Pay gap persists: Women still make less, study says

After I talked about the wage-gap in quite a few posts, I wanted to tackle data that comes from another direction. This gem was something I saw recently pop-up more than once. A study by the "American Association of University Women Educational Foundation". I cite the press article:

Women make only 80% of the salaries their male peers do one year after college; after 10 years in the workforce, the gap between men's and women's pay widens, according to a study released Monday.

The study, by the American Association of University Women Educational Foundation, found that 10 years after college, women earn only 69% of what men earn.

They mention this first because that are the numbers that should stuck. One year after college? 80%? Unbelieveable....

Even after controlling for hours, occupation, parenthood, and other factors known to affect earnings, the study found that one-quarter of the pay gap remains unexplained. The group said part of the gap is "likely due to sex discrimination."

This is mind boggling, information that really is useful is considered afterwards. Of course occupation and hours worked etc. is important. One would hope this was in the first information. What is left? A quarter of the gap or 5% of the differences in wages could not been explained by the AAUW. Of these 5% a part is "likely due to sex discrimination".

"Over time, the unexplained portion of the pay gap grows," the group said in a news release.

I read that study and can say the unexplainable percentage after 10 years is 12 percent. On with the article.

Catherine Hill, the organization's director of research, said: "Part of the wage difference is a result of people's choices, another part is employer's assumptions of what people's choices will be. ... Employers assume that young women are going to leave the workforce when they have children, and, therefore, don't promote them."

Interestingly what Hill is talking about here was not subject of the study. My last post about the glass-ceiling had something to say about women and promotion.

General Electric just completed a study of its 135,000 professional workers and found that women quit at a higher rate: Annual voluntary turnover of the women is 8%, vs. 6.5% for the men. (That may not sound like much, but it adds up to 2,025 more women than men a year.) Research firm Catalyst reports that 26% of professional women who are not yet in the most senior posts say they don't want those jobs. And of the 108 women who have appeared on the FORTUNE 50 over the past five years, at least 20 have left their prestigious positions--most of their own volition

[...]

[O]ur interviews (FORTUNE Magazine) show that lots of women push for promotion less strongly than men not because they're reining in their ambition but because they really don't hang their egos on the next rung of the corporate ladder. Instead, powerful women often dream of moving on to more meaningful things.

[...]

A Carnegie Mellon University study has concluded that women executives out-earn their male counterparts.

The study, which examined 16,000 executives over 14 years, found that women at the top of the business world bring in a bit more than men and are promoted at the same rate, countering the popular notion that women earn less than men for the same work.

Female executives on the whole still earn less than male executives, but that's because more women quit before they reach the top, the study says.


"At any given level of the career hierarchy, women are paid slightly more than men with the same background, have slightly less income uncertainty and are promoted as quickly," it concludes. "We concluded that the gender pay gap and differences in job rank in this most lucrative occupation is explained by females leaving the market at higher rates than males."

Why they quit is harder to explain. Younger women opt out of the work force to have babies, but the average age for executives in the study was 53, beyond the child-bearing years.

Yet female executives still retire earlier than men and are more likely to switch careers. The CMU paper offers some possible reasons, including "more unpleasantries, indignities and tougher, unrewarding assignments" at work. The authors also suggest that women over time acquire "more nonmarket human capital" than men -- meaning connections outside the workplace -- that make retirement more attractive.

[...]

Some studies had indicated female executives were paid the same as men, but those didn't address the rate of promotion as this one does, he said.

More recent studies reached similar conclusions. A report released last month by The Corporate Library, a research firm in Maine, said women corporate directors earn 15 percent more than male counterparts, although they are still outnumbered 8-1 by men on boards.

Now we take a closer look at that study. At first one of course must accept that the "American Association of University Women Educational Foundation" is not an independend institution. This study highlights a problem studies of that kind have, that try to prove that there is wage discrimination against women. They can´t.

Discrimination cannot be measured directly. It is illegal, and for the most part, people do not believe that they discriminate against women or other groups. One way to discover discrimination is to eliminate other explanations for the pay gap. To uncover discrimination, regression analysis was conducted to control for the different choices women and men make.

This study also lists many points why men and women are not equal workers. Of course it is not easy to measure these findings, and my question would also be, how one could measure motivation or the aggressiveness to climb the corporate ladder to the top. This, what we find at the ending, was for example not measured by the study.

Further magnifying these gender differences, women expect less and negotiate less pay for themselves than do men. Researchers have found that women expect less, see the world as having fewer negotiable opportunities, and see themselves as acting for what they care about as opposed to acting for pay. These learned behaviors and expectations (which may be based on experiences) tend to minimize women’s pay (Babcock & Laschever, 2003).

