Can you believe it's the 21st century, and we're still talking about pay equity and the gender wage gap?!?
Last week, President Obama urged Congress to pass the Paycheck Fairness Act. During an interview discussing the Act, White House senior adviser Valerie Jarrett said "women deserve equal pay," and cited a statistic: women earn 77 cents for every dollar men earn.
This "77 cents" statistic is certainly making the rounds- earlier this year, Acting EEOC Chairman Stuart Ishimaru stated, "The wage gap is alive and well in America, with the typical full time year round female worker making $0.77 for every dollar earned by her male counterpart."
What's the first thing you think of when you hear that statistic? If you're like most people, you think of gender discrimination. Women earn 77 cents for every dollar earned by men because of discrimination.
I'm here to tell you that's not true. The "77 cents" statistic can't be due to gender discrimination. Here's why.
In 2007, Francine Blau and Lawrence Kahn published an article that looked at earnings of men and women, and found a difference of 23 cents per hour; this article is the original source of the "77 cents" statistic. But they didn't stop there - they tried to understand what was causing the difference. Here's what they found:
*Blau and Kahn also included education; they estimate that education actually closes the wage gap by 6.7% (not included in my chart since it's a negative number).
Blau and Kahn found that 59% of the gender differential could be explained by non-discriminatory things: experience, chosen occupation, chosen industry, etc. So the "77 cents" statistic can't be due to discrimination:
- Estimated wage gap based on "77 cents" statistic = $0.23 per hour
- Amount explained by nondiscriminatory factors = $0.14 per hour
- Amount NOT explained = $0.09 per hour
According to Blau and Kahn, the most that could be attributed to discrimination is $0.09 per hour. And this assumes that their model accounts for ALL legitimate nondiscriminatory factors.
Are there legitimate nondiscriminatory factors that were omitted from their model? Probably - no model is perfect. Some people have argued that men are better negotiators than women, and because of this men tend to get higher starting salaries. Are differences in negotiating skills discriminatory? Perhaps, based on the way that we raise our daughters (that's a sociological issue). But the employer can't be held responsible for differences in negotiating skills, can he?
Something else to consider: overtime hours, shift premiums, etc., may cause a difference in earnings between men and women, even though their base rates of pay are the same. If a woman chooses to work fewer overtime hours than her male counterpart, resulting in lower earnings, is that discrimination?
If we were able to build the perfect model and study every single legitimate nondiscriminatory factor, the unexplained portion of the gender wage gap would likely be less than $0.09. And even then, it doesn't automatically follow that the remaining unexplained portion of the gap is directly attributable to the employer engaging in gender discrimination.
So now you know. The next time you hear the "77 cents" statistic, stop and think about what it REALLY means...
Stephanie R. Thomas is an economic and statistical consultant specializing in EEO issues and employment litigation risk management. For more than a decade, she's been working with businesses and government agencies providing expert EEO analysis. Stephanie has published several articles on examining compensation systems with respect to equity. She is the host of The Proactive Employer, and is the Director of the Equal Employment Advisory and Litigation Support Division of MCG.