SuperFreakonomics Book Club: Ask Claudia Goldin and Larry Katz About the Male-Female Wage Gap

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In the previous installment of our virtual book club, Sudhir Venkatesh answered your questions about his research on street prostitution.

Now, moving on to another section of Chapter One, here’s your chance to ask a pair of researchers about a central and pressing fact of U.S. economic life: the enduring wage gap between men and women.

Claudia Goldin is the Henry Lee Professor of Economics at Harvard University and director of the National Bureau of Economic Research’s Development of the American Economy program. Lawrence Katz is the Elisabeth Allison Professor of Economics at Harvard and a research associate at the NBER. They are among the most esteemed economists in the world at sorting out labor questions, historical and present, especially when it comes to the male-female divide.

Here are a few sections of SuperFreakonomics in which we rely on their research:

For American women twenty- five and older who hold at least a bachelor’s degree and work full- time, the national median income is about $47,000. Similar men, meanwhile, make more than $66,000, a premium of 40 percent. The same is true even for women who attend the nation’s elite universities. The economists Claudia Goldin and Lawrence Katz found that women who went to Harvard earned less than half as much as the average Harvard man. Even when the analysis included only full-time, full-year employees and controlled for college major, profession, and other variables, Goldin and Katz found that the Harvard women still earned about 30 percent less than their male counterparts.

What can possibly account for such a huge wage gap? There are a variety of factors. Women are more likely to leave the workforce or downshift their careers to raise a family. Even within high-paying occupations like medicine and law, women tend to choose specialties that pay less (general practitioner, for instance, or in-house counsel). And there is likely still a good amount of discrimination. This may range from the overt – denying a woman a promotion purely because she is not a man – to the insidious. A considerable body of research has shown that overweight women suffer a greater wage penalty than overweight men. The same is true for women with bad teeth.

And:

Among the top fifteen hundred companies in the United States, only about 2.5 percent of the highest paying executive positions are held by women. This is especially surprising given that women have earned more than 30 percent of all the master’s in business administration (MBA) degrees at the nation’s top colleges over the past twenty- five years. Their share today is at its highest yet, 43 percent.

The economists Marianne Bertrand, Claudia Goldin, and Lawrence Katz tried to solve this wage- gap puzzle by analyzing the career outcomes of more than 2,000 male and female MBAs from the University
of Chicago.

Their conclusion: while gender discrimination may be a minor contributor to the male-female wage differential, it is desire – or the lack thereof – that accounts for most of the wage gap. The economists identified three main factors:

Women have slightly lower GPAs than men and, perhaps more important, they take fewer finance courses. All else being equal, there is a strong correlation between a finance background and career earnings.

Over the first fifteen years of their careers, women work fewer hours than men, 52 per week versus 58. Over fifteen years, that six-hour difference adds up to six months’ less experience.

Women take more career interruptions than men. After ten years in the workforce, only 10 percent of male MBAs went for six months or more without working, compared with 40 percent of female MBAs.

The big issue seems to be that many women, even those with MBAs, love kids. The average female MBA with no children works only 3 percent fewer hours than the average male MBA. But female MBAs with children work 24 percent less. “The pecuniary penalties from shorter hours and any job discontinuity among MBAs are enormous,” the three economists write. “It appears that many MBA mothers, especially those with well-off spouses, decided to slow down within a few years following their first birth.”

We write a lot more in the chapter about women’s wages, but this should give you enough ammunition to ask Goldin and Katz some good questions. Leave your questions in the comments section below and, as always, we’ll post their answers in short course. If you’re interested in reading some of the underlying research papers, you can find them here, here (with co-author Ilyana Kuziemko), and here (with co-author Bertrand).

Addendum: Katz and Goldin answer your questions here.

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  1. John Owens says:

    “All else being equal, there is a strong correlation between a finance background and career earnings.”

    I recall a study a few years ago (though not well enough to cite it properly) that found women’s choice of graduate program in Psychology was strongly negatively correlated with the statistics requirement of the program. Given that Finance is highly quantitative (often graduate finance programs are co-listed with graduate-level mathematics offerings), should the finance differential be attributed to math aversion?

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  2. KarenS says:

    Another thought–perhaps one of the reasons more women take time off work for kids more often than men is because they’re already making less in their job. The lower pay might be the cause instead of the effect.

