Ask a Scholar: What Accounts for Wage Differentials Between Men and Women?

Jason Fertig

Dear Ask-A-Scholar: Please outline the reasons for wage differentials between men and women.

Answered  by Dr. Jason Fertig, Assistant Professor of Management, Romain College of Business, University of Southern Indiana:

This seems like  an easy one – discrimination.  Women earn $.77 for every dollar than men earn. 

If only the answer were that easy.

There are certainly “old boys” networks out there, but it’s foolish to assume that any pay disparity between the sexes is primarily due to sexism.  The $.77 number is a talking point derived from looking at the wages of full-time workers and then performing a mean comparison by sex.  This type of simple math works wonders for teaching introductory statistics, but it’s not as useful for accurate social commentary.  With a little deeper dive into the data, we find that variables like occupational choice and hours worked account for much of the pay variance.  Yes, Larry Summers is vindicated.   Please note that nothing in this paragraph implies that there are no female engineers or females who work more than males; rather, these are variables that mediate the relationship between pay and gender across a studied population.

Yet, there are two arguments beyond the statistical one that need more airtime.  First, as Thomas Sowell has written on several occasions, where in society do we find a perfect 50/50 split?  There are more female nurses, but less female computer programmers.  There are also more African-Americans than whites in the NBA, but more whites than African-Americans in the NHL.  Asians tend to have higher GPAs in school than whites, but there are more whites than Asians in Congress.  Every group difference is not born out of bias.

Finally, let’s say that someone is still not convinced.  If so, this person needs to honestly answer this assertion – if the goals of businesses are to create and maintain a customer while also being profitable, why would any organization hire a man if a woman can do the same work for 25% less?  It takes a lot of chutzpah to say that having more testosterone in the office trumps a larger net income. 

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