Claudia Goldin Talked To Freakonomics About The Gender Pay Gap

See The True Story of the Gender Pay Gap: A New Freakonomics Radio Podcast. Excerpts:

"The implication is that women are being discriminated against. True, they earn less. But does that mean …

CLAUDIA GOLDIN: Does that mean that women are receiving lower pay for equal work?  That is possibly the case in certain places, but by and large it’s not that, it’s something else.

“Something else” – like what? That’s our question of the day on Freakonomics Radio, as we try to figure out the true story of the gender pay gap. If you’re looking for someone to explain the gender pay gap, you couldn’t do much better than today’s guest."

           "GOLDIN: Claudia Goldin, I’m a professor of economics at Harvard University.

Goldin has been working on gender economics for years, and has personally done some of the most influential research."

"In 1990, Claudia Goldin became the first woman to get tenure in the Harvard economics department. In 2014, she served as president of the American Economic Association, the AEA. Her lecture at the annual AEA meeting was called “A Grand Gender Convergence: Its Last Chapter.”

DUBNER: You have argued — and I’ll quote you to yourself — “The converging roles of men and women are among the grandest advances in the last century.” What do you mean by that, and why is it so grand?

GOLDIN: I’m very much interested in converging roles having to do with the productive capacities of men and women. So that would be their education, their professional degrees, their life-cycle labor-force participation — meaning how many years have they been productive members of the workforce. And so, there are converging roles in these arenas and they have meant that men and women are significantly more alike in terms of how firms and employers would look at them and how they look at themselves.

DUBNER: Now, we hear about the gender pay gap a lot.  We’re told repeatedly — including by the President of the United States in the State of the Union — that “women earn much less than men for doing the same work,” is one of the phrases that we hear — seventy-some cents on the dollar. So, first off, can you clarify what that really means?  How true is that, when we hear a statement like that, especially in a political arena?

GOLDIN: Well, it is true that if you took individuals in the labor force and took those who were working full-time, full-year, and took all women, took the median annual earnings of those women and took the same thing for men, and divided the two, it would be .77 or around that, OK?  And that’s a number that has increased. In early 1970’s it was .59 and there was a mantra, “59 cents on a dollar, that’s not enough, OK?  We are equal to men, we deserve more.”  So, is this for equal work?  Is it equal individuals?  What economists do is they use data to figure out whether the individuals are the same; they try to make them comparable as possible; they squeeze out these differences and productive attributes; they look for individuals who have the same education, the same labor-force participation rates over their life cycle, etc.  And they squeeze those out and we still get a number that’s less than one. So, does that mean that women are receiving lower pay for equal work?  That is possibly the case in certain places, but by and large, it’s not that. It’s something else.

DUBNER: If we are talking about a gender pay gap, of whatever size — somewhere between 23 cents and zero cents less per dollar than a man — let’s look at what factors might contribute to that.  So, number one, what about discrimination? What is the evidence that women earn less because they’re discriminated against on some dimension or another.

GOLDIN: It’s hard to find the smoking guns, OK?  The smoking guns existed in the past. I have found many a smoking gun where you find actual evidence of firms saying, for example, “I do not hire Negroes.” Or, “I do not hire women.” I mean, you actually find these in 1939.  We don’t find those smoking guns now, but what we do try to do is hold everything constant that we can hold, get the best data that we can get. And what remains we don’t call discrimination, we call wage discrimination. Discrimination is such a loaded word that we don’t want to use that, so we use quotes around “wage discrimination.” And so the first thing is, what type of data do you need to do that? It would be incredibly rich data. And a couple of people have put together data using administrative records that are phenomenally good data that can hold lots of things constant, that can track individuals over their lifetimes and get to the answer. And the answer is that it’s a pretty small number, this number for wage discrimination once you hold lots of things constant.  It’s probably there, but we’re not quite certain whether these differences are due to the fact that women, even those without kids, have more responsibilities or take more responsibilities in their own families — taking care of their parents, for example.  So the answer is that we don’t have tons of evidence that it’s true discrimination.

DUBNER: Talk for a moment about potential categorical differences between men and women that have shown up in some research.  The different appetite for competition, as some have labeled it. Or, in another instance, the willingness to bargain on salary or flexibility.  How much might those contribute to the pay gap?