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  3. L says:

    If I read Glass (2004) correctly, many of the adverse effects of taking time off are ameliorated when the woman changes jobs, which naively indicates that the major reason for depressed wages due to taking time off is due to a discrimination (conscious or unconscious) after the mother returns to work. As opposed to the time off adversely influencing the mother’s skills and hence her compensation. Do either Goldin or Katz have an insight on whether this study in particular is persuasive or generally whether this major confound is ruled out in the studies they do find persuasive?

    Glass, J. (2004). Blessing or curse?: Work-family policies and mother’s wage growth over time. Work and Occupations, 31, 367-394

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  4. Harold Cline says:

    I don’t believe your conclusion that there is little discrimination against women MBAs follows from the numerical evidence. Women may work fewer hours and take breaks in their career to have children that is true, but the timing of those decisions are endogenous. You do mention that income effect of a rich husband, but don’t mention whether a woman faces the same wage progression if she stays on the job. While MBA men may not have taken off time to have a baby, many male MBAs do take off to set up small businesses particularly during the dot.com mania or during the hedge fund boom. Are they penalized as well when they return to the big organizations. The structure of the job market that rewards sticking with one skill or company, and never take on new challenges hardly makes sense in a changing economy.

    I would think that there are significant cohort effects as well. The four bankers of the apocalypse before the senate committee were all male, as well as most CEOs of the 1000 companies For younger groups, there may not be any discrimination particularly in certain fields, but I would think you would have to go back the drawing board to correct for the biases, selection biases and unknowns.

    Harvard economists have been known to make silly statements about gender bias. At least your not attributing the differences in pay to innate ability, but suggesting its because of individual choice maybe worse.
    I believe economists should get out more. Having worked in many of the top banks those who are in charge are the ones who can shout louder and intimate others, and decision making ability and skill may not be the criteria for advancement.

    As the father of three daughters and a son, I not sure what advice to give them now. To believe they will not have to fight discrimination on many dimensions is far too simple.

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  5. Michael K says:

    Who is setting the initial salaries of these groups, and is there any data on them and their decision making?

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  6. bumblebee611 says:

    Bluntly categorizing these gender disparities as the result of “desire” not “discrimination” depends entirely on what we call “discrimination” and what is so imbricated in the fabric of our society that we don’t even see it as discrimination. Even if we accept as a starting point that many women supposedly “opt out” to spend more time at home with children, while their high-earning husbands put in more hours at the workplace, isn’t the real question what leads to the difference in approach to childcare versus earning responsibilities? Your approach (at least what is excerpted here, with the conclusion that it’s about “desire not discrmination”) seems to omit this most fundamental question. The question of what leads to the gender variation in career and parenting choices is what gets to the root of whether the wage gap arises from women’s essential and inherent love for babies, from overt and intentional discrimination, or from something in between. For example, perhaps some of those relatively young and high-earning heterosexual couples decided that the female half of the couple should become the primary caregiver to their young children not because the woman really loved playing pat-a-cake but because both partners looked at the people at the top of the totem pole and decided the woman didn’t really have much of a shot, so why bother putting effort where it might well be for naught? I wouldn’t exactly say that election occurs because women, even those with MBAs, love babies.

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  7. vj says:

    Has anyone done a study on how women fare negotiating a salary? I know that I tend to value my work less than my husband values his, despite that I have an advanced degree and he never finished college. I also wonder if women have more difficulty negotiating a salary, because asking for a lot of money might seem aggressive or self-aggrandizing, or because an interviewer (male or female) might not believe that a woman is worth as much as a man.

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  8. science minded says:

    Dear Anu;

    As a part-time employeee, full time sociologist and mom and wife, I agree. My day often begins at 4:30 am or ends 2 am. Either way, my sociological work is my work (however little I have been paid for it). Lately, I have been fortunate to have inherited some income. But until recently, my paid work (not my sociological work) was for paying the bills. I do love to teach and to do research and have been involved in all kinds of and numerous income producing projects, but (aside from home and family), my real work is of science. You can call the wage gap whatever you like- Just saw the movie The Foundtainhead. Must have seen it as a kid because I remember it. And I do identify with the architect in that film.He reminds me of myself. I just kept it to myself for a very long time until a friend forced the issue.

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