Putting Your 77 cents Toward Gender Equality: Mind the Wage Gap
Following the State of the Union, Twitter was cluttered with #madmen. But it wasn’t about Don Draper or Madison Avenue, but rather about progress in regard to women’s rights and wages.
“You know, today, women make up about half our workforce, but they still make 77 cents for every dollar a man earns,” President Obama said in his speech. “That is wrong, and in 2014, it’s an embarrassment. … It’s time to do away with workplace policies that belong in a Mad Men episode.”
Women in the 1960s, the period in which Mad Men is based, earned 59 to 64 cents for every dollar a man made. The current 77-cent figure is an average—not taking into account time off, job sectors, time in the workforce, or other factors. When those factors are accounted for, the gap is smaller, but it still exists.
And it isn’t for a lack of trying. On the public policy front, there have been attempts to increase women’s wages, with varying success. In 1965, President Lyndon B. Johnson signed the Equal Employment Opportunities Act, which act stopped discrimination based on sex, creed, religion, color, or national origin.
In the 1980s, there was a push for comparable pay—paying men and women the same for equivalent jobs. But this led to questions as to exactly what “comparable jobs” meant. Garbage collectors (a job deemed undesirable) were paid as much kindergarten teachers (a job deemed important, as they were educating future generations). However, there were also questions about whether or not it was tampering with the market and creating disincentives for certain industries, and comparable pay stopped.
In 2009, Obama signed the Lily Ledbettter Act, which was meant to amend the Civil Rights Act of 1964. The act, in most simple terms, works to end workplace discrimination. For example, if women discover information about salary structure, they can file an equal-pay lawsuit. It also puts a 180-day statute of limitations on filing an equal-pay lawsuit.
But does the wage gap—this 77-cent figure we keep hearing—really exist in the context we think it does? And what implications does this have?
AU Professor Daniel Lin teaches his microeconomics class that wage discrimination is unsustainable as artificially high wages will be phased out in a competitive market because companies will offer more competitive wages to those discriminated groups. Gary Becker from the University of Chicago pioneered this neoclassical theory.
Others say the wage gap doesn’t exist in the context we think it does, and that women’s choices and job sectors are to blame. Following the State of the Union, the Daily Beast ran a story “No, Women Don’t Really Make Less Money than Men” by Christina Hoff Summers. Summers writes that men choose to major in inherently higher-paying fields such as pharmacy, mathematics, engineering where women major in psychology, education, social work, and the arts. According to Summers, these choices lie behind the wage gap.
However, a study conducted by the American Association of University Women in 2012 found that immediately out of college, women make 6.6 percent less than men due to employer’s belief that women will take time off to become mothers. This gap only grows as women age and is more prominent in minority women.
So why hasn’t this wage gap been phased out? And does it only exist because of differences in job sectors?
Caren Grown, a professor at American University and co-director of the Program on Gender Analysis in Economics and co-principal investigator of the Gender Asset Gap Project, said Becker’s theory on discrimination has been discredited on both theoretical and empirical grounds, and there are superior neo-classical, institutionalist, and feminist theories. Feminist and institutionalist theories point to unequal power relations in the family and discrimination in the workplace. Among neo-classical theories, the theory of statistical discrimination, based on imperfect information, better represents empirical evidence.
“If you’re an employer and you don’t have perfect information on every individual applicant but you think that women, on average, have higher turnover rates than men because they take time off from the labor force, you may not want to hire them or you may pay them less because you don’t want to invest in training them and eventually lose that investment in their human capital, even if you as a worker have no intention of taking time off,” Grown said. “That kind of statistical discrimination can endure over time.”
Grown said these gendered social norms are often the culprit.
“Women’s choices are also conditioned to some extent by expectations about their roles as mothers [and] careers as well as what are ‘appropriate’ jobs for women in balancing those roles,” Grown said. “And they may be related to real barriers that exist in the labor market, like lack of flexibility. If, for instance, you think you’re going to be a mother later in life, you may want to choose an occupation that offers you more flexibility. And, unfortunately, a lot of those occupations may be lower paid and have less opportunity for advancement.”
As a result, all societies have to various degrees, occupational and job segregation by sex. In female-dominated sectors, workers tend to make less money than in male-dominated sectors. More interestingly, women that work in male-dominated sectors make more than women working in female-dominated sectors. The same goes with men who work in female-dominated sectors––they earn less than what they might in male-dominated sectors but often still more than women in those sectors.
Grown said that there has to be an institutional and social change to reduce occupational segregation and gender pay gaps. If employers made it easier for mothers to continue working through flextime (where employees are expected to be at work for a few hours a day, and then can finish the workday at home) and telecommuting (working from home or a coffee shop through the Internet), women might be able to change the perception they will leave the workforce to become mothers.
“I also think that we have a whole lot more to do about changing the social norms surrounding male caregiving,” Grown said. “And once you start to have men who participate more within the home, I think you’ll start to see some changes.”
Fatima Goss Graves, the Vice President of Education and Employment at the The Women’s Law Center, an organization that works to advance women’s rights within the workplace, said, “There’s no question that one thing that contributes to pay discrimination is stereotypes about women overall, women’s commitment to work, women’s value to work, and the time spent in motherhood.”
However, she said she is seeing some changes on the federal level, but more clearly on the state level. This year, New Hampshire unanimously passed a bill that banned retaliation against workers who discuss their wages. States like Vermont, New Jersey, New Mexico, Illinois and Colorado already have these equal pay bills in place.
“What’s been really good to see are the recent articulations of economic agendas that help women more broadly, and we’ve seen both the House and the Senate and some states have done the same, and these agendas really outline the plans to advance women’s security in a way that’s systematic,” Graves said.
Right now, there needs to be the same push seen in individual states for equal pay legislation on the federal level. It’s time we leave this #madmen era once and for all.