SuperFreakonomics Book Club: Goldin and Katz on the Male-Female Wage Gap

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In the SuperFreakonomics Virtual Book Club, we invite readers to ask questions of some of the researchers and other characters in our new book. Last week we opened up the questioning for Claudia Goldin and Lawrence Katz, labor economists and experts on the male-female wage gap. Their response is below. Big thanks to them and to all of you for participating.

Many thanks for your insightful comments and questions. If you are interested in more detail about gender differences in the labor market for MBAs you can read our paper (with Marianne Bertrand) entitled “Dynamics of the Gender Gap for Young Professionals in the Corporate and Financial Sectors.” Gender differences in the labor market for a range of professions are examined in “Transitions: Career and Family Life Cycles of the Educational Elite.”

Q.

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? — Andy

When you compare “apples to apples” (i.e., a childless, college-educated 29-year-old female in an urban area to childless, college-educated 29-year-old man in an urban area), what’s the real wage discrepancy? — Lisa

A.

These questions are at the core of our analysis. We actually do compare “apples to apples.” Here’s how: To determine whether there is “wage discrimination,” we statistically construct individuals who are observationally identical, and then measure whether their earnings differ by sex. Many data sets do not allow comparisons of approximately the same apples (Macs to Macs, for example). Some have such limited detail that the comparison is essentially “apples to oranges.” But our University of Chicago MBA data (for those graduating from 1990 to 2006) is extremely rich, allowing us to control for business school courses, GPA, job experience, demographics, hours, sector, occupational title, and so forth.

For male and female newly-minted MBAs, our comparison of “apples to apples” produces just a modest wage gap (favoring men), and these observationally equivalent men and women work approximately the same number of hours per week. Fast forward 10 to 15 years, and the earnings gap between our male and female MBApples is about 40% for those who were observationally equivalent at graduation. But almost all of that huge difference can be fully explained by the greater number of career interruptions and lower weekly hours experienced by the women (mind you, they still work a large number of hours). One of the reasons for the large gap in earnings between male and female MBAs is that the cost of career interruptions is very great in the corporate and financial sectors. These costs are considerably lower in medicine, and somewhat lower in law and academia (a finding from our related work).

Q.

Many of us – here’s the surprise – got our MBAs precisely because we wanted to have children and work, and we knew we wouldn’t be able to recover from the economic hit nearly as well unless we had an MBA to accelerate us back up the speed ramp when we re-entered the workforce post child-raising! In fact, one could argue that having an MBA helps on the pregnancy end too, with presumably higher skills and therefore occasionally higher leverage to negotiate a better childcare leave than we might have otherwise. — Lisa

A.

The vast majority of MBA moms are just like Lisa – in the workforce, occasionally part-time, often self-employed, working for firms with generous family policies and making a lot of dough. They may not be making as much as their male peers who are working full-time, but they are, just as Lisa notes, doing very well in securing their futures and keeping a toe-hold in the business. In our sample, the fraction of MBA moms 10 to 16 years out who were working part-time was equivalent to the fraction who were no longer in the labor force. And about half of the part-timers were self-employed. Because we track our MBAs for at most 16 years, and because women are having kids much later in their lives, we do not know what happens to them over the long term, and whether those who leave the labor force will eventually return to the firm they left, other firms, new careers or self employment.

Q.

Are women being paid less because they take time off for kids, or are they being paid less because employers expect them to take time off for kids? If an employer puts you on the “mommy track” simply for being female, and pays you less or doesn’t promote you as often, perhaps when you do have a child, the fact that you’re already being paid less gives you less incentive to return to work. — sasha

Is there a pay gap before time is taken off? How much of that is due to the possibility of future time not worked? — Dan Rosenberry

A.

As we just noted, at the start of their careers male and female MBAs in our sample earn approximately the same income, and almost all work long hours. We do not find evidence that women are placed on a “mommy track” from the start, or that there is a major pay gap before job interruptions for whatever reason. MBA women do very well in their jobs before they have children. Even after their first birth, they tend to return to work soon and work fairly long hours. But after a year or so the average MBA mom will shorten her hours of work (they are still long compared with most non-MBAs), and some will leave the workforce, possibly for a while. We also find that those who leave the workforce are disproportionately those with very high-earning husbands. Women with husbands earning below the median husband’s income in the sample exhibited no decrease in their employment. It is only those with the higher-earning husbands that do.

Q.

Having worked in many of the top banks those who are in charge are the ones who can shout louder and intimidate others, and decision making ability and skill may not be the criteria for advancement. — Harold Cline

Has anyone done a study on how women fare negotiating a salary? 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. — vj

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 indicate 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? — ktb

A.

