences in human capital, industry of employment, and occupation, are thought to account for more than half of the gender pay gap.

To round things off, women do the heavy lifting in terms of unpaid care. On average, across 75 countries for which time use survey data are available, women do over three-quarters of the unpaid care work—things like cleaning, cooking, childcare, and eldercare. These responsibilities make it challenging, to put it mildly, to balance work and home life, even in countries which are thought to have relatively progressive gender-related policies. Case in point, Denmark. Danish men and women kick off their careers at parity when it comes to pay. But then, some women bear children. This kicks off the great divergence, in which women who were earning on par with men wind up with roughly 80 cents on the dollar after they have kids. This gender pay gap shows no sign of ever letting up. In fact, almost all the gender pay gap in Denmark has been attributed to the so-called “child penalty”. (Danish men also have kids, but they don’t suffer it; and neither do Danish women who don’t have children.)

The child penalty comes from three margins. The first is the “extensive margin”: many women drop out of the labour force after they have kids. The second is the “intensive margin”: they tend to work fewer hours, often by switching from full-time to part-time work. Finally, when they work, they tend to have lower wages than men. Some of this may be because they don’t get equal pay for equal work. But a substantial portion comes from the fact that they switch to different industries and occupations that often allow for more flexibility and more job security at the price of lower pay.

The size of the child penalty varies from country to country, but it’s hard to see how public policies can fully neutralize changes in mothers’ employment. Denmark, for example, has generous paid maternity, paternity, and parental leave; some of the earliest anti-gender-based discrimination and pay transparency laws; and universal publicly provided childcare. Yet, women seem to be choosing to step back from work. One way to interpret the gender pay gap in a country like Denmark, then, is that it is the outcome of choices that women make. Personal choices made freely deserve respect. But how many of our choices are truly free? How constrained are we by culture? I’m not a philosopher, so I’m not going to venture an answer to these questions. What I can say is that there is a strong correlation between gender norms and the child penalty, which tends to be higher in countries that feel more strongly that mothers should not work outside the home. Are women dropping out of the labor force once they have kids because they have so perfectly internalized these social norms? Again, we can’t know the answer because we are all bound by one set of norms or another. The bad news is that social norms are tough to budge, so if norms governing women’s unpaid work are what is holding women back, equal work is going to be a tough nut to crack.

The pandemic recession, which has hit women harder than men in terms of employment, is only the most recent reminder that work is unequal. In the US, for example, the increase in unemployment at the height of the recession was a full two percentage points (roughly 20 percent) higher for women than it was for men. Hindsight is 20/20, but if we had paid enough attention to decades-old gender differentials in employment and unpaid care work, we could have seen a “shesession” coming from miles away. When businesses like hotels and restaurants are shut down, who is disproportionately going to lose their jobs? Women, who are disproportionately represented in the service industry where jobs often can’t be done remotely. When schools close, which parent is more likely to pick up the slack—the mother or the father—given what we know about the gender distribution of unpaid care work?

All of which is to say, equal pay for equal work is very important, and it’s a battle worth fighting. But it’s not going to win the war because, very often, the premise of that statement is flawed. Work is not equal to begin with. Ironically, making paid work more equal rests in large part on making unpaid work more equal. This involves such things as work flexibility; public provision of child and elder care; and a serious reconfiguration of social expectations placed on women’s responsibilities in the household. This is all easier said than done, but it really boils down to striving for equal freedom to work. That doesn’t have the same ring that the symmetry of “equal pay for equal work” evokes, but the whole point is that it’s all so very asymmetric to begin with.

Originally published by 3 Quarks Daily on September 20, 2021. Reprinted with permission of the author.

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