How can one measure such a factoid? I honestly don´t know. Back to our negotiating difference, which seems to have quite an impact.

The current legal standard fails to account for the insidious results of gender differences in salary negotiation. A study of master's-degree candidates at Carnegie Mellon University by economist Linda Babcock found that only 7 percent of first-job-seeking women negotiated their salary, as opposed to 57 percent of men. There was no small consequence to this failure to negotiate. In their book Women Don't Ask: Negotiation and the Gender Divide (Princeton University Press, 2003), Babcock and co-author Sara Laschever found that candidates who negotiated increased their starting salaries by 7.4 percent (about $4,000), and that the starting salaries of males averaged 7.6 percent higher than the females'.

Babcock calculated that failing to negotiate for a first salary can lead to an overall loss of over $560,000 by age 60. That comprises a good chunk of the estimated overall wage gap between men and women

Apart from that CONSAD made a recent analysis (Jannuary 2009) for the U.S. Department of Labour about the gender wage gap.

- In 1970, about 43 percent of women aged 16 and older were in the labor force; by 2007, over 59 percent were in labor force.
- In 1970, only 17.9 percent of women aged 25 and older had gone to college; by 2000, almost half had gone to college; and by 2006 one-third of the women in the labor force held a college degree.
- In 2007, women accounted for 51 percent of all workers in the high-paying management, professional, and related occupations. They outnumbered men in such occupations as financial managers, human resource managers, education administrators, medical and health services managers, and accountants and auditors.
- In 1970, the median usual weekly earnings for women working full-time was only 62.1 percent of those for men; by 2007, the raw wage gap had shrunk from 37.9 percent to just 21.5 percent.

However, despite these gains the raw wage gap continues to be used in misleading ways to advance public policy agendas without fully explaining the reasons behind the gap.

[...]

The major findings are:
There are observable differences in the attributes of men and women that account for most of the wage gap. Statistical analysis that includes those variables has produced results that collectively account for between 65.1 and 76.4 percent of a raw gender wage gap of 20.4 percent, and thereby leave an adjusted gender wage gap that is between 4.8 and 7.1 percent. These variables include:

A greater percentage of women than men tend to work part-time. Part-time work tends to pay less than full-time work.

A greater percentage of women than men tend to leave the labor force for child birth, child care and elder care. Some of the wage gap is explained by the percentage of women who were not in the labor force during previous years, the age of women, and the number of children in the home.

Women, especially working mothers, tend to value “family friendly” workplace policies more than men. Some of the wage gap is explained by industry and occupation, particularly, the percentage of women who work in the industry and occupation.

Research also suggests that differences not incorporated into the model due to data limitations may account for part of the remaining gap. Specifically, CONSAD’s model and much of the literature, including the Bureau of Labor Statistics Highlights of Women’s Earnings, focus on wages rather than total compensation. Research indicates that women may value non-wage benefits more than men do, and as a result prefer to take a greater portion of their compensation in the form of health insurance and other fringe benefits.

In principle, more of the raw wage gap could be explained by including some additional variables within a single comprehensive analysis that considers all of the factors simultaneously; however, such an analysis is not feasible to conduct with available data bases. Factors, such as work experience and job tenure, require data that describe the behavior of individual workers over extended time periods. The longitudinal data bases that contain such information include too few workers, however, to support adequate analysis of factors like occupation and industry. Cross-sectional data bases that include enough workers to enable analysis of factors like occupation and industry do not collect data on individual workers over long enough periods to support adequate analysis of factors like work experience and job tenure.

Although additional research in this area is clearly needed, this study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers

[...]

Extant economic research has identified numerous factors that contribute to the gender wage gap. Many of the factors relate to differences in the choices and behavior of women and men in balancing their work, personal, and family lives. These factors include, most notably, the occupations and industries in which they work, and their human capital development, work experience, career interruptions, and motherhood. Other factors are sources of wage adjustments that compensate specific groups of workers for benefits or duties that disproportionately impact them. Such factors for which empirical evidence has been developed include health insurance, other fringe benefits, and overtime work.

It is not possible to produce a reliable quantitative estimate of the aggregate portion of the raw gender wage gap for which the explanatory factors that have been identified account. Nevertheless, it can confidently be concluded that, collectively, those factors account for a major portion and, possibly, almost all of the raw gender wage gap.

And although it must feel like flogging a dead horse, a fact sheet by the National Center for Policy Analysis

Tuesday, April 16, 2002, is Equal Pay Day - the day on which many organizations protest wage discrimination between men and women. According to the U.S. Bureau of Labor Statistics, the median income for all women is about three-quarters that of men, although the results vary significantly among demographic groups. Feminist organizations and some politicians point to these statistics as evidence of the United States as a patriarchal society that discriminates against women. But a closer examination leads to a different conclusion. 

