 And here is the next article in my series for SwiftEconomics on "economics lies and statistics," this time on the wildly misinterpreted wage gap between men and women. (I expanded on this topic for The Mises Institute here as well.) Next in Lies, Damned Lies and Statistics Series: Part 7: Roger Maris’ Asterisk Previous in Lies, Damned Lies and Statistics Series: Part 5: Female-Male College Gap ______________________________________________________________________________________________________ Now we turn from the mostly meaningless college gap to the mostly nonexistent wage gap. It is quoted ad-nauseum that women make 75 cents for each dollar a man makes for the exact same work (it used to be 59 cents, now it ranges from 75 to 80). In response to this, Nancy Pelosi helped push through congress the Fair Pay Act. (1) Furthermore, April 20th, 2010 not only represents a day we should all get stoned out of our gourds, it’s “Equal Pay Day.” This holiday (of sorts) symbolizes how far into 2010 a woman would have to work to make what a man makes in 2009 alone. (2) Obviously this is a sign of discrimination; as Jessica Valenti, founder of Feministing.com, states rather bluntly, “the wage gap is like a big f*ck you to women.” (3) Unfortunately (for Jessica, fortunately for every other woman in the country), even a faint knowledge of business or economics should immediately raise a degree of skepticism about this dubious claim. I’ll let John Stossel ask what should be the obvious question: “Suppose you’re an employer doing the hiring. If a woman does equal work for 25 percent less money, businesses would get rich just by hiring women. Why would any employer ever hire a man?” (4)  Many people seem to believe that businessmen, (I mean businesspeople, sorry), care about nothing other than making money. However these same people also seem to believe businesspeople discriminate against everyone but white, Protestant, straight men with no handicap and well parted hair. So apparently, businesspeople do have values other than making money: they are racist, sexist, xenophobic, homophobic, Islamophobic, Christian fundamentalists. Well, at least they have some principles, right? The truth is that businesspeople discriminate in favor of the color green; money. Market economies discriminate mightily against those who discriminate. If it were true that men make approximately 33% more for the same work, companies that predominantly hired women would crush companies that predominantly hired men. Ask any business owner what would happen if he or she could decrease his or her labor expenses 25% and he or she would tell you he or she would soon be hiring his or her competitor’s employees (as his or her competitor’s employees would be unemployed, because his or her competitors got crushed). Discrimination assuredly exists, but for such a large wage gap to be present, there are really only four options for someone to believe: 1) There is an all-encompassing agreement among business owners throughout the entire country, both male and female, to discriminate against women, thereby preventing any one business from undercutting another by hiring only women at 75 cents on the dollar. To believe this puts you in the company of the wildest conspiracy theorists. 2) Profits are not particularly important to a business, so business-humans can hire based on just about anything they want. This would make you one of the dumbest people on the planet. 3) Women aren’t as productive as men and therefore, while doing the same job, women provide less output (approximately 25% less) than men do. This would make you a pretty run-of-the-mill sexist. 4) This statistic is wrong. Before continuing on, I should note that this discussion will not deal with discrimination that may occur with regards to hiring or promoting. Glass ceilings and pink ghettos will not be discussed. The fallacy here is that men and women are paid vastly different amounts for doing the exact same work. As you will soon see, the “same work” has a very flexible definition indeed. What we need to recognize is that having the same job, (or the same type of job, as these statistics are often based on), does not infer that one does the “same work” and should be paid equally. For example, there is a much greater demand for business professors than history professors, so business professors will be paid more. Furthermore, the longer someone’s had a job, the more they will usually get paid. And obviously, the more hours they put in, the more they will get paid. And when the position is paid by commission, any discrimination that occurs would be by the consumer, not the business-homosapiens who employ them. Once we recognize these things, we can start to come to grips with what is actually happening. First, we cannot assume that men and women have the same career aspirations in the aggregate. Second, we have to look at what happens when men and women get married, namely, we must investigate the marital asymmetry hypothesis. Let’s start with the types of jobs men and women seek. As mentioned with regards to the college gap, men and women tend to seek different professional aims and career goals. Men are much more likely to take on dangerous positions, as evidenced by the fact that 93% of workplace fatalities are men. (5) Hazardous conditions usually come with hazard pay. Men are also more likely to take jobs in uncomfortable conditions, which brings a premium as well (if you ever watch an episode of Dirty Jobs, you’ll quickly notice there aren’t a lot of women on the show). Professor James T. Bennett compiled 20 major reasons for the wage gap, which include some of the following:
