Friday, December 2, 2016

Data from BLS report on women’s earnings suggest that raw gender pay gap is explained by age, marriage, hours worked

From Mark Perry.

"The Bureau of Labor Statistics (BLS) releases an annual report every November on the “Highlights of Women’s Earnings” (since the BLS report actually analyzes equally both men’s and women’s earnings, one might ask why the report isn’t simply titled more accurately “Highlights of Earnings in America”?).


Here’s the opening paragraph from the most recent BLS report “Highlights of Women’s Earnings in 2015” that was just released:
In 2015, women who were full-time wage and salary workers had median usual weekly earnings that were 81 percent of those of male full-time wage and salary workers. In 1979, the first year for which comparable earnings data are available, women’s earnings were 62 percent of men’s. Since 2004, the women’s-to-men’s earnings ratio has ranged from 80 to 83 percent.
How do we explain the fact that women working full-time last year earned only 81 cents for every dollar men earned according to the BLS? Here’s how the National Committee on Pay Equity explains it:
The wage gap exists, in part, because many women and people of color are still segregated into a few low-paying occupations. Part of the wage gap results from differences in education, experience or time in the workforce. But a significant portion cannot be explained by any of those factors; it is attributable to discrimination. In other words, certain jobs pay less because they are held by women and people of color.
Let’s investigate the claim that the gender pay gap is a result of discrimination by looking at some of the wage data by gender in the BLS report for 2015:

1. Among full-time workers (those working 35 hours or more per week), men were more likely than women to work a greater number of hours (see Table 5). For example, 25.8% of men working full-time worked 41 or more hours per week in 2015, compared to only 14.5% of women who worked those hours, meaning that men working full-time last year were nearly twice as likely as women to work 41 hours per work or more. Further, men working full-time were also 2.5 times more likely than women to work 60+ hour weeks: 6.2% of men worked 60 hours per week or more in 2015 compared to only 2.5% of women who worked those hours. Also, women working full-time were about 2.5 times more likely than men to work shorter workweeks of 35 to 39 hours per week: 11.3% of full-time women worked those hours in 2015, compared to only 4.7% of men who did so. What’s especially interesting is that women working 35-39 hours per week last year earned nearly 10% more than men who worked those hours, i.e. there was a 9.1% gender wage gap in favor of female workers for that cohort. Using the standard political and gender rhetoric, couldn’t that wage premium for women only be explained by gender discrimination against men in the labor market for employees working 35-39 hours per week?

2. Although not reported by the BLS, I can estimate using its data that the average workweek for full-time workers last year was 41.4 hours for women and 43.3 hours for men. Therefore, the average man employed full-time worked nearly 2 more hours per week (1.90 hours) in 2015 compared to the average woman, which totals to an average of an additional 95 male work hours per year.

Comment: Because men work more hours on average than women, some of the raw wage gap naturally disappears just by simply controlling for the number of hours worked per week, an important factor not even mentioned by groups like the National Committee on Pay Equity. For example, women earned 81.1% of median male earnings for all workers working 35 hours per week or more, for a raw, unadjusted pay gap of 18.9% for full-time workers. But for those workers with a 40-hour workweek, women earned 88% of median male earnings, for a pay gap of only 12%. Therefore, once we control only for one variable – hours worked – and compare men and women both working 40-hours per week in 2015, more than one-third (36.5%) of the raw 18.9% pay gap reported by the BLS disappears.

3. The BLS reports that for full-time single workers who have never married, women earned 91.2% of men’s earnings in 2015, which is a wage gap of only 8.8% (see Table 1 and chart above), compared to an overall unadjusted pay gap of 18.9% for workers in that group. When controlling for marital status and comparing the earnings of unmarried men and unmarried women, more than half (53.4%) of the raw 18.9% wage gap is explained by just one variable (among many): marital status.

4. In Table 7, the BLS reports that for full-time single workers with no children under 18 years old at home (includes never married, divorced, separated, and widowed), women’s median weekly earnings of $679 were 93.4% of the weekly earnings of $727 for their male counterparts in that cohort (see chart above). For this group, once you control for marital status and children at home, we can explain about two-thirds of the unadjusted gender earnings gap.

