Are Gay Men Really Rich?

Hey everybody. A Freakonomics Radio listener named Danny Rosa recently got in touch with us. He’s 22, recently graduated from the University of Chicago. He works as a youth advocate at the Los Angeles Gay & Lesbian Center. Danny himself is gay, and he has a question for us:

Danny ROSA: Hey, Freakonomics. I’m Danny Rosa and I’m wondering why gay men are so affluent and successful. If you walk down neighborhoods like West Hollywood in Los Angeles, the Castro in San Francisco, and Boystown in Chicago, they are all very well-kept, expensive, and highly sought after. So, I’m thinking, what is it about gay men and the gay culture that makes them so wealthy?

What is it about gay men that makes them so wealthy? It is true that the gay neighborhoods that Danny mentions in L.A. and San Francisco and Chicago – as well as similar areas in New York and Washington and elsewhere – are very nice neighborhoods. And if you watch even a little bit of television these days, you’ll get the same idea … So, yes, it’s pretty easy to get the impression that being gay is a ticket to affluence. But today, on Freakonomics Radio, we ask this: how real is that rich gay stereotype?

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Okay, so the question we’re trying to answer today seems pretty simple: why are gay men affluent? That, of course, presumes that gay men are more affluent, so we should probably start there. Let’s take a look at U.S. Census data. According to some analyses, median household income for heterosexual couples is about $86,000. For gay male couples, meanwhile, median household income is…$105,600, or nearly 20 percent more. And, for what it’s worth, lesbian couples have lower median income than heterosexual couples, about $84,000. So Danny Rosa seems to be right – gay men do seem to earn more. So the next logical question is … why? Lee Badgett is an economist at the University of Massachusetts-Amherst. She says it appears that gay men tend to have higher-than-average education levels. Now, there may be a lot of explanations for that. Here’s one you may not have considered:

Lee BADGETT: One possibility is a gay person says, well, I know I’m going to face some stigma and discrimination in the labor market, maybe my best defense against having an income disadvantage is to get a lot of education. So that’s one possibility that it’s trying to overcome the effects of discrimination.

Now, as we know, more education usually translates into more earnings. Here’s Steve Levitt, my Freakonomics friend and co-author. He’s an economist at the University of Chicago:

Steven D. LEVITT: The best estimates that economists have are that each extra year of education that you get is worth about maybe an 8 percent increment to your earnings each year for the rest of your life.

So someone with a college diploma will, on average, out-earn someone with only a high-school diploma by about a million dollars over their lifetime. If, therefore, gay men get more education, that would go a long way toward explaining why they earn more. Plus which, men generally earn more than women, so having two working men in a household should also lead to higher incomes. So that’s the earning. What about the spending? Are there big differences between how a gay couple and a straight couple spend their money? Well, the most obvious difference, and probably also the biggest, goes by a famous acronym DINK. That’s Dual Income, No Kids: Dan Black is an economist who teaches public policy at the University of Chicago. He says there’s a rank order as to what kind of couples are more likely to have kids:

Dan BLACK: The hierarchy sort of goes heterosexual couples, lesbian couples, followed by gay male couples.

Okay, here are the numbers. In the U.S., 43.5 percent of straight couples are raising kids under age 18. Among lesbian households, that number is 22 percent. And only 10 percent of gay male couples are raising a child. So a straight couple is more than four times as likely as a gay male couple to be raising a kid. And when you’re not raising a kid, as Dan Black points out …

BLACK: You have more disposable income because you’re not making the expenditures associated with having children.

And what kind of expenditures are we talking about for having children? Well, one government estimate says that American parents spend an average of nearly $175,000 per kid from birth to age 18. So a couple without kids – gay or otherwise – has that money to spend in some other way. How is it spent? Well, here is some data. The average same-sex household, we’re told, makes 16 percent more shopping trips than the average straight U.S. household. Also, gay households are said to spend 50 percent more on pet care products – so if you’re a dog, and you want to be pampered, having gay parents seems like a good idea. If you don’t have kids, you don’t have tuition bills and orthodontist bills, kick-boxing lessons to pay for. You don’t have to stay home with the kids when they’re young. Here’s another financial advantage of childlessness:

BLACK: So if you, you know, want to live in San Francisco it’s nice if you don’t have to buy a five-bedroom house.