Furthermore, some of the explanations Professor Bennett discusses represent the single biggest difference between the genders when it comes to wages: marital asymmetry. In other words, marriage tends to increase a man’s earning potential and reduce a woman’s earning potential. Regardless of whether it’s right or wrong, women typically take up more responsibilities at home than men do. Since women usually spend more time at home, they have less time to work, and thereby their earning potential is reduced. Since men have many of their domestic responsibilities taken care of for them, they have more time to work and thereby their earning potential increases. Economist Thomas Sowell elaborates: “Not all domestic responsibilities can be shared equally, such as having babies, which is not an inconsequential thing since the existence of the human race depends on it. What it means is that women make choices that make a lot of sense for them. For example, the choice of occupations… women tend not to go into occupations in which there’s a very high rate of obsolescence. If you’re a computer engineer and you take five years out to have a child and [raise him] until the age you can put him in daycare, well my gosh, the world has changed. You’d have to start way, way back. On the other hand, if you become a librarian, a teacher or other occupations like that, you can take your five years off and then come back pretty much where you left off.” (8)  While more women go to college than men, women typically go into fields that have less earning potential. In 2005, women received more than 60% of the doctorates in education, but less than 20% of the doctorates in engineering (9). Men are over-represented, proportionally, in business, finance, accounting, engineering, computer science and medicine, the fields with the highest earning potential. Denise Venable, of the National Center for Policy Analysis, further proves this point showing that, “in general, married women would prefer part-time work at a rate of 5 to 1 over married men.” (10) Additionally, women over 25 years of age have held their current job for an average of 4.4 years vs. 5 years for men and pay raises come with seniority (11). This makes sense when we look at it in terms of the marital asymmetry hypothesis. And again, a higher earning potential doesn’t mean better, it’s simply means different. A career in education is likely more interesting, fulfilling and flexible than a career in finance, but it comes with less money. It’s all about the trade-offs folks. The marital asymmetry hypothesis and specifically, child rearing, seems to be of huge importance here. And luckily, there is an easy way to test the importance of it; namely compare the wages of never-married women to that of never-married men. In 1982, never-married women earned 91% of what never-married men did. (12) In 1971, never-married-women in their thirties earned slightly more than never-married men (13). Today, among men and women living alone from the age of 21-35, there is no wage gap. (14) Among college-educated men and women between 40 and 64 who have never married, men made an average of $40,000 a year and women made an average of $47,000! (15)  Women who work between 1-34 hours earn more than men This should pretty much end any question about whether or not the wage gap exists. Certainly there is discrimination, but it’s not as simple as comparing gross wages. If we do that, we’d have to come to some very strange conclusions. For example, Asian Americans make more money than white Americans do on average (16); do business-mammals-with-the capacity-for-higher-cognitive-abilities discriminate against white people in favor of Asians? Since 1960, and continuing through today, black women with a college degree earn more than white women with a college degree. In 1970, black women who had graduated college earned 125% of what white women who had graduated college earned. (17) Would anyone like to stand-up and make the argument that employers discriminate against white women in favor of black women? I didn’t think so.
So let’s just go one step further and get all controversial: should men and women be paid equally across the board? The answer is more complex than one would expect. People, in general, should be paid as individuals, so however productive an individual is should determine his or her pay. Therefore, in jobs where men typically have an advantage, say jobs requiring physical strength, odds are the average man will be more productive in that profession than the average women, and therefore should typically get paid more regardless of the other factors mentioned above. In jobs where women have a natural advantage, say jobs requiring an excellent memory (yes, much to the chagrin of every straight man in the history of the world, the ladies typically have a better memory, if this bothers any guys out there, worry not, you’ll probably forget about it fairly soon) (18), women will typically be more productive and should therefore get paid more. However, this only applies when discussing aggregates. The differences within each gender are far greater than the differences between the genders. Everyone should be paid based on their individual productivity. It simply