Busting Myths: Do Women Earn 23% Less Than Men For The Same Work?

Recently at the 2015 Oscars, Patricia Arquette used her acceptance speech for best supporting actress to explain the need for “wage equality” for women. She based her speech off the entirely too often quoted statistic that women earn 77% as much as men for the same work. There’s a funny thing about statistics though, if you remove all the variables and qualifying information, you can make them say anything you want, even something that is patently false.

There are a wide variety of factors contributing to the perceived gap in pay between men and women, and it would be worthwhile to look at a few. The first one has to do with occupational choice. According to the Federal Reserve Bank of St. Louis:

“Men are more likely to be lawyers, doctors and business executives, while women are more likely to be teachers, nurses and office clerks. This gender occupational segregation might be a primary factor behind the [gender] wage gap.”

While there’s nothing wrong with being a teacher, a nurse, or an office clerk (in fact these jobs are good, important, and helpful), the simple fact is that there are a great deal many more people qualified to work as a nurse or a school teacher than there are qualified to work as a doctor, a lawyer, or a high level executive. Given the higher demand relative to the available supply for these jobs, they tend to pay higher wages.

Another major factor contributing to the perceived gap in pay between men and women is the choices made by men and women when it comes to the option of payment either in cash, or in cash plus non-cash benefits. Research shows that women prefer a higher percentage of their compensation in non-cash benefits (like health insurance, paid parental-leave, etc.), which the people railing against a perceived gender wage gap totally ignore. The Federal Reserve Bank of St. Louis explains:

“Some researchers believe that it is not enough to compare wages of similar men and women. They argue that total compensation (wages together with benefits) must be compared. Women of child-bearing age may prefer jobs with a lower wage but with employer-paid parental leave, sick leave and child care to jobs with a higher wage but without such benefits… Economists Eric Solberg and Teresa Laughlin applied an index of total compensation, which accounts for both wages and benefits, to analyze how these benefits would affect the gender gap. They found a gender gap in wages of approximately 13 percent. But when they considered total compensation, the gender gap dropped to 3.6 percent.”

From this we can gather that any measure of earnings that excludes fringe and other non-cash benefits will produce misleading results as to the existence of any sort of wage gap caused by gender discrimination.

So, we can see that two major factors in compensation are occupational choice and qualification, and additionally the choice in type of compensation. Another major factor in total compensation, (even in cases where men and women work in the same general occupation) is the total number of hours worked. For any variety of reasons, women tend to prefer more flexible hours, and tend to work shorter hours than men. Flexible hours are a wonderful thing, however they do come at an economic cost, since hours of work in most occupations will be more valuable to the employer if they are worked on a more consistent and linear basis. A bird in the hand is worth more than two in the bush to most people, and so one can expect a higher rate of compensation if they are able to offer more labor, and more importantly, more consistent labor.

Ultimately the complaints of those rest not in economic statistics or an understanding of supply and demand, but rather in (whether consciously or not) Karl Marx’s labor theory of value. This heterodox theory has bled into the discussion of wages far too much, when the discussion should instead be focused on human choice. We all want what we want, when we want it. We all want to get what we want at the lowest cost possible for us, and we all make choices based off of our desires. Because of this truth, economic value is always ultimately subjective and dependent on personal preference of individuals. The economic value of work is always subjective, and dependent on a complex series of decisions of a larger mass of individuals, making it clear that myths such as “women earn 77% of the money men do for the same work” are silly, and not based in any honest economic analysis.

Once variables such as hours worked, occupational choice, and varying types of compensation are accounted for, there is no discernible gap in the wages which men and women earn for similar work. The difference in overall wages earned between men and women reflects a different series of choices and preferences when looking at each sex more broadly, and there is nothing wrong with people making these choices free of coercion. However, there is something very wrong with presenting half-truths and lies about complex economic issues, and there is something far worse in asking the state to fix the perceived problem with the use of violence. Trade is about using your given set of skills to improve your own station along with the station of others by means of free exchange, and when the state interferes, it ends up harming everyone, men and women alike.

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3 thoughts on “Busting Myths: Do Women Earn 23% Less Than Men For The Same Work?

  1. Beautiful takedown. I’ve seen a few articles deal with the personal choices and different career tendencies between the sexes, but i hadn’t seen anyone mention the non-cash+cash vs just cash method of calculating earnings. It makes sense tho. I’m surprised i hadn’t thought more about it.

    Thanks.

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