That’s Dan Black again. He co-wrote a paper called “Why Do Gay Men Live In San Francisco?” So why do they? One reason is that they can afford to! But also, Black’s research shows that neighborhood amenities are a particular draw for gay men. Here’s Steve Levitt again.

LEVITT: So when economists talk about location they use the word amenities to mean the kinds of things that people are willing to pay for. So access to theater, or to nature, or to a good bar scene, or things like that.

So all the evidence seems to confirm the hunch that Danny Rosa, our Freakonomics Radio listener, got in touch to ask us about. That gay men are more affluent, probably because they’re more highly educated, and because they’re much less likely to have kids, which means they have the money to live in really nice neighborhoods. BUT, as you know, this show is all about using data to look at the world. And some data is much better than others. So what if the data that we’ve been looking at here … just isn’t very good?

BADGETT: The most important thing to know is that it is actually pretty hard to get good data on lesbian, gay and bisexual people.

Coming up on Freakonomics Radio, why everything that we just told you is probably kind of wrong.

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On today’s show we’re talking about the stereotype of the high-income gay American male, and how true that stereotype may be. So far, we’ve given you some pretty convincing-sounding data. But it’s probably not as convincing as it sounds. Keith Ericson is a professor of public policy and law at Boston University. There is a problem, he says, with just about everything we’ve told you so far:

ERICSON: Data about L.G.B.T. individuals that we have is really data about individuals who choose to disclose their sexual orientation. And that’s not necessarily a representative sample of gay people for instance.

O.K. So one problem is that not everyone who’s lesbian, gay, bisexual, or transgender is going to say so when a stranger with a Census form knocks on their door. But even before that, you have to back up a step:

ERICSON: Well, the first problem that we’d have is that the census doesn’t ask directly about sexual orientation.

DUBNER: Okay, so if the Census doesn’t ask directly about sexual orientation, how do we know what we’ve been telling you about – that, for instance, gay couples earn about 20 percent more than straight couples?

ERICSON: What people have been able to do at the census is look at people who report being in a same-sex-partnered household. And obviously that’s a sub-sample of gay people as a whole. It’s a sub-sample because not all gay people are partnered, and it’s also a sub-sample because not all partnered gay people would want to disclose that to the census.

DUBNER: So you see the problem, yes? You probably also see why, in the earlier part of our program, we told you about the income of gay couples but not individuals. But as Keith Ericson points out, even that data isn’t necessarily a good representation of the gay-couple population. And why is that? Well, maybe a high-earning gay couple is more likely to divulge their sexuality to a census-taker than a low-earning couple. So in a way, the more we learn here, the less we seem to know. Maybe we should go back even further back, to something really basic – like: what share of the U.S. population is L.G.B.T.? A Gallup poll tells us the number is about 3.4 percent. But again, keep in mind, that’s survey data. Keith Ericson says the L.G.B.T. headcount is “substantially underestimated.”

ERICSON: So we find that even when we ask people anonymously, if we ask them directly, they aren’t necessarily willing to reveal that they are L.G.B.T. But when we ask them in this private, veiled way so that we don’t know anything about a particular person, then our reported L.G.B.T. identity goes up substantially, about a 65 percent increase in our data.

DUBNER: So if a group of people is under-counted – and many of them may be unwilling to disclose information about themselves, it makes it pretty hard to get reliable data about their income, doesn’t it? So how can we find out if the affluent-gay stereotype is really true? Here’s economist Lee Badgett again.

BADGETT: We have a few studies from the Williams Institute that look at income…

The Williams Institute is a think tank at UCLA that specializes in issues around sexual orientation. Badgett is one of their scholars. The studies she’s talking about tell a completely different story about gay income.

BADGETT: Gay and lesbian people tend to have higher-than-average education levels, so you would expect them to have higher-than-average incomes. But when you compare gay and straight people with the same education level, actually the gay people earn less.