Our work only indirectly confronts the important issues of competition and bargaining. Important scholarship by others addresses these questions directly. A great book on the topic of women’s bargaining power on the job is Women Don’t Ask (Princeton 2003) by Linda Babcock and Sarah Laschever. They find that new MBAs who negotiate rather than accept their offered salary raise their pay by around 7%, and that MBA men negotiate eight times as often as MBA women. Where does that show up in our work? We do find that even women without children and with no career interruptions earn about 12% less than the observationally equivalent men (the “apples to apples” comparison) both at the beginning of their careers and 10 to 16 years after obtaining their MBA. There is also excellent research on the subject of competitiveness among men and women by Muriel Niederle, and various co-authors, using laboratory experiments. They find that women shy away from competitive situations, losing income in the process, whereas men over-compete, also losing some income by being overconfident.

Q.

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

A.

First of all, your daughters (and sons) should follow their passions wherever that might take them (law, medicine, art, poetry, lion taming). But they should also be cognizant of the potential costs in each field from taking time off and reducing hours. Each occupation has its own culture, and some are highly tolerant of individual needs and some are less tolerant.
It should also be recognized that these tradeoffs have changed enormously over time, and that it is difficult to predict what the future will hold. Who would have guessed in 1970 that various MD specialties today would have a large fraction of part-time physicians? More than 35% of all female pediatricians work part-time today, for example. As women become a critical mass in various professions, more pressure will be placed on institutions to change their rules. In some occupations, however, the rules won’t budge much. A trial lawyer who is present at each deposition, hearing, and trial day is far more valuable to the client than one who shares the case with a partner. But an obstetrician does not have to be present at every birth for each female client in his or her group practice. Another in the group will be an (almost) perfect substitute.

Q.

What careers have the most equal pay for women, and which ones have the widest gaps in pay? — Mario

A.

Don’t be misled by gender equality in pay. Women should not necessarily want to choose the occupation for which the gender gap is the lowest. In fact, the most equal occupations by pay are those in which there is low pay and little advancement.

Q.

So you’re saying that men don’t love kids? From the article – “The big issue seems to be that many women, even those with MBAs, love kids.” — Kathleen

A.

We never said that men don’t love their kids (or other people’s kids). In fact, we never said that MBA moms love their kids. But we are fairly certain that they do. (Beware literary license taken by Freakonomists.)

Q.

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. — KarenS

A.

For many women (and men) a lull in one’s career is a good moment to take time off for additional training or to raise a family. Since women often make less than men, are kids the cause of their lower earnings or the result? Our study is limited to MBA women and men. The MBA women who had kids after receiving their MBA were not earning less than other women before they had their kids. And these MBA women at the start of their careers were not doing that much differently than were MBA men. We noted before that MBA women who never had kids and had no job interruptions made 12% less than observationally equivalent men. That difference, moreover, was mainly because they were employed by smaller firms, and disproportionately in the non-profit sector. Even though we find little evidence to support the notion that lower earnings of MBA women cause them to have kids, the point is critical to understanding the division of labor in the household more generally.


linzi

It's interesting how heteronormative (and could we say theocratic? I'm unsure) time comes into play.

I mean, gays and lesbians probably would not be so much on the mommy-track as a straight female.

I wonder what the wage gap is between say an openly gay or lesbian employee would be versus a biological but heterosexual equivalent.

Walt

intersting

Kim

In my experience in academia, women at the pre-tenure stage get stuck with service assignments that will doom them when it comes to research. For example, married men with kids at my university can get out of duties like judging at History Day by claiming a son has a soccer game--and a woman could not do the same. And in many cases there is no soccer game. Women are more likely to get stuck administering special programs that require long hours but come with little or no pay increase. I know that the AAUW has looked at these issues, but the system never gets fixed.

ShowMe

There still is a strong bias in our society towards considering the work and actions of males as more important than those of females. As a female, it grates on my sensitivities.

Charles

It was interesting to see what the researchers were willing to brush off as a "modest" gap in pay for the equally situated comparison. In fact, they only cite the number -- 12% -- when answering the negotiation question and instead use the imprecise adjective in their first answer.

That "modest" pay gap means a lot in real terms at high salary levels. For an MBA earning $200,000 that is a full $24,000 advantage for the men.

What actually interests me is how different social groups, both national and sub-national, conceive of acceptable versus unacceptable differences. I'd like to see one of their "apples to apples" comparisons along a cross section of different national cultures, for example Sweden, the US and Japan.

