Discrimination not main cause of Ontario’s ‘Gender Wage Gap’

By Ben Eisen of The Fraser Institute.

"Recently, Ontario’s Ministry of Labour published a report on the “Gender Wage Gap” in Ontario. The National Post quickly published a story about the study, repeating its headline statistic that women earn, on average, about 70 cents for every dollar a man takes home.

The Post article’s was not sufficiently critical of the report’s analysis, and may therefore leave many readers with the impression that Ontario’s labour market is rife with wage discrimination, and that women generally earn far less money than men for similar types of work.

This is a myth. The notion that women face wage discrimination of anything approaching the magnitude of 30-cents-on-the-dollar (tantamount to a 30 per cent wage gap) has been widely discredited, and springs from a crude comparison of the average annual earnings for all earners, which ignores key variables such as job tenure, weekly hours worked, education or the occupations people choose.

In fact, the Ministry of Labour itself helps demonstrate this reality in Figure 6 of its report, which shows recent trends in the “gender wage gap” by average hourly earnings as well as average annual earnings. If you adjust this data for the number of hours worked, the average hourly wage gap in 2014 between men and women shrinks to 11.9 per cent—far below the 30 per cent (or 70 cents for every dollar) headline figure.

Controlling for the number of hours worked in a typical week therefore explains most of the supposed 30 per cent gender wage gap. Much of the remainder can be explained by other observable differences between men and women including the occupations they choose to enter.

For example, men disproportionately choose to enter high-paying fields such as mechanical engineering and computer sciences, whereas women are much more likely to enter lower-paying fields such as social work and early childhood education. American author and scholar Christina Hoff Sommers has shown that, when analyzing data, controlling for an individual’s choice of college major causes much of the supposed wage gap to disappear. In other words, comparably skilled, educated and experienced men and women working similar numbers of hours in similar professions tend to earn about the same amount of money.

The existing research does not preclude the possibility that some small share of the observed wage gap between men and women could be the result of “statistical discrimination” driven by the fact that some employers prefer to hire young men over young women due to a woman’s greater likelihood (on average) of taking time off or leaving the workforce entirely due to pregnancy and/or child-rearing. The extent of this type of discrimination is poorly understood, but it can explain only a small share of the wage gap identified by Ontario’s Ministry of Labour.

Citing the fact that women earn, on average, 70 per cent as much money as men may make for good headlines, but it doesn’t prove the existence of significant gender discrimination in Ontario’s labour market. Because, again, simple adjustments (number of hours worked, occupations people choose) cause most of the apparently alarming 30 per cent wage gap to disappear.

There are legitimate conversations to be had about the effect of gender discrimination on women’s employment prospects and the appropriate policy response, but these are not aided by the repetition of misleading statistics that give a grossly overstated impression of the extent and nature of the problem."