2 Sep 2014

MythBusting The Gender Pay Gap

'Economists have useddiscriminationas a placeholder word.'
A response to Pamela Coukos, US Dept. of Labor Senior Program Advisor
By : Pamela Coukos, US Dept. of Labor Senior Program Advisor (and perhaps Senior Propaganda Advisor?), wrote a blog post titled “Myth Busting the Pay Gap.” At first, Coukos’s arguments that there is a gender pay gap and that it’s related to sexism look reasonable. After all, she doesn’t claim that 100% of the difference in men’s and women’s wages comes from sexism. She writes, “Economists generally attribute about 40% of the pay gap to discrimination—making about 60% explained by differences between workers or their jobs.”
My reaction to that: Wow! Economists, who rarely agree on anything at all, really agree that 40% of the pay gap is related to discrimination? I’ve got to learn more about this!Coukos didn’t specify any economists as part of her claim, so I did my own homework.

After looking for it, I found the word “discrimination” associated with 40% of the pay gap within the work of only one economist: Harvard professor Claudia Goldin. But in context, I learned that Goldin doesn’t think that 40% of gender earnings differences come from sexism. In reality, she explains that economists have useddiscriminationas a placeholder word—just a name to call that 40% while they figure out what is really causing the difference. But don’t take my word for it:
Goldin writes, “Most of the gender wage gap studies have produced estimates of an ‘explained’ and a ‘residual’ portion. The ‘residual’ is often termed ‘wage discrimination’ since it is the difference in earnings between observationally identical males and females.” In the rest of her paper, Goldin comes up with potential explanations for this “residual” number, which have nothing to do with sexism.

A better explanation for the discrimination residual, Goldin concludes, is the fact that women don’t allow their schedules to be bossed around as much. They choose variations of work time that are more convenient for them, whereas men choose their work hours—and what they do during their work hours—based on what the company tells them it needs. Flexibility, including more choices when it comes to being “on call” or having “face time,” Goldin explains, “comes at a high price.”
Goldin explains that increased flexibility standards and improved cross-training (i.e., making it possible for workers to replace each other more easily) could almost entirely close the earnings gap between men and women who work the same jobs, which is why newer sectors of the economy, such as health and information technologies, experience the smallest “residual” number (difference between otherwise identical men and women). At the end of her publication, Goldin suggests that as we work toward a more equal workplace, “The last chapter … for gender equality is not a zero-sum game in which women win and men lose. This matter is not just a woman’s issue. Many workers will benefit from greater flexibility.”  
So, Pamela Coukos, if you’re reading this: Claudia Goldin is a Harvard economist who called the 40% residual “discrimination” in an academic paper but did not actually attribute that number to gender discrimination. Therefore, it seems that you either do not read or, worse, do not understand the work of the economists you refer to.
Still, I like giving people the benefit of the doubt. Maybe it’s the economists’ fault for using such a messy, politically charged placeholder word. Below, I’ll take a look at some of Coukos’s other claims.
Coukos “busts the myth” that “Saying women only earn 77 cents on the dollar is a huge exaggeration—the ‘real’ pay gap is much smaller” with more of the same mathematically irresponsible rhetoric. She simply rewords the same misleading statistic, comparing “a working woman” to “a working man,” but she again ignores the variables that economists like Claudia Goldin so painstakingly separate out—the most important being career choice. As a full-time marketer/copy editor, I don’t make as much as a full-time JC Penney CEO. But I’m a “working woman,” and he’s a “working man,” so that must be sexism, right?
Coukos then adds insult to injury, writing, “Once you factor in race, the pay gap for women of color is even larger.” Really, Pamela? Statistically, black men make less than white men, largely due to education and career choice. Similarly, black women make less than black men, so naturally, black women make less than white men. What is your point here?
Coukos also suggests that “high-school girls are discouraged from taking math and science classes that lead to high-paying STEM jobs,” so we should “in some way count that toward a lost equal earnings opportunity.” But her argument falls short in two ways: first, she offers no evidence that girls are discouraged from entering the sciences; on the contrary, you can use a simple Google search to find hundreds of scholarships for women who want to do math and science. Google itself, for example, offers the Anita Borg scholarship for women in technology. Apple offers $10,000 to promising female engineers through its iOS scholarship for women in technology. Neither firm offers a similar scholarship for men.
Second, economists would not be so quick to quantify the feeling of “discouragement” within a hard number like “earnings potential.” An economist would wonder, how much “discouragement” equals a dollar less in earning potential? Or should we see it as a Boolean variable, so that someone can be either “discouraged” or “not discouraged”? What about compassionate, childcare-oriented boys who are discouraged from pursuing early childhood-related professions? Can we quantify that as reduced “happiness potential”?
Perhaps the soundest part of Coukos’s argument is her citation of a study that compares the earnings of entry-level male and female doctors. The study controls for variables like practice location, specialty, and hours worked, and the researchers conclude that male doctors start out earning $16,000 more. However, it’s not clear that other, possibly unconsidered variables aren’t important—for example, do more men attend the most prestigious medical and residency programs? Or, since the gap is widest between male and female doctors who run their own private practices, do women hire less competent staff? Who invests more in digital marketing? Many behavioral variables might explain a 12% earnings difference like the one in that study.
Coukos concludes that it is the government’s job to fix the earnings differences between men and women, but there’s no reason to assume that the government is the best solution, even if the problem is real. For example, she mentions a seemingly benign government initiative to help women “know their worth,” but we have to remember that these government initiatives—and their employees—are funded by taxpayer dollars. Perhaps if we put that money in parents’ hands instead of hiring even more government workers, they could access more extracurricular resources to help their daughters and their sons grow, develop marketable skills, and “know their worth.”

TL;DR – Pamela Coukos, please read the research you cite. Also, consider the idea that maybe the best way to get a happy, fulfilled workforce is not with a regulatory band-aid but with preventative, customized care that starts in the family.

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This item printed originally on the Honeybadger Brigade. –DE

About Ellen A. Fishbein

Ellen is an entrepreneur and Economics grad student in NYC. Her current project, Precision Editing, is a B2B editing company that helps small business owners communicate with customers, especially when English isn't their first language. When she's not doing patent research or regression analysis, she enjoys opera, driving long distances, and blue jolly ranchers.

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