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. M.B. says:

    These conclusions are were also supported by Robert B. Reich as previously discussed here. So shouldn’t this be the end of the debate. Why does the political mainstream want to pass more laws to right the wrongs. Won’t attempts to equalize pay be sub-optimal if the current situation reflects choices we each make that are in our best intrrests? Or does government really know what is best for us but we are not smart enough to figure it out ourselves?

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  2. ktb says:

    This is kind of tangential, but do men with kids work fewer ours than men without kids?

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  3. Norm says:

    It looks like, in the UK at least, single women with no children outearn their male counterparts
    http://www.dailymail.co.uk/news/article-1145973/How-paid-men-Stay-single.html
    and urban women outearn men in the US
    http://www.independent.co.uk/news/world/americas/urban-women-earn-more-than-men-460217.html
    Is there any reason to think that any differences in wages at this point are anything more than a reflection of the differences in individual choises that the different genders tend to make?

    Also, it seems that, in the current economy, men have suffered much more from unemployment than women have
    http://www.nytimes.com/2009/02/06/business/06women.html
    http://www.examiner.com/x-830-Workplace-Law-Examiner~y2009m1d13-Womens-unemployment-rate-is-lower-than-mens
    http://economy.kansascity.com/?q=node/439
    What are the long term implications of these kinds of shifts in the work force?

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  4. ktb says:

    I have no doubt that raising a family has a huge impact on the career decisions women make. As I’m in the position of trying to start a family right now, I can easily see that it may not just be an issue of how many hours I plan to stay at work, but how agressively I pursue a more fulfilled but demanding position that would require more hours of me and give me opportunity for recognition. The concern is that I may not be able to balance my work life in that more demanding position, where as I can get the job I’m in now with fewer hours and less stress on my part.

    However, I notice you don’t talk much about self-estimation. I had heard that when applying for jobs, men on average were much more likely to apply for a position that they did not meet 100% of the qualifications for, where as women tend to want to meet all stated criteria. I would assume this would also indciate women are less likely to sell themselves in interviews, salary negotiation (or may even make them less likely to think to negotiate salary), or performance reviews. Have you included this in your research?

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  5. Rick says:

    What seems absent from this conversation is an accurate description of the process by which wage is determined. It is my personal experience that while job or title sets a range of possible wages, there is invariably a negotiation which takes place to determine the final wage.

    While I think there is certainly reason to suspect that employers are factoring in the increased risk of voluntary exit (and thus try to hedge against this cost through lower wages), I think we must first show that men and women are pursuing the same wages in the same jobs.

    Further, because wage increases are often on a percentage basis, an initial difference could be doubled after 10 years through this effect alone. If women are settling for lower wages early in their careers, this sets them on a trajectory that will make it increasingly difficult for them to ever close that gap.

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  6. PaulD says:

    Q. A thought experiment: Suppose the existence of an impartial, omniscient observer (e.g., a non-sexist God). Suppose further that this perfect observer deems the state of compensation with respect to gender perfectly fair. Would state of the art econometric analysis agree that compensation was perfectly fair? And supposing that this analysis of mere mortals were to conclude that things were essentially fair, how likely do you think is that feminist interest groups would still be crying foul?

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  7. Andy says:

    If you consider only women/men that have roughly equal work experience, education level, hours worked, GPA, marital status, and number of children, is there still a wage gap?

    If you run a regression predicting wage based on those factors along with sex, what are the results?

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  8. Hillary says:

    Are there fields or areas you would recommend your daughters pursue? Avoid?

    Also, I second Anu’s question regarding sectors. Six years out of undergraduate, most of my classmates have completed our masters or professional degrees. However, our salaries vary depending on field and goals. The male librarians I know don’t make any more than the women.

    For female MBAs, I wonder if it has anything to do with the tendency in full-time programs to marry other students. At some point the couple will probably have to move for one person’s career, and the other may choose to step out of the workforce or be required to because of visa restrictions.

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