GOLDIN: I think there’s no doubt that they contribute to some degree. But let me tell you why I don’t think that they go the real distance. Some of the best studies that we have of the gender pay gap, following individuals longitudinally, show that when they show up right out of college, or out of law school, or after they get their M.B.A. — all the studies that we have indicate that wages are pretty similar then. So if men were better bargainers, they would have been better right then. And it doesn’t look as if they’re better bargainers to a degree that shows up as a very large number.  But further down the pike in their lives, by 10-15 years out, we see very large differences in their pay. But we also see large differences in where they are, in their job titles, and a lot of that occurs a year or two after a kid is born, and it occurs for women and not for men. If anything, men tend to work somewhat harder. And I know that there are many who have done many experiments on the fact that women don’t necessarily like competition as much as men do — they value temporal flexibility, men value income growth — that there are various differences. But in terms of bargaining and competition it doesn’t look like it’s showing up that much at the very beginning.

DUBNER: Let me ask you about one more contributory factor. The parent penalty, what’s often called the mommy tax. How significant is that as a contributory factor?

GOLDIN: Well, it seems as if it’s a very large factor.  That anything that leads you to want to have more time is going to be a large factor.

The noted public-policy scholar Anne-Marie Slaughter, in a book called Unfinished Business, singled out what she calls the “care penalty” as a main driver of gender inequity. Here’s how Slaughter sees it:

ANNE-MARIE SLAUGHTER: If you take women who don’t have caregiving obligations, they’re almost equal with men. It’s somewhere in the 95 percent range. But when women then have children, or again are caring for their own parents or other sick family members who need care, then they need to work differently. They need to work flexibly, and often go part-time. They often get less-good assignments because their bosses think that they’re not going to want work that allows them to travel, or they’re not going to be able to stay up all night, or whatever it is. And so then you start — if you’re working part-time, you don’t get the same raises. And if you’re working flexibly your boss very typically thinks that you’re not that committed to your career, so you don’t get promoted.

It is this pursuit, of what Claudia Goldin calls “temporal flexibility,” that Goldin sees as perhaps the most powerful explanation for the gender pay gap. As she told us, it doesn’t seem as though outright discrimination or differences in competitive drive or bargaining ability can account for much of the difference. But that need, or desire, for flexibility in the workplace leads to a split that’s very clear in the data — a split that has to do with job selection.

GOLDIN: Women often take jobs that have different characteristics, different amenities.

When Goldin refers to “amenities,” she isn’t just talking about free lunch at the office or free massages. She’s talking about the ability to work flexible hours, or maybe work at home some days, maybe complete a project outside the typical corporate schedule — all of which can be extremely valuable if you are helping care for your family members in addition to working.

GOLDIN: I like to think about an individual who gets a degree — let’s say a law degree — and it’s a woman, and now I have an individual a man who gets a law degree. And they graduate from law school and they’re both equally brilliant, and they both get jobs in approximately the same type of firm. By and large they’re going to earn approximately the same amount when they start. Things will continue in their lives — they’ll both perhaps find partners, get married, have kids. It’s often the case that women will leave the very large law firms that put a lot of time demands on them and go to smaller firms or become corporate counsel, become part-time corporate counsel, perhaps, for a while. They will go to small firms where the workload is somewhat different. They may work in fact the same number of hours, but they may work hours that are their hours rather than the hours imposed on them by the firm. The woman will then begin to make — if she’s the one who did this — she will make considerably less than the man.  And a lot of what we see — not all of it — but a lot of what we see is this choice to go into occupations that have less expensive temporal flexibility, that allow individuals to do their work on their own time.  

DUBNER: So do you find that there are bigger differences between men and women between different occupations? In other words, what would be a more typical story? A man and a woman, let’s say, who are observationally equivalent in terms of aptitude and education, and so on.  What would be more typical, that the female would go into a profession where the average salary is lower than the man? Or that the female would go into the same profession as the man, but choose a particular type of occupation within that profession that might provide more latitude and therefore come with less salary?

GOLDIN: Right, so we have both things going on. So, we know that there is what many people call “occupational segregation.”  Nurses are female.  Doctors are — they were disproportionately male; in some specialties they still are.  We know that nurses earn less than doctors, in general.  So one might think that all of the difference in average earnings is going to be the difference because women select more into occupations that look like they’re paying less — big occupational groups that are paying less — and men select into occupations in which they pay more. But, really the lion’s share of the difference is due to the fact that in every occupation, just about, women receive less than men. And they’re receiving less than men for a host of reasons, one of which is that they’re not working the same amount of time. And in many occupations, working more hours or being there when the firm wants you to be there earns you a lot more. So, in fact, something like three-quarters of the difference, if you look at the 469 occupations in the Census, and you look at how much is due to the fact that women are disproportionately in certain occupations, and how much is due to the fact that within each occupation there are differences — 75% is due to the within each occupation.  Thus, another way of putting it is, you could hypothetically give women the male distribution of occupations and you would wipe out only about a quarter of the difference in earnings between men and women.

