SPEAKER: How do economists explain the gender pay gap, the fact that women earn less than men? Economists point to a number of factors that could be important, but traditionally they focused on two primary explanations.
I'm calling them gender-specific factors in line with work I've done with Professor Lawrence Kahn here at the ILR school. By gender-specific factors, I mean factors relating specifically to differences between men and women either in their qualifications or how they're treated.
In terms of qualifications, the human capital model has been especially important in pointing out the role played by education and experience. In terms of possible gender differences in education, in fact, the gender education gap was never particularly large in the United States.
And so the average education of women and men was never very different. The biggest difference historically was that although women were actually more likely to graduate high school than men, they were less likely to go on to college and graduate education.
That gap has closed quite a bit in recent years, especially at the college level where today women are actually over half of college students. The qualification that has proven to be quite important in explaining the gender gap is work experience because traditionally women moved in and out of the labor market based on their family considerations.
Economists Jacob Mincer and Saul Polachek have done especially important work in highlighting the importance of experience in explaining the gender pay gap. In the old days, that is, before World War II, most women left the labor market permanently when they got married and had children.
Then a pattern arose after the war where older married women returned to the labor market after their children were grown or in school. This was followed by an even bigger change that has occurred in the past 20 years or so.
Some women have started staying in the labor force fairly continuously even when they have small children at home. Today, the majority of women with children a year or less an age are actually participating in the labor force. Nonetheless, on average, women have less work experience than men do. And that difference in qualifications is statistically quite important in explaining the gender pay gap.
However, even when you control for experience and whatever other qualifications you can readily measure, there tends to be a pay difference between men and women that is not explained and is potentially due to discrimination.
In terms of discrimination, Gary Becker, a Nobel Prize-winning economist, has been especially helpful in analyzing it. Although he was looking at differences between Blacks and whites, the idea of prejudice and the negative consequences it has are readily transferable to women versus men. We can get an idea of the importance of discrimination by examining the results of statistical analyses of the gender pay gap.
So for example, some results from a study that Professor Kahn and I did are shown in the chart at your right. We found that on average, women earned 72% of what men earned. This is shown by the first bar in the chart.
If one adjusts for differences between men and women in experience and education-- this is shown in the second chart, excuse me, the second bar in the chart-- we see the gender ratio increases to 81%. This increase in the ratio from 72% to 81% means that gender differences in what are called human capital factors, principally labor force experience, do explain some of the gender pay gap, but this still leaves an unexplained gap of 19%.
Economists generally take the unexplained gap as an estimate of discrimination, although as we shall see, it is not a perfect measure. If in addition you adjust for gender differences in industry, occupation, and union membership, as we do in the third bar in the chart, the gender ratio rises to 88%. This suggests that differences between men and women in the types of jobs they work in are also important in explaining the pay gap, but this still leaves an unexplained gap of 12%.
The 88% figure is substantially above the unadjusted figure we started out with of 72%, but the unexplained gap of 12%, which is potentially due to discrimination, is still sizable. And some might argue that it is inappropriate to control for gender differences in occupation, industry, and union status because such differences could reflect discrimination, as well as differences in the choices men and women make as to which job to go into.
Estimates of discrimination of the type I've been discussing are instructive. But unfortunately, as I hinted earlier, they're not without their limitations. The problem is that statistically, we can't measure discrimination directly. We look at it as a kind of residual, the portion we can't explain after having control for gender differences in measured qualifications.
This unexplained gap could be due to discrimination, but it could also reflect differences in skills that we can't measure like commitment to the labor force or motivation to do the job very well. If men do better in terms of these omitted factors, say they are on average, given traditional gender roles, more committed to the labor force or more motivated to succeed, then statistical measures will overestimate discrimination.
However, it's also possible that women do better on some of these omitted characteristics. For example, it could be that women working within a particular occupation are actually more ambitious and hard working than the men in the job because discrimination has blocked their access to higher level jobs, whereas most of the able men have been promoted out. If this were the case, then statistical measures would underestimate discrimination.
What this means is that since we can't measure every qualification that could be important, our statistical measure could either over or underestimate discrimination. Some interesting recent research using a very different approach tends to confirm the idea that discrimination does exist. Let me illustrate with a couple of studies that might be viewed as using an experimental approach.
- There's other evidence that women's pay is still held down by discrimination. In high-priced restaurants, for example, one study sent women test subjects looking for waiter jobs. They got half as many job offers as men who were sent in with similar resumes. Orchestras-- another study showed women musicians were hired more often when auditioning blind behind screens hiding their identity and judged only on their playing.
SPEAKER: So we see that statistical analyses and the other types of evidence that I've just been talking about both provide some support for the explanations economists have traditionally offered for the gender pay gap, both the idea that there are gender differences in qualifications and the possibility that there's labor market discrimination against women.
However, research that I've done with Professor Kahn points to an additional factor that needs to be considered. And that is wage structure. What is wage structure? And how does it help to explain gender differences in pay?
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Francine Blau, the Frances Perkins Professor of Industrial and Labor Relations and Labor Economics at Cornell ILR School, describes trends in the gender pay gap, considers fundamental explanations for the gender pay gap and uses these explanations to understand the trends.
This video is part 4 of 8 in The Gender Pay Gap series.