I'd also like to see data on how researchers in different academic cultures within the US are likely to characterize the pay gap. For example, among economists, sociologists and law professors, which group is more likely to label 12% as a modest one rather than use a more negative label?

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Brian

Did you control for height? It is well known that tall men make more than short men, and men are taller than women, so I wonder how much of the difference could be explained by that.

kim b.

And you don't think it's statistically important to note that MBA women were working for smaller firms or non profits...meaning this is where the opportunities were for them to begin with vs the larger firms where some of their opportunities come up against the glass ceiling.

I think if I studied this study long enough I'm pretty sure I could poke a few holes in it. You mention the 12% difference as if it's okay...like only 12%. There should be no difference.

And truthfully insofar as a woman taking time off work, here's some new rules for ya, if a woman manages to help make a company millions of dollars and takes time off vs the MBA male who doesn't perform exactly like that, has the same role, works the same amt of hours, blah, blah, blah, I'm thinking the woman MBA not only should pick up right where she left off but get a raise for coming back into the fold. After all she's just gained some perspective that her male counterpart will never have in the mommy world where most of the purchasing juice comes from.

Your premise is marred from the beginning.

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Mary Beth

It's quite far down in the Q & A that you acknowledge that when you compare "apples to apples", women still earn 12% less than men 10 - 16 years out. When asked about "apples to apples" in question one, you do not note this. A bit of a bias in your reporting, no? Just ask someone who got a 12% raise -- at MBA salary rates!

DrS

Charles! The reason they say the 12% is modest, and don't bring it up much isn't because they consider that to be acceptable. The reason is mentioned at the end. The 12% is largely accounted for in that women disproportionately work for small firms or non-profits. So 12% pay difference isn't completely apples to apples comparison, and they don't mention what the difference between men and women is who work at similar firms and have similar time off, but they lead you to believe it's significantly less than 12%.

DirkJohanson

Like any discussion of this topic, there is one thing no one ever wants to consider: the possibility that guys, on average, are simply more valuable workers than women.

Guys are from Earth, women are from Venus. As I noted in We can do anything better than they can - Part I in a Series of About a Billion (http://guyinism.com/?p=10), look at the Earth, and nearly everything that has been accomplished on Earth worth mentioning - its nearly all been done by guys. Maybe there's a reason for that - and any study that does not explore that possibility is fatally flawed.

Jen

It's interesting that women disproportionately worked for smaller firms or non-profits. I wonder if that is because women tend to choose jobs that will offer a better work-life balance (i.e., shorter hours, less travel, more flexibility, working from home, etc.) even though that often means a lower salary. It could be that women value these things over money more so than men, on average, even when they don't have children. Once they do have children, I would venture that they value these benefits out of necessity (have to be home in time to pick up the child from daycare, or have the flexibility to stay home with a sick child, for instance).

Geronimo

This is a good piece of work!

Controlling for ALL non-gender variables affecting pay is a dickens of a chore, but when it's done, most of the "pay gap" disappears. Careful studies have found this, for years.

Just to balance the scales in the hypothesis--men who leave the workforce undergo an even more drastic pay drop than do women. If that's gender discrimination, it's certainly not directed at females.

I am trained as an anthropologist, and or 20+ years headed the HR function for a very successful S&P 500 company, the first in our industry to have a female president. I had constant exposure to both the social-science theory and daily practicalities of pay, for questions of gender discrimination. It is very exasperating to hear wage discrimination asserted on the basis of bad science and sloppy research methods.

Valerie Jarrett, the White House advisor, is going on talk shows and presenting a bad hypothesis and wrong conclusions, still citing the old "x cents for every dollar a man makes" one-liner, which is thoroughly discredited among careful social scientists. I bet Ms Jarrett reads the NY Times, though--let's hope she sees this, and understands it. Then she will at least have to forgo the luxury of believing she's telling the truth.

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Les

On page 59, near the top of the page, you use a very nice metaphor describing a census issue with an archeological description. Unfortunately, what you used was a geologic description.

I am thoroughly enjoying reading the book and the observations in this forum.

Kai

Jen has it. The 12% is considering all with MBAs - not those in similar jobs. That's why it still isn't fair comparison, as it includes those in different types of work.
Women don't find themselves working for nonprofits because they can't get the big jobs, but because they want to. Women *choose* to work in places which give them other rewards at the expense of less money. For some this is shorter hours, for others flexibility, or for others job satisfaction. That is a valid choice to make, but it means less money.
We should be celebrating that all people are able to choose which things are most important - not fussing about the fact that women more often choose differently than men.

