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It is well known that the raw wage data indicate that on average women earn less than 80% of what men earn in similar jobs. When economists do research to control for some factors that might explain the gap (such as differences in occupational choice or skills) some, but not all, of the gap goes away. We get to numbers less than 10% when we do that. In other words, we are not able to explain about 10% of the gender wage gap on the basis of measurable factors alone.

A basic explanation for this would then be that the remaining gap comes from things that are not measurable. And perhaps the least measurable thing would be discrimination. Whether the remaining 10% difference is due to discrimination for real can never be known. It could in fact either over- or under-state the degree of discrimination. It might understate it if for example women end up selecting occupations on the basis of pre-market discrimination, or if there is discrimination in the acquisition of skills throughout life. It might overstate it if there are significant impacts of female labor force membership that are not measured but which lead to lower wages. We might not be able to measure, for example, some aspects of productivity that are tied to time off from the job due to child-care.

But in typical discussions of these issues, one factor has gone terribly under-reported. I can see why, because this factor could not explain the earlier wage gaps or the narrowing of the wage gap over the last 50 years. But it might actually still have a say in why the gap persists or isn’t perhaps even negative. What is that? Could it be that the existence of anti-discrimination laws, though well intended, raise the costs of hiring women as compared to otherwise identical men? After all, the empirical work of Acemoglu demonstrated pretty convincingly that this indeed happens for the case of disabled Americans in response to the passage of the ADA in the early 90s. I am not familiar, offhand, with research that has looked into this aspect of the male-female differences in labor market outcomes, but if there is not work done here it would be a terrific topic for a research paper.

Why, by the way, might it be more costly to hire a similarly situated woman? If a man and a woman are each performing badly on the job, for whatever reason, it may be “easier” to fire a male employee because he is very unlikely to be able to claim he was being discriminated against when he was fired. There are lots of empirical ways to tease this out – perhaps there are papers out there that do it. When I get a breather I will look around. But this is certainly not something that came up in this interesting and informative interview.

3 Responses to “On the Gender Pay Gap”

  1. wintercow20 says:

    From the loyal reader Michael Marotta:

    “Why are men the standard? Why not say that women are the norm and many men are able to earn 10% to 20% above the norm and then seek to explain why. That would then lead to questions with positive answers – do this, don’t do that – which are behaviors that perhaps “anyone” could adopt, including those men who are earning below the (female) norm, as statistically, some must be.

  2. Speedmaster says:

    >> ““Why are men the standard? Why not say that women are the norm and many men are able to earn 10% to 20% above the norm and then seek to explain why?”

    That’s a d@mnewd good point and question!

    Did you guys the editorial on this topic in today’s WSJ?

  3. Harry says:

    Maybe WC planned this subject for one of his courses, and if so, fine; the question is worthy of discussion. However, it appears it is a cause du jour on campuses because it coincides with campaign talking points, perhaps to suggest that people like the Koch brothers want to subjugate women in more subtle ways than Ayatollah Ali Khameni wishes. I know WC, having been bought by the Koch brothers does not suggest this in the slightest.

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