DUBNER: Can you talk for a moment about where you see the largest in-sector differences in gender pay?

GOLDIN: So, what I did was I took all of the occupations in the Census and then I looked at the top paying 105 occupations. So, the point that I’m drawing is about $60,000 a year. So, the occupations then divide into those in the corporate and finance sector, those in health, those in science and technology, which I can group together.  And then there is this other group that’s just very hard to put in one or the other — lawyers, for example, would be in that one.  And what I find — it’s very clear — is that the gender wage gaps, when you correct for the stuff you can correct for in the Census, you find that the biggest wage gaps are in the corporate, the financial sectors, also law, and the health occupations in which there is a high fraction of ownership, of self-employment — so the podiatrists, for example, the chiropractors.  So, the ones that have the smallest difference between male and female earnings with these corrections are the technology occupations and the science occupations and the health occupations where there is a small degree of self-employment — as is true today for, for example, pharmacists.

DUBNER: OK, so as best as you can figure the why out, where the gap within the profession is so large, why is it so large?

GOLDIN: By and large, it appears that there’s just a very high cost of temporal flexibility in certain occupations. And part of this is that people don’t have good substitutes for themselves in certain cases.  So, you are doing a merger in an acquisition, you’re a lawyer, you are a consultant — whatever it is — the client might say, “I want you there. I want you there all the time.  I want to call you at 2 in the morning. I want you to be there on Sunday, on holidays. I want you to go to Japan whenever I say that you should.”  Well, that’s a tremendous demand. So an individual who values their family time would say, “I’m not doing that.” So therefore if a woman wants to — law, for example, is a good example — if a woman wants to practice law, she has a law degree, she enjoys practicing law, being a corporate counsel would give her more flexibility. That doesn’t mean that she’s working fewer hours than she would’ve worked otherwise, but she can work her hours, and she gets paid somewhat less.  

The big question of the gender pay gap has to be broken down into a set of smaller questions. And then you have to find the data to answer them. When someone like Claudia Goldin does that, it’s pretty obvious that the statistic cited by everyone from Sarah Silverman to President Obama isn’t quite right. Because women aren’t getting paid twenty-some percent less than men for doing the same work. They are, however, often doing different work, or work that affords more flexibility — which tends to pay less.

Now, it may be that if you put a dollar value on the flexibility, it could offset a lot of the actual, salary dollars. In any case, there would seem to be kinda-sorta good news here, which is that discrimination doesn’t seem to be the main culprit in the gender pay gap. Or at least it’s hard to find a smoking gun, as Claudia Goldin says. But not impossible."

"DUBNER: So, let me ask you this. Can you point to examples of countries or cultures or maybe firms that in your view have successfully addressed the real root causes of the gender pay gap?

GOLDIN: In some ways, certain occupations that seem to have successfully addressed them may not have given it any thought.  My favorite example is pharmacy, in which there’s virtually no part-time penalty, in which there is very little ownership now in terms of independent pharmacies. We may lament that — I would certainly lament if I lost the wonderful independent pharmacy in Cambridge — but in fact, women tend to shy away from ownership in part because it involves a fair amount of responsibility that is unpredictable. So, there have been changes in pharmacy that have led pharmacists to be better substitutes for each other — the use of highly standardized drugs, for example, less compounding, less individual, less need for a particular pharmacist to deal with you. Information technologies have been absolutely essential. When you go to the pharmacist, it could be any of the pharmacists working there who are intelligent and professional and can read the information about you. So some of what has happened that has been good for women comes from changes that I call organic, and they simply happen because of various technological advances that make each pharmacist a perfect puzzle piece for another pharmacist. And also, I mean, go to Silicon Valley and they don’t talk about family time, they talk about play time, and it’s work-life balance rather than just work-family balance. So the more and more people in our society who value that, the more firms are going to be searching for methods to reduce the cost of this amenity.  If the cost is expensive, then it’s going to be the case that individuals who shy away from those jobs are going to be paid disproportionately less and the more people who want those jobs, the more firms are going to find it costly to provide them, and they’re going to come up with ways using information technology to create these puzzle pieces."

 "It may be a natural impulse, when you hear that women earn less than men, to find someone to blame. One obvious villain is: men, presumably for being discriminatory. But as Claudia Goldin told us, there isn’t much evidence to support the discrimination argument."