Christopher Strom

"[Babcock and Laschever] find that new MBAs who negotiate rather than accept their offered salary raise their pay by around 7%, and that MBA men negotiate eight times as often as MBA women."

So one would expect to see about a 6% gap for new grads in their first job solely due to negotiation. Continued annually, this gap would expand to 12% after the second year of salary negotiation.

The "12% gap" cited in the post is for "women without children and with *no career interruptions*", suggesting that these are people several years into their careers, as it would be difficult to interrupt a career that hasn't begun yet.

So it appears that the 12% wage gap early in the careers could be explained solely by differences in salary negotiation.

Furthermore, if the "negotiation gap" between men and women continued over 15 years, the "wage gap" would grow to 40%.

Factor in the severe salary punishment for career interruption for MBAs, a large male/female wage gap is entirely explainable for reasons that have nothing to do with - but are much less interesting than - an "old boys club keeping women down."

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Jai

For further research, let's compare people in the same job. It's my experience that married women and especially single mothers have been paid more (for the same job with the same company) than single women, widows, those with grown children - even when the single no-young-kids woman has more education and experience. Excuses? "But she has children," assuming the no-young-kids person has no dependents, no obligations. Of course, the one without young kids has to do the work of single-mom because she has to take time off for the soccer game, PTA, teacher conference, etc.

htb

Jai, there are very few same job/same qualifications/same company gender pay gaps in the US or Europe -- so few that when they're discovered, they're headline news. Many large companies actually have regularly scheduled internal analyses for gender and race wage gaps to make sure that they're lawsuit-proof on this point.

The gap is driven instead by men pursuing jobs at larger and better-paying companies *because* they are better-paying companies with more promotion options, and women pursuing jobs at smaller, worse-paying companies *because* they are smaller (think, "friendlier") or have non-monetary compensation (more interesting products, more variety in job duties, more stability, more interest in the individual and her contributions) -- or even because smaller companies are often somewhat female-dominated, and women like to work with and for other women.

C. Harper

> women still earn 12% less than men 10 - 16 years out.

That is between 0.7% and 1.1% per year. It isn't like men get a 12% higher raise every year. They may get a slightly higher raise every year, but after a decade or so, it adds up to 12%.

1% per year _is_ modest. It just looks big due to the magic of COMPOUNDING!

lt

I realized reading this that I'm one of the women that you're writing about. I wanted to add two additional points. First, I wanted to diminish the negative spin that's placed upon what are often women's conscious decisions to earn less. My husband and I occasionally talk about whether I should try to take a job that would require (many) more hours but likely pay me much more. The conclusion so far has always been the same -- I work 40 to 50 hours a week in a job that I love to earn more money than 95% of Americans and get a bonus larger than most families earn in a year. I don't need more money and I certainly don't need that at the expense of time with my family so please don't pity my lower salary. I am a life long feminist so I find it interesting that I am also happily choosing to be a statistic of women's inequality in earning. And this is not because I don't get help from my husband because we have a truly equal relationship. And this leads me to my second point. We were both born in the very late 70s and both got our MBAs in the mid-2000s so you would barely have data on us in your data series. We also both had mothers who worked and all the women of our parents' generation in both families worked. The main point in your article is that women earn less than men because of different choices they make about employment. I think you may be missing a transformative story about men also. It is really both my husband and I who are making different decisions about working because we both expect to work and care for our family equally. The senior women I know in financial services, like the senior men, are sole bread winners in their households. My husband and I are on the lead edge of the first generation in our country that has grown up with the expectation that we would be a two wage earner household. While I, and the women in your study, are struggling how to transform and reject the traditional housewife role, my husband is rejecting the pressure and time away from his family associated with the traditional sole breadwinner role. I think what labor statistics will say about both men and women as the result of this over the coming decade will be very interesting and I hope to read about it in the future.

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cresur

Check out the questions by Sasha and VJ. Their concerns, albeit plausible, are not supported by evidence, and all seem to come from self-esteem issues. It seems to me that women are the ones who are limiting themselves.

They are the ones who enter a job thinking they've been "mommy-tracked" because of their gender. They are the ones who shy away from negotiating salaries because they assume the interviewer will think they are worth less because of their gender.

Why, I ask? What makes these women think that everything that happens to them happens because of their gender? Could it be because the feminist movement taught women to see themselves as victims of an oppressive patriarchy in which their true worth will never be recognized and any success is beyond their reach? More and more it starts to look that way. If they want to be truly equal, women need to liberate themselves from feminism.

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