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.


jac

How much do the desires of men play into pay descrepencies. I have heard in other discussions on the subject that men rate income as being more important than women do. As such they are in general willing to work in less desirable less rewarding conditions then women if it will earn extra money. It seems to make sense that if men in general want to make more money they would tend to do what it takes to earn more money.

Do you think there are professions that suffer from a legacy of inequality? I would guess that when gender discrimination in the workforce was more rampent professions mostly practiced by women would have made much less money than those practiced by men. Are there professions that still earn less because they were traditionally women's jobs.

Mark Semo

I'm new to this site and can't wait to get an autographed copy of your book. I am a voracious reader since being stuck in this wheelchair 4 years ago.

Thanks again for the free books.

Dan Rosenberry

As others have alluded, there are a lot of factors that are hard to tease out.

Do women choose to reduce their hours because it's less costly to the household income due to overall reduced lifetime earnings, or do they have reduced lifetime earnings because they make different choices? Which factor is driving, the societal discrimination or the individual's choices? What is known that can distinguish between the two?

Wages might diverge due to the potential for children. If there's a chance that the employee might take time off down the road, that should impact present pay. How big is the impact? How can it be quantified? How can women credibly commit to not doing so?

Otherwise all women without children will bear the implicit costs of those that eventually choose to take time off, leading to lowered pay for women, leading to all women choosing to take time off. Is there a pay gap before time is taken off? How much of that is due to the possibility of future time not worked? How can this be disambiguated from discrimination?

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LisaC

What does this look like controlled for race?

Christy in Austin

Maternity leave is a sizable cost to the firm. Firms need to hire and train temporary workers or increase the workload of her co-workers, while still paying the pregnant employee. A rational firm would consider this cost when hiring future employees that are expected to take maternity leave.

In your research, how can we control for this effect and bargaining process (price taker vs. price setter) between an employer and potential employee?

sean

i am a bit shocked to hear women have slightly lower GPAs.

arthur stowe

if u r still deeply committed to learning about women's rights issues, and some day hope or plan to help get equal rights for women:

i think u will find this n at least some of the comments worth knowing about.

love n hugs n kisses,

bigdad

Jackie O

The generalized conclusion in this is skewed. Are the comparatives the same? Ex: 1.) Are we comparing men vs/ women at the same company, with the same education, doing the same job, for the same amount of time, with the same results? If not, this is nothing more valid than speculative theory...

Shan

Ummm... I am wondering if you just count the women whose partner earns less than they do, including the house husbands,will they earn more than their female colleagues and similar to the male counterparts? It is based on the hypothesis that people earn more money when they feel the necessities.

LP

Which gender switches jobs more?

Ruth

Are discrepancies a result of ineffective measurement of performance? How accurate are measurements of hours worked for salaried workers? How accurate are measurements of performance compared to the long-term performance of the company (on a scale ranging from Steve Jobs at Apple to Richard Fuld of bankrupt Lehman Brothers down to Ken Lay of Enron)?

Do male and female MBAs count schmoozing time differently when they calculate hours?

How do wage discrepancies look when you look at other groups of employees -- for instance, do the MBAs who smoke and work for smokers have higher salaries than the MBA nonsmokers who work for smokers?

Are salary discrepancies higher in companies where compensation is secretive and employees have to sign documents saying they won't reveal compensation? Are salary discrepancies higher or lower in companies that provide bonuses?

Would it be better public policy to regulate discrimination or to require all compensation to be public information? Do MBA recipients measure salary against personal goals or do they measure salary against others working in the same company, and if they measure against those in the company, what to they think they know about others' compensation and how accurate is their information?

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Chris

One possible flaw with your starting point is that the ambition level of the 2000 male students is the same for 2000 female students. There are certainly females that are every bit as ambitious as males, but I would guess there is less of them in the general population. I don't know how the University of Chicago handles enrollment, but if some sort of pro-diversity system is used, then there would be more competition amongst males. I am curious if there is a disparity in the GPAs of the 2000 males vs. 2000 females. Do students with the same GPA get the same starting salary? Do those same students (those that do not start a family) have a salary disparity after 5 years? I'm not even sure GPA is a good measure of ambition, does high GPA correlate with high hrs/week in the workforce?

Sumitra Shah

My apologies if this was mentioned in some post, but I find it curious that nobody is offended by the argument that maybe women 'love' babies and therefore sacrifice higher incomes to have them and bring them up. And men don't? Or men shouldn't? The way the market economy is working, the deck is already stacked against women; and our implicit acceptance of this division of labor (even of labor of love) bodes ill for females.

The Swedish system of requiring both fathers and mothers to take paid leave at children's birth maybe just the recipe that is needed in America to move in the right direction towards real gender equality in the workplace.
In Sweden, a parental allowance is paid out for a total of 480 days when a child is born or adopted. Women claim most of the days. In 2008, men claimed about 20 percent of parental leave. But another provision is also important:

Each parent has 60 days of leave reserved specifically for him or her, which means these days cannot be transferred to the other parent.

The father of a newborn baby gets 10 extra days' leave in connection with the birth of their child. With the birth of twins, a father is entitled to 20 days' leave

If we don't encourage men to be full participants in the household, we come up with reductionist and circular arguments like families rationally deciding that men would not spend time in childcare like women because their incomes are already higher than women's. The stigma attached to men withdrawing from work is not a fantasy.

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the viking

Why should I ask you a question? I already had concluded that from over 20 years in public and private sector. Is it a revelation to you that could only be discovered by your research? What you should do is study gay and lesbian couples with children and determine if there is a difference in hours worked between the two partners. I think I know that answer too but I am not going to help you.

ChallengeX

Have you done any studies across high pressure/low pressure jobs? Also, the averages in terms of salaries/hours are not a good measure, since for many MBA jobs the pay does not increase linearly with the hours worked.

A friend of mine, a then recent graduate of a top school MBA programm, was looking for a job a few years ago. And the search was not going too well, even though the market was bubbling. She explained that there are plenty of jobs paying $150K and up + bonus, however, they all require 70+ hrs workweeks. This was unacceptable for a mother of a young child. She ended up taking $80K job with 45 hrs workweek. She had all the requirements, the strong quantitative background, etc. She was getting offers for the high paying jobs, but she is now a statistics in the pay gap.

Raquel

Recently a friend that has a small kid just told me she was in competition to climb a level in her company's hierachy, but she was not sure she wanted the position.
Even if the number of ours that she would have to work was going to be the same, the position was associated with much more resposability.

My view is then that those women might be choosing to cool down on their carreers not for the hours spent in the office, but for the quality of their ours spent at home.

www.highflyingladies.com

why stop at such a superficial level of explanation. Okay, so women have less ambition and less desire to advance, according to research. Don't you want to find out why? Why is it that women have less ambition? Why don't they aim as high? Where does this lack of self-confidence and settling for less come from? What can be done about it? These are the real questions that should be addressed.

Leanna

Lack of desire? As a reason, that's really funny! Your research is a joke.
Loving kids? That's even funnier! Women love their children more than men? That's what you're basically saying. It's social/cultural pressure on women to take on the unpaid labour in the home.
What time does school end? What time does work for parents end? Society is set up so someone has to has to give in! Unfair. There's a lot more going on to explain the wage gap and your so called research is misleading.