Gender pay gap – real but not all discrimination

A sensible and balanced view on the gender pay gap and the reaction to a report on it last week from Dr Rachel Hodder : THE GENDER PAY GAP IS NO MYTH, BUT NOR IS IT ALL DISCRIMINATION

Whenever controversial issues are debated, the loudest voices are often the least informed.

The quickest and loudest are often poorly informed.

Nowhere is this more evident than in the gender pay gap debate.

Last week, the Ministry of Women released an excellent report examining gender pay differences in New Zealand. The reception of the report was disappointing, but not surprising. It would seem that many of those arguing about the report had either not read it or not understood it.

The proponents lauded the report as undeniable evidence that women are paid 10% less than men purely because of discrimination. On the other side, critics rushed to rubbish the paper claiming the pay gap is a myth and only exists when researchers fail to account for obvious differences.

Both sides are wrong, but both also contain a nugget of truth. This report does provide strong evidence that the gender pay gap is indeed real. However, the report does shed light on factors beyond discrimination that may explain the gap.

With pay discrepancies there are always going to be multiple factors.

The critics pointed out that there are important factors that can account for wage differences. Personal characteristics, household characteristics, age, education, occupation, and industry will all matter in how much someone gets paid regardless of gender. Without accounting for any choice or circumstance factors, the average woman gets paid 12% less than the average man.

The authors know this too and so they controlled for these factors. The pay gap persisted. They showed that a woman will get paid 10% less than a man with the same age, ethnicity, education, occupation, industry, marital status, number of kids, full time status, etc.

That 10% is called the ‘unexplained’ component of the wage gap. This is not a failure of the model, as some critics claimed. Nor is it necessarily all caused by workplace biases, as some proponents claimed.

Women are also more likely than men to choose child care over advancing their careers (and earnings), at least temporarily.

What that 10% represents is the difference in pay that men receive when they have the same identifiable characteristics as women. The 10% can then be broken down into the different factors that affect men and women’s pay differently.

The pay gap is not caused by women choosing lower paying careers. The authors controlled for that. There is still a gap.

There may still be important differences within occupations and industries that the study cannot observe. Surgeons are paid more than paediatricians but in the data they will both be counted as professionals in the health care sector.

However, the study showed that women actually receive slightly higher returns to industry and occupation choice than men. In other words, the wage gap looks bigger, not smaller, once you control for these factors.

And:

The report proponents did miss some of the important details too.

First, the paper clearly demonstrates that there is no pay gap at the bottom end of the income distribution. If anything there appears to be a slight bias in the opposite direction, particularly for younger women.

So females start at least as well off.

Moving up the distribution, the gap increases and less can be explained by observable factors. Which would seem to point towards a glass ceiling effect. Women have roughly equal opportunities at the early stages of their careers but face a tougher climb up to the top of the ladder. However, the glass ceiling is not entirely imposed by sexism.

A separate report released by Statistics New Zealand showed that the gender pay gap is much larger for parents compared to non-parents. This report confirms that differing pay effects from household characteristics explains about half the pay gap. For better or worse, mothers are much more likely to spend time out of the workforce for child-rearing than fathers. This can have a dramatic effect on career advancement.

Women are more likely than men to choose to take time out from their careers.

The biggest factor that affected the pay gap was the difference in pay as it relates to age. Older men get paid much more than older women. This could partly be explained by the same motherhood penalty that may have enduring effects throughout a woman’s career.

It may also be picking up cohort effects. Sexist attitudes from decades ago will have enduring effects on the income distribution.

As more women get into management and salary and promotion deciding positions sexist bias should diminish – unless women tend to be biased too.

As society gets more progressive these effects should diminish.

The critics claiming the pay gap is a myth should pay more attention to quality research in the area. There is a wealth of research demonstrating unconscious bias against women. It would be absurd to suggest that discrimination does not cause some of the pay gap.

However, accepting that such discrimination exists does not mean accepting all the proposed policy solutions. Both sides seem to miss this crucial point. There is nothing inconsistent with acknowledging a pay gap but disagreeing that Government must fix it. Some policy cures can be worse than the disease.

The best way to address the gender pay gap will be determined by informed, rational analysis. Something not offered by those who don’t bother to read the research before commenting.

It takes time to get informed comment from people who take the time to read reports properly rather than react to headlines. By the time that happens most vocal critics are likely to have moved on to other issues.