Even though there’s much discussion and fuss about the pay gap between men and women, The Golden Investor will show that there is much more nuance to the story. In most Western societies equal pay is ensured by strict laws and differences in wage are a result of personal choices. Possible differences in pay can be fully explained by differences in working hours, sectors and work-experience. While gender plays an important role in these differences, it would be incorrect to call a resulting pay gap a gender pay gap, as it insinuates that all women structurally are paid less than men solely based on gender. Speaking about a motherhood penalty would be more correct. To quote Denise Venable (2002): “The wage gap is not so much about employers discriminating against women as about women making discriminating choices in the labor market.”
Men Have The Biological Advantage Over Women
A case study on gender pay by Harvard University academics Bolotnyy & Emanuel (2012) on bus and train operators of the Massachusetts Bay Transportation Authority investigates differences in wage between men and women. They find that even when work hours and tasks are exactly the same, female operators earn 0,89 cents for every dollar male operators earn. They show that this gap could be explained by the fact that men take 48 percent fewer unpaid hours off and work 83 percent more overtime hours per year than women. And these differences are largely the result of women taking on more of the household and childcare duties than men, which then limits their work availability. This takes us to the first point: Instead of focusing in differences in pay, strive for equalizing parenting hours and shared parental leave.
However, it is important to note that many parents tend to choose for some specialization within the household as it leads to higher efficiency. Secondly, having kids is based upon equal valuation of tasks within the household. As males don’t bear the burden of having to impregnate, it is out of an efficiency standpoint logical that the male specializes in working, while females take upon the care-giving tasks. As females are genetically penalized by gestation and the resulting backlog to men on the work floor, some kind of compensation to women could be fair, even if this is not necessarily the best neoclassical economic option. The alternative is to value maternity and care-giving over children more, but in a capitalistic society this is hard to achieve as many values are valued in monetary ways.
Why The Pay Gap Increases Over Time, Further Evidence
A long run gender pay study by Bertrand et. al (2010) tracked wages of men and women after graduating with a master’s business administration degree at the elite business school Booth School of Business of the University of Chicago from 1990 to 2006. Interestingly, at first there are no differences in wages between men and women, but as years pass, the gap widens. They observe three reasons for a large divergence in wages after 10 to 16 years. At first, males have a small advantage in training prior to MBA graduation and combined with rising labor market returns to such training with post-MBA experience men outpace women. Secondly, there are large gender differences in career interruptions combined with large earnings losses associated with any career interruption (of six or more months). At last, they find growing gender differences in weekly hours worked with years since MBA. The latter two points prove again that women face a large motherhood penalty. Bertrand et. al (2010) further emphasize this when they correct for having children:
“The presence of children is associated with less accumulated job experience, more career interruptions, shorter work hours, and substantial earnings declines for female but not for male MBA’s.”Bertrand et al. (2010)
Only women with low-earning husbands won’t face these consequences. In such a scenario the woman is even after pregnancy the relatively best earner, which gives them the incentive to keep working full-time. This further proves the specialization theory, in which most of the time men have the biological advantage over women. In this scenario the woman keeps working as it is still the relatively advantageous economic option, resulting in a significantly smaller difference in wage to men. This further shows that the gender pay gap largely can be explained by changing factors due to choices after pregnancy.
However, it could be argued that in a working parental relationship and mature society, values shouldn’t be based on wage. Focusing on differences in wage that are a result of a biological disadvantage of women portrays the undervaluation of giving care to the new generation. The Golden Investor thinks that many parents can relate to this kind of reason, because within a healthy parental relationship there does not exist such undervaluation. Marriage based on community property ensures equal valuations of tasks within relationships and takes away all the financial disadvantages of specialization within relationships. Policies should focus more on creating an equal opportunity for women who still pursue a high level career after having children, as their biological disadvantage to men should not rule out the opportunity to pursue an ambitious career after having children. Moreover, pay gap reducing policies should focus less on gender and more on the motherhood penalty and the resulting backlog. Women tend to settle for part-time jobs resulting in increasing pay gaps over time, which in itself is not a problem as long as it is a choice, not the natural outcome.
Misleading Gender Pay Gap Claims Are Everywhere
The Official Bureau of Labor Department statistics show that the median earnings of full-time female workers is 77 percent of the median earnings of full-time male workers. However, many of these kind comparisons lack statistical strength. Full-time officially is 35 hours, but men on average work more hours than women. This is a comparison between men who spend an average of 41.0 hours per week at their jobs, while women work an average of 36.3 hours per week, according to US Census data. These numbers are often used in highly misleading headlines and tend to result in false interpretation. Such headlines are the cause of the increasing lack of faith in main-stream media.
Many more studies have been done, almost all showing the same thing: only a very minor, non-significant part of the gender pay gap is because of gender discrimination, even though some misleading numbers seem to point to that. If women would really be underpaid based on gender, why aren’t there any companies only hiring women? Companies go to extreme lengths for cheap labor, if these pay gap differences would be solely explained by gender discrimination we would see many firms hiring only women. However, in a fully competitive capitalistic global economy there is no room for gender discrimination, just as it should be.
Want To Know More?
Venable, D. (2002). Wage Gap Myth. National Center For Policy Analysis: Brief Analysis, (392), 392. Retrieved from http://www.ncpa.org/pdfs/ba392.pdfhttp://www.ncpa.org/pdfs/st105.pdf
Bolotnyy, V., & Emanuel, N. (2018). Why Do Women Earn Less Than Men ? Evidence from Bus and Train Operators (Job Market Paper). Department of Economics, Harvard University, (Novembre 28th), 1–85. Retrieved from https://scholar.harvard.edu/files/bolotnyy/files/be_gendergap.pdf
Bertrand, M., Goldin, C., & Katz, L. F. (2010). Dynamics of the gender gap for young professionals in the financial and corporate sectors. American Economic Journal: Applied Economics, 2(3), 228–255. https://doi.org/10.1257/app.2.3.228
U.S. Census Bureau American Community Survey (ACS) 2017