The Good News. 

When women behave in the workplace as men do, the wage gap between them is small. June O'Neill, former director of the Congressional Budget Office, found that among people ages 27 to 33 who have never had a child, women's earnings approach 98 percent of men's. Women who hold positions and have skills and experience similar to those of men face wage disparities of less than 10 percent, and many are within a couple of points. Claims of unequal pay almost always involve comparing apples and oranges. 

Lifestyle Choices
Women make different choices, and those choices affect how they work. Women often place more importance on their relationships - caring for children, parents, spouses, etc. - than on their careers. A study by the Center for Policy Alternatives and Lifetime television found that 71 percent of women prefer jobs with more flexibility and benefits than jobs with higher wages, and nearly 85 percent of women offered flexible work arrangements by their employers have taken advantage of this opportunity.
 
Entry and Exit from the Job Market.
Women are more likely to enter and leave the workforce to raise children, take care of elderly parents or move with their families. Working mothers are nearly twice as likely to take time off to care for their children as are working fathers in dual-earner couples. Yet time out of the workforce is an enormous obstacle to building an attractive resume and working up the corporate ladder. Women 25 years of age and over have been with their current employer 4.4 years, on average, compared to 5.0 years for men. Data from the National Longitudinal Survey reveal that women between the ages of 18 and 34 have been out of the labor force 27 percent of the time, in contrast to 11 percent for men. Women ages 45 to 54 who have recently re-entered the workforce after a five- or 10-year break are competing against men who have had 20 years of continuous experience. 

Part-Time Work.
Women are also more likely to work part-time. In 2000, one-quarter of all women employees worked part-time, compared to less than 10 percent of men. Nearly 85 percent of those who worked part-time did so for non-economic reasons; e.g., to spend more time with the family or to further their education. In general, married women would prefer part-time work at a rate of 5 to 1 over married men.

While part-time work usually increases flexibility, the part-time worker loses out on promotions and pay increases. Part-time work also tends to mean lower hourly pay. Shorter labor stints and part-time work contribute to the probability of working for the minimum wage. Nearly two-thirds of minimum wage earners are women.

However, women's wages hold up quite well to men's wages when comparing specific job categories. [See Figure I .] Among adults working between one and 34 hours a week, women's earnings are 115 percent of men's. Among part-time workers who have never married, and who thus confront fewer outside factors likely to affect earnings, women earn slightly more than men. These statistics suggest that skill level, tenure and working hours - not gender - determine wages. 

Occupational Choices.
Beyond work behavior, women gravitate to sectors of the economy that compensate workers at lower levels. While women hold 53 percent of all professional jobs in the United States, they hold only 28 percent of jobs in professions averaging $40,000 or more in annual compensation. For example, fewer women have chosen to enter such technical fields as computer sciences, math and science teaching, medicine, law and engineering. In 1998, women earned only 26.7 percent of computer science degrees.

Closing the Gap.
Despite all these factors, the gap between men and women's wages has been closing. Figure II illustrates that over the last 20 years women's earnings have jumped at least 12 percentage points relative to men's earnings, closing the wage differential at every level of education. A change in women's work expectations also has tended to close the gap. Until the 1970s, a minority of women expected to work after marriage. Today, almost 75 percent of young women expect to be working at age 35.

Changing work expectations are an apparent cause of women's increased focus on education, and the enrollment of women in higher education has grown much faster than that of men. Women were awarded more than 50 percent of associate's, bachelor's and master's degrees in the 1990s. Women currently earn more than 40 percent of Ph.D.s, medical and law degrees.

The narrowing of the gender wage gap approximately one percentage point a year since 1980 is particularly significant, since during the 1980s and '90s the overall wage level rose little and the wage inequality between skilled and unskilled workers grew. Without enhanced skills, women's wages likely would have fallen further behind men's. However, market pressures have helped to generate corrective mechanisms, and as the costs of denying employment to women mounted, prejudices were set aside.

Conclusion.
Women's work-life patterns and their occupational preferences are significant factors in determining wages. Rather than being "funneled" into low-wage, low-prestige and part-time positions, women often choose these occupations because of the flexibility they offer. After adjusting for these factors, scholars find that the difference between men's and women's earnings is very narrow.Those who still cite women's 76 cents for every male dollar as evidence of sexism fail to take into account the underlying role of personal choice. The "wage gap" is not so much about employers discriminating against women as about women making discriminating choices in the labor market.

What do we learn from all of this? Certainly that discrimination had little to no effect on women´s wages. The most interesting question in my mind is, do we really have to take action, to make women in the work-place behave more like men, to fight women´s "indoctrination" (which some assume there is) with another kind of indoctrination? Well I don´t think so as I certainly believe that women have free will.