means we have to be very careful when we are interpreting wage data. Finally, let’s get one last thing straight, which should be completely obvious, but apparently isn’t: being a stay-at-home mother, or father for that matter, is morally neutral. It all depends on what the individual wants. If a woman gains fulfillment from raising her kids, taking care of the home and perhaps having a part-time job or being involved in her community in another way, than staying at home is what she should do. If, on the other hand, she would prefer a career, then there is a problem. Same goes for career woman who would prefer to stay at home with the kids. And the same thing applies for men as well. Certainly there are other issues that come into play, mostly financial, and every relationship requires some give and take, but the general principle holds throughout. I find it ironic that liberals, who often decry materialism, tend to judge equality based solely upon materialism (in this case, wages). Take your standard family unit: father, mother and 2.3 kids. There are a host of tasks that need to be completed, some family members bring in an income and others do not. This in no way infers that one type of work is superior to the other, since both types need to be completed. Now, I’m not a big fan of strict gender roles because it’s collectivist thinking; it’s gender socialism. But still, however these tasks are delved up is morally neutral (assuming it’s a similar amount of work), it all depends on the individuals involved. And we shouldn’t be denigrating the work that doesn’t come with a dollar sign attached to it. Unfortunately, that’s what we’re implicitly doing when we see the wage gap for what it is: a comparison of apples and oranges. Certainly discrimination exists, but the market grinds away at it with ruthless tenacity. The concept that women earn 75 cents on the dollar is simply a bogus statistic that simultaneously denigrates work done at home and implies the need for some very nonsensical policies. ______________________________________________________________________________________________________ For more Swift Economics, subscribe now to our RSS Feed Follow Swift Economics on Twitter LIKE Swift Economics on Facebook ______________________________________________________________________________________________________ Lies, Damned Lies and Statistics Series Part 1: A Primer Part 2: Income Stagnation Part 3: All Fiat Currencies Fail Part 4: Iraq War Casualties Part 5: Female-Male College Gap Part 6: Male-Female Wage Gap Part 7: Roger Maris’ Asterisk Part 8: Women Do All the Work but Men Keep All the Money Part 9: The BMI Part 10: A College Degree is Worth One Million Dollars ______________________________________________________________________________________________________ (1) “Lilly Ledbetter Fair Pay Act of 2009,” Wikipedia.org, retrieved September 18, 2009, http://en.wikipedia.org/wiki/Lilly_Ledbetter_Fair_Pay_Act_of_2009 (2) See “Equal Pay Day,” National Committee for Pay Equity, http://www.pay-equity.org/day.html (3) Jessica Valenti, “Equal Pay Commercial,” Feministing.com, December 15, 2008, http://www.feministing.com/archives/012716.html (4) John Stossel, “The wage gap, give me a break,” Townhall.com, June 22, 2005, http://townhall.com/columnists/JohnStossel/2005/06/22/the_wage_gap,_give_me_a_break (5) “Table 4. Fatal occupational injuries by selected worker characteristics and selected event or exposure, 2008,” Bureau of Labor Statistics, Last Modified August 25, 2009, http://www.bls.gov/news.release/cfoi.t04.htm (6) Quoted in Thomas DiLorenzo, “Every Feminist’s Nightmare,” Lewrockwell.com, December 3, 2008, http://www.lewrockwell.com/dilorenzo/dilorenzo160.html (7) Warren Farrell, “Why Men Earn More,” Cato Book Forum, February 1, 2005, http://www.cato.org/event.php?eventid=1834 (8) Thomas Sowell, “Thomas Sowell – Gender Bias and Income Disparity: A Myth?” Uncommon Knowledge with Peter Robinson, retrieved September 18, 2009, http://www.youtube.com/watch?v=8EK6Y1X_xa4 (9) Thomas B. Hoffer, et at., Doctorate Recipients from United States Universities: Summary Report 2005, Chicago: National Opinion Research Center, pg. 16, University of Chicago, Copyright 200 (10) Denise Venable, “The Wage Gap Myth,” National Center for Policy Analysis, April 12, 2002, http://www.ncpa.org/pub/ba392 (11) Ibid (12) “Current Population Reports,” Series P-60, No. 132, Bureau of Labor Statistics, Washington D.C.: U.S. Government Printing Office, 1982, pg. 161 (13) “The Economic Role of Women,” The Economic Report of the President, 1973 Washington D.C.: U.S. Government Printing Office, 1973, pg. 103 (14) Anita U. Hattiangadi and Amy M. Kahn, “Gender Differences in Pay,” Journal of Economic Perspective, pg. 58, Autumn 2000 (15) Warren Farrell, Why Men Earn More, Pg. 16-17, Amacom, Copyright 2005 (16) “Income Stable, Poverty Rate Increases, Percentage of Americans Without Health Insurance Unchanged,” U.S. Census Bureau, August 30, 2005, http://www.census.gov/Press-Release/www/releases/archives/income_wealth/005647.html (17) Richard Freeman, “Decline of Labor Market Discrimination and Economic Analysis,” Table 1, American Economic Review, pg. 281, May 1973 (18) See “Sex Differences in Episodic Memory,” Current Directions in Psychological Science, Volume 17 Issue 1, Pg 52-56, http://www3.interscience.wiley.com/journal/119411612/abstract?CRETRY=1&SRETRY=0
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