5. Also from Table 1 in the BLS report, we find that for married workers with a spouse present, women working full-time earned only 78.1% of what married men with a spouse present earned working full-time in 2015 (see chart). Therefore, BLS data show that marriage has a significant and negative effect on women’s earnings relative to men’s, but we can realistically assume that marriage is a voluntary lifestyle choice, and it’s that personal decision, not necessarily labor market discrimination, that contributes to at least some of the gender wage gap for married full-time workers with a spouse present.

6. Also in Table 1, the BLS reports that for young workers ages 20-24 years, women earned 89.7% of the median earnings of male full-time workers reflecting a 10.3% gender wage gap for that age cohort in 2015. Once again, controlling for just a single important variable – age – we find that nearly half of the overall unadjusted raw wage gap for all workers (18.9%) disappears for young workers.

7. Also from Table 7, married women (with spouse present) working full-time with children under 18 years at home earned 80.4% of what married men (spouse present) earned working full-time with children under 18 years (see chart). Once again, we find that marriage and motherhood have a significantly negative effect on women’s earnings; but those lower earnings don’t necessarily result from labor market discrimination, they more likely result from personal family choices about careers, workplace flexibility, child care, and the number of hours worked, etc.

Bottom Line: When the BLS reports that women working full-time in 2015 earned 81.1% of what men earned working full-time, that is very much different than saying that women earned 81.1% of what men earned for doing exactly the same work while working the exact same number of hours in the same occupation, with exactly the same educational background and exactly the same years of continuous, uninterrupted work experience. As shown above, once we start controlling individually for the many relevant factors that affect earnings, e.g. hours worked, age, marital status, and having children, most of the raw earnings differential disappears. In a more comprehensive study that controlled for all of the relevant variables simultaneously, we would likely find that those variables would account for nearly 100% of the unadjusted, raw earnings differential of 19% lower earnings for women reported by the BLS. Discrimination, to the extent that it does exist, would likely account for a very small portion of the raw gender pay gap.

For example, in a 2005 NBER working paper “What Do Wage Differentials Tell Us about Labor Market Discrimination?” by June O’Neill (Professor of economics at Baruch College CUNY, and former Director of the Congressional Budget Office), she conducts an empirical investigation using Census data and concludes that:
There is no gender gap in wages among men and women with similar family roles. Comparing the wage gap between women and men ages 35-43 who have never married and never had a child, we find a small observed gap in favor of women, which becomes insignificant after accounting for differences in skills and job and workplace characteristics.
This observation is an important one because it suggests that the factors underlying the gender gap in pay primarily reflect choices made by men and women given their different societal roles, rather than labor market discrimination against women due to their sex.
To claim that a significant portion of the raw wage gap can only be explained by discrimination is intellectually dishonest and completely unsupported by the empirical evidence. And yet we hear the false claims all the time from groups like the National Committee on Pay Equity, the American Association of University Women, the Institute for Women’s Policy Research, and politicians like President Obama, President Jimmy Carter and Virginia governor Terry McAuliffe that “women are paid 77 cents on the dollar for doing the same work as men.” Last year, Hillary Clinton made the completely false claim that “On average, women need to work an extra two hours each day to earn the same paycheck as their male co-workers.”

When those false claims are made, there is never any attention paid to the reality that almost all of the raw, unadjusted pay differentials can be explained by everything except discrimination – hours worked, age, marital status, number of children, years of continuous work experience, workplace conditions, career choices, education, etc. In other words, once you impose the important ceteris paribus condition that “all other things are equal or held constant,” the gender pay gap that we hear so much about probably doesn’t really exist at all.

But we know by now that logic, economic theory, and empirical evidence won’t matter to gender activists, progressives, President Obama and most Democrats, and all we’ll hear regarding the new BLS report will be that women earned only 81 cents for every dollar earned by men last year…. for doing the same work, and how unfair that is…… And we’ll hear all about their plans to address and correct the raw gender pay gap with additional legislation, even though a comprehensive 2009 study from the Department of Labor came to the following conclusion (emphasis added):
This study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers."

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