Did you hear that? Badgett says that, while her data may not be so great either, it appears that if you took two observationally equivalent men — same background, same education, and so on – that the gay man would earn less than the straight man, not more. In fact, earlier this year, Badgett and two co-authors released a Williams Institute study which found that gays and lesbians are more likely to live in poverty than observationally equivalent heterosexuals. Now, you may be a bit suspicious of such a claim made by an institute dedicated to sexual-orientation issues but, assuming it’s legitimate, the next obvious question would be: why aren’t gays earning more? Dan Black, from the University of Chicago, has a couple ideas:

BLACK: I think there is some good evidence that gay men do take occupations that are, you know, they look more female like, and of course female occupations traditionally pay a little bit lower so that could explain a part of it.

Now, again, keep in mind, an analysis like this relies on self-identified gay men who live with a same-sex partner but, among that group, a gay man was about 16 times more likely than a straight man to teach preschool or kindergarten. About 5 times more likely to be a librarian or a registered nurse. Not the highest-paying jobs. Dan Black says that if gay men do indeed earn less, there may be another reason:

BLACK: I wouldn’t be shocked to find that a good portion of that was actually due to discrimination.

Now, how does an employer discriminate against someone they think is gay? Here, according to Black and Badgett, is one way it can happen:

BLACK: You send… just send a resume in…

BADGETT: …and it’s just one little line that’s buried in there on the resume.

BLACK: And you know, down halfway through the resume you list a membership, or not, in a gay or lesbian group.

BADGETT And it employers, you know, who are seeing resumes with and without that line tend to notice it apparently, because in one study that was done by a sociologist recently here in the U.S., Andras Tilcsik, for every, for every eight jobs a straight man applied for, he got invited to an interview. But gay men had to apply for eleven jobs to even get just one interview. So that’s just at the interview stage. And I suspect that that differential treatment between the gay and the straight applicants is likely to be seen in other ways, if we could actually study this further into the employment process.

So how much might discrimination affect what gay men earn? You remember Keith Ericson, from Boston University?

ERICSON: Hi, yes…

Well, as he tells us, there might be more discrimination than we think, because there’s probably more homophobia than we think too …

ERICSON: We find that people are also hesitant to reveal that they don’t support gays and lesbians, that they hide their anti-gay sentiment. So when we ask in a private, veiled way, people are more likely to admit that they would be uncomfortable having a gay manager, or that they think it’s okay to discriminate against gays and lesbians.

A study that Ericson co-authored found that when people could answer questions totally anonymously, they were much more likely to express anti-gay feelings. So of course this would help explain why so many gays and lesbians are unwilling to admit they’re gay or lesbian. It also helps explain why it’s so hard to do something as simple as collect basic income information. Now, this will likely change as society moves on. Same-sex marriage is increasingly being recognized and legalized in this country and elsewhere.  What kind of changes will that bring? Over the past 20 years, it appears that the rate of partnered gay men becoming parents has nearly doubled. What happens if that trend continues? Here’s Dan Black again:

BLACK: Well it could have negative effects on economic outcomes in the sense that in particular I think giving greater access to adoption on the part of gay and lesbian couples might induce them to suffer, if you will, the consequences of having children, and of course achieve the obvious benefits to having children as well.

As someone who has kids, two of them, I’ll vouch for the benefits. I’ll also vouch for the costs. They are for real. As for the question that started this whole conversation, from Danny Rosa — he wanted to know “what is it about gay men and the gay culture that makes them so wealthy?” He got this idea from seeing the really nice, expensive gay neighborhoods in big cities. Media stereotypes confirm this idea. But as we’ve learned in today’s program, the data doesn’t necessarily confirm it. In fact, the data pushes back against this stereotype. Now, this wouldn’t be the first stereotype that turned out to not be true. Maybe the best lesson to learn from this is about what’s called confirmation bias. That means, basically, that when you already think something is true, you tend to pay more attention to evidence that confirms that idea. So if you already think that gay men are relatively affluent, and then you see a few really nice neighborhoods that happen to be gay neighborhoods – well, it confirms your view. It’s not that you necessarily block out the evidence that runs contrary; it just doesn’t register in the same way. This is just one of many ways in which we humans are, alas, not perfect. But we’re still pretty good. Happy holidays.