77 Cents and Gender Discrimination: The Wrong Conclusion

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.

Comments

[Kelly]

I am so glad that I'm not the only woman who "gets it". Men and women are biologically different, therefore we are motivated and driven by different factors. More power to the women who are motivated by power and money, but that's not the norm of our gender.

[Laura Schroeder]

Great post. I know several women who accept a lower salary in return for fewer hours and/or more flexibility. Where wage discrimination exists it's wrong but this post rightly points out there's more to it than a simple dollar figure.

[E. James (Jim) Brennan]

A 9% pay gap sounds right to me. The gender pay differential for ACA members (WorldAtWork used to be the American Compensation Association) back in 1981 when Howard Risher, PhD, took all those variables into account was 14.3%. That research and more was cited in my "pro" Comparable Worth article in the July 2010 Workspan. Today, college women have out-graduated men and we have experienced a feminization of the professional work force, so a lot more women have entered those highly paid "male" jobs. All else held equal, women earning 9% less than the male full dollar makes sense.

[Michael Haberman SPHR]

This post should be required reading for EVERY person in HR. I am sending it out to everyone I know.

[Doug Sayed]

Thanks you for a little bit of common sense and reason! Every time I read about the alleged huge wage gap between men and women, I know that the person writing it doesn't understand issues like controlling for occupational choice, education, experience, and yes some subjective factors, like negotiating ability.

While I do believe that gender discrimination still exists (although to a lesser degree than when people first started talking about the gender gap), the 23% figure is pure fallacy and implies that the employers are actively suppressing wages of women. Haven't we moved beyond these beliefs by this point?

[E. James (Jim) Brennan]

Ah, but Doug, you are suggesting rational consideration involving logic and informed reasoning in a world dominated by marketing techniques that emphasize sound bites to generate thoughtless emotional reactions. Whether political policy or laundry soap makes no difference to the sleaze-merchants.

[Paul Weatherhead]

Hey, how is the litigation lawyers' lobby going to get more pay equity litigation legislation passed by rallying around a 9 cent gap?

It's much easier to rally people around a 23 cent gap!

[nadine]

I wonder how many people don't realize that they are being discriminated against. I recently left a job and found out that I was being paid 13.5k less than my predecessor.. among other things.

Could be my gender, age or race, but either way, it was clearly discrimination.