The wage gap myth


“For the economy as a whole, in 2017, women's gross hourly earnings were on average 16% below those of men in the European Union (EU-28). ”– Eurostat

Having first heard this a few years back, I was shocked that such a thing could happen. Not shocked in a repulsive manner, however; more so shocked at how this was possible, how someone could pay workers less based on their gender. How does this work? Do companies own two contracts, one for a man and one for a woman? And if hiring women is cheaper in relative terms, why don’t companies just hire women to reduce costs?

Intrigued by this, I decided to do a bit of research. As it turns out, it is not that straightforward. In fact, the gender wage gap is simply calculated by a formula in which we compare the average annual salary of men with the average annual salary of women (by dividing one by the other). So when we hear that “women make 77 cents on the dollar”1 what we are being told is that, on average, the mean salary of all American women is 23% lower than the mean salary of all American men. This is simply a statistic that doesn’t take into account a host of factors that might explain this discrepancy.

In order to fully understand why women make less than men we have to analyse the quantity and complexity of the work being done, as well as the workers’ ambitions when it comes to their career paths. Simply put, we have to take into account professional preferences that influence the desire to work and to choose a certain job.

There are clearly several components that go into the making of a person’s payroll: the job they have, needed qualifications, the necessary skillset, the number of hours worked per week, the number of extra hours worked, career prospects, quality of work, work ethic, risk involved with the job, so on and so forth.

If we first look at the type of work that is being done by the different sexes, data shows that men tend to go for higher paying careers whilst women go for lower paying ones. According to a study developed by Georgetown University2 researchers, the top five best paying college majors are: petroleum engineering, pharmaceutical science, mathematics and computer science, aerospace engineering and chemical engineering. In these majors, men account for, respectively, 87%, 48%, 67%, 88% and 72% of the students. Women out-represent men in only one of the five top paying majors, and by a very small margin. Considering the same study’s list of the top 5 worst paying college majors we have: counselling and psychology, early childhood education, theology and religious vocations, human services and community organization and social work. Here, women lead in all but one category. They represent, respectively, 74%, 97%, 34%, 81% and 88% of students.

But even within the same profession, men and women make different career choices that impact on how much money they make. One of the most important factors to look at is the desire to work. In fact, men tend to give a higher degree of importance to their careers whilst women put family and other values at the forefront. Because of this, they are more likely to work less in order to take care of children or babies after pregnancy. It is estimated that for every child a woman has, she suffers a five percent wage penalty3. They also work more hours at home (cleaning, cooking and so forth), which implies they have less time to focus on their careers. Should we now conclude that there is a wage gap between women who have children and women who don’t? Sure, but only because they work less and therefore earn less; not simply because they are mothers.

Another important factor are biological traits which distinguish men and women, although these are more arbitrary and harder to quantify. What we know is that the average woman is more agreeable and less assertive (with her boss or work colleagues, for example) than the average man, which can make her more likely to settle for a lower wage or less likely to ask for a raise. She is also less likely to move for a better job and less likely to have a dangerous job.

The most interesting topic regarding the subject of the gender wage gap is, perhaps, understanding the reason why women choose less paying jobs and focus less on their careers when compared to men. No doubt it is engrained in social, psychological and biological differences but an analysis in this field is beyond the scope of an economic interpretation of the gender wage gap. Still, it is an interesting and relevant point to consider.

As we can see, there is more than meets the eye when we look at the gender wage gap. In a world where information is produced and delivered at a faster pace than ever and where everyone has something to say, it is important to take a step back and separate facts from opinions and put math equations into a social and economic context. In fact, 10 years ago, in 2009, the US Department of Labour released a paper that examined more than 50 peer reviewed studies and concluded that the often cited 23 cent wage gap may be almost entirely the result of individual choices being made by men and women.

In conclusion, the gender wage gap exists mostly because of different individual choices made by the two genders, as research concludes. There may be other factors that influence the pay gap (perhaps even gender discrimination), but these prove to be much less determinant when we analyse the tremendous impact of individual choices. Nevertheless, this is a hard and complex issue which can only be discussed when people are well informed about facts and are able to see past the sensational title of “77 cents on the dollar”.

1 I will base this article on statistics from the USA simply because they are much easier to find and are based on more studies

2 Source: https://cew.georgetown.edu/wp-content/uploads/2014/11/whatsitworth-complete.pdf

3 Source: National Organization for Women

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