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.


Rick

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.

PaulD

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?

Andy

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?

Hillary

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.

Lisa

When you compare apples to apples (ie a childless, college-educated 29 yr old female in an urban area to childless, college-educated 29 yr old man in an urban area), what's the real wage discrepancy?
Isn't the real problem of the gendered wage gap that we keep getting statistics that aren't controlling for the issues the obviously cause people to make decisions that affect their wages? If a mom chooses to leave the workforce for 5 years to be a parent, it is not exactly shocking that she would then have a tough time coming back into the workfore at or above her previous wage, nor is it shocking that she'd be less likely to vault up the "corporate ladder" in terms of pay. Right?
Also, I'd love to hear about an apples to apples comparison of stay-at-home moms and dads to see if that still holds true.
Finally, I'd be interested to see the new proportion of female to male primary household breadwinners these days.

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Erik

While I agree that there is tremendous economical benefit in raising children that become productive members of society, this benefit certainly should not be paid for by a private employer...unless one promised that their kids would work there.

Choosing to take time off during one's prime earning years to raise a family can make excellent economic sense. Children often feel an obligation to take care of their parents later in life.

sasha

1. 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.

2. How would providing paternity leave benefits affect the wage gaps? Maybe women take more time off because their employers allow them to.

3. I believe women on average get married and start families at a younger age than men. So, maybe women in their late 20s are working less because they are likely to have a baby at home, but men don't have babies at home until they're older. Do men cut back on hours when they first have kids? What is the ratio of hours worked between female MBAs with children and male MBAs with children? Is it possible that women incur more of a penalty for taking leave earlier in their careers?

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Mark B

Men are judged by their earning ability so they expend more of their resources to reap financial gain. Women are judged on their beauty so they use more of their resources to look more attractive. One only needs to look at who has more cosmetic surgery . There may still be some bias, however, I doubt the gap will close completely.

Dr. Manak

I think it is fabulous that you plug your book every third of fourth blog entry

Rick

I recall a study regarding salary negotiations during hiring. It showed that women were more likely to accept the first offer and men were more likely to reject the first offer and to ask for more money even if the offer was completely acceptable.

logan

I recently read the book Why Beautiful People Have More Daughters which is essentially a brief introduction into the more fascinating aspects of evolutionary psychology. I find that some of the issues, when brought up with others, are very unpalatable.

For example, one of the issues spoken of in the book is the prevalence of the wage gap between genders. If I remember correctly, the authors say that the difference is due to the fact that women are primarily concerned with their children's well being where as men are more concerned with succeeding professionally. The point being that the psychology inherent in men and women is different; women are concerned with protecting their offspring where as men, at least subconsciously, know that their odds of passing on their genes is largely determined by their wealth/success. This difference, at least with the experiments they reference, supposedly explains 98% of the difference in earning between men and women which of course doesn't do the standard models of prejudice and bias an favors. Of course I'm skipping all sorts of relevant details and paraphrasing from memory.

My question is - is this at all a prevailing thought in this field or even a respected one? The people I've spoken with seem very unwilling to accept such an idea as is the case with many of the other issues in the book.

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Neela

Is there any evidence that differences in the level of specific vs. general knowledge partially explain the differences in was inequalities across industries and positions?

Bruce

I've witnessed salary equality in some settings I or my family/friends have worked: specifically public-sector jobs where standard job classifications and salary schedules are followed (including teaching). Similarly, in firms where I've worked, in same job classes, particularly in engineering, pay for women and men is exactly the same.

So in these kinds of jobs, would any long-term disparity really represent women stepping off the career track a while, or not even pursuing promotions in order to better balance work and family?

Does the data suggest certain types of jobs demonstrate lessor or greater disparity, and perhaps for different reasons?

A different question altogether is whether and why roles that (more so in the past) are typically associated with women may have lower pay scales, such as teaching and nursing.

Thanks!

htb

to Harold Cline (@12): Setting up a small business, e.g., during the dot com boom *is* "working". It is typically working an enormous number of hours, as a matter of fact.

In my experience, a dot com startup really did mean working 70, 80, or 90 hours per week, for months on end. There's a reason that we had a room filled with bean bags and sleeping bags, food in the kitchen, a shower in the bathrooms, and a spare set of clothes in nearly every desk: It's because the staff didn't always manage to go home at night.

Staying home to feed the baby has many wonderful social and relational benefits, but it is not "working" in the "getting paid for using your MBA" sense.

Christopher Strom

I'll echo both Banty's and Bruce's questions:

To describe "gender inequity in pay scales" seems very broad without controlling for certain factors such as marital status, continuity of employment, and especially field of work. I would think that some fields would permit more discretion in the setting of pay (business managers with MBA) than others (engineers with PEs).

Accordingly, do the data show varying gender inequity in pay across fields of work? And is the inequity consistent within a field or does it vary across employers? Is there even sufficient data to parse it in this way?

Jason

Why not look at medians instead of averages? Averages can be scewed too easily by some very high wage earners.

elena

I've just read Freakonomics...what an amazing book! Congratulations from Gijón, Spain

dave

Interesting, what I just read was that women do a better job of jprioritizing what is important as they age (i.e. job vs. family). I'd love a tangental analysis of these same groups and life expectancy, I bet it would be eye opening....

Kathleen

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. "

Bowen

You stated a major reason for the discrepancy of male-female wages was a woman's "love for kids". Have you considered that this "love for kids" is acutally a manifestation of societal norms requiring the woman to play an active role in the child-rearing process. I would like to see data for the men who take over the traditionally female role of rearing their kids. Is there a discrepancy there as well? If yes, societal norms might be a more accurate reason as compared to female discrimination.