The gender wage gap is not a "myth"

It’s common to hear commentators, typically on the right of the political spectrum, describe the gender wage gap as a “myth”. A pertinent (if unexpected because he’s usually more nuanced than this) example came recently form Jordan Peterson in an interview over on Quillette:

It doesn’t exist. How about we do some multivariate analysis? That’s the answer to that. Men and women get paid differently. What’s your point? Do you want to add some more variables? How about we do that? Which variables?

Well, we can have an intelligent discussion about that. If you do a reasonable multivariate analysis, there is no gender pay gap. (emphasis added).

I’m going to need to see some citations please.

To my knowledge, this claim is not true for any country. It isn’t true for the United States. It isn’t true for Britain. And it certainly isn’t true for my home country of Australia. None of these countries is particularly special by OECD standards, so there is no reason to think the wage gap is close to zero anywhere else either, except perhaps Scandinavia.

The National Centre for Social and Economic Modelling (NATSEM) at the University of Canberra did an extensive multi-variate analysis of the Australian gender wage gap in 2001 and found a gap of 7 per cent after all available controls were accounted for (see link here, pg. 20). Some might scoff: “well, 7 per cent is trivial!” Really? The median individual earnings of Australians in 2016 was $78 800 p. a. 7 per cent of that is $5516. The Australian retirement age is 65.5 years. Assuming you start work after tertiary education at 21, that leaves you 44.5 years to work for a total average wage loss for having a vagina of $245 462, before compound interest is factored in. Does that sound trivial to you?

More recently using data up to 2012, a PhD colleague of mine at the Crawford School of Public Policy at the Australian National University completed an even more extensive analysis using fixed effects techniques. In her analysis, the gender wage gap shrinks dramatically (from 19 per cent) with controls for labour market characteristics like education and experience and individual-specific, time-invariant fixed effects (see here for an explanation of what this statistical technique involves). But it does not disappear. The residual wage gap is 8 per cent in the private sector and 6 per cent in the public sector. We cannot necessarily attribute this residual to sexist prejudice, but we also can’t rule it out.

The idea that the gender wage gap is a myth typically emerges as a response to misguided feminists who believe the wage gap refers to equal pay for equal work. Cathy Newman seems to fall foul of this misunderstanding in her recent interview with Peterson, and bell hooks explicitly makes this error in her Feminism is for Everybody. The gender wage gap absolutely does not refer to different pay for the same work, even after controls. It refers to the average pay of all men compared to the average pay of all women. Even after controls are included, there are still plenty of potential unobserved factors accounting for the pay gap other than gender. Many of the factors mentioned by biologists and evolutionary psychologists like personality type are difficult to get individual level data on in large enough samples to run reasonable estimates of the gender wage gap.

We are not comparing apples and apples with different genitals here. Such a comparison is exceedingly difficult to achieve. Arguably, the closest we have come is the work of Claudia Goldin, Lawrence Katz and Marianne Bertrand (hereafter GKB) on gender pay gaps among MBA graduates from the University of Chicago. They find that immediately after graduation, there is virtually no wage gap among these people. Yet within a decade, the wage gap has exploded to 60 log points. The main factor that accounts for this is career interruptions caused by children, and the resulting preferences for jobs with more flexible hours.

An altogether too common response to GKB’s findings is to say: “See! Among elite graduates of elite universities who go on to work in elite firms, the wage gap is only a function of the fact that it is overwhelmingly women who take on child rearing duties. No prejudice here! The gender wage gap is a myth! Case closed.”

Hold up a second.

For starters, neither MBA graduates of Chicago University nor the world of corporate finance are representative of the wider population of employees and industries, so we have to be at least a bit cautious about the extent to which we generalise these findings.

A second important question to ask is why do women overwhelmingly bear the career costs of child rearing? If feminism is about equality of opportunity (rather than reverse-patriarchy) then it is understandable that feminists would be incensed to discover that all the incentive structures in place across social, cultural and economic policy encourage them to be the primary carers rather than fathers. Feminist men, like myself, tend to also be discouraged when they discover that not only must they bear the career-interruption costs of child-rearing if they want to be primary carers, but they must also forgo all the tax-and-transfer (not to mention social) benefits directed at women in many countries to encourage them to stay home and be mothers.

This is part of a bigger issue: even if the gender wage gap shrunk to zero after controls, even if it was shown to be entirely a function of women making different choices to men, it would still be a fact that women are on average paid less than men in all countries. Not necessarily less for the same work, but less on average. That is not a trivial fact, and it certainly isn’t a myth. The gender wage gap exists. Many people, quite reasonably, consider this a problem. They are especially inclined to consider it a problem if it indicates that women are being shepherded by social, cultural and economic forces into making decisions that leave them financially dependent on men. This would come under the heading of patriarchal social structures that oppress women.

Let me provide some quick examples to set the scene. First, a range of settings in the Australian labour market, notably the general absence of paternity leave policies, clumsy regulations that constrain the supply of childcare and thus make it extremely expensive, and spousal tax treatment provisions that encourage women rather than men to take care of children, all combine to make it overwhelmingly the case that new mothers take time-out from their careers to raise children. This interrupts the wage growth of these women just as it is taking off, results in them having smaller superannuation funds at retirement, and encourages firms not to promote women to middle management out of fear that they will shortly exit the workforce to have children. All of these factors contribute to women being more economically dependent on men, especially if they want to have children.

Some readers are doubtless already stewing because they see all this as perfectly natural: women give birth and breast-feed, so it is only common sense that they should be the primary carers.

You are committing the naturalistic fallacy: you are arguing that because something emerges organically that it is morally good or at least not something to get angry about. This is, as the name implies, fallacious logic. Thomas Hobbes described the natural order as “nasty, brutish and short”. Unsurprisingly, we have taken extensive measures to improve matters. The same could be done for the agency of women. Even if we did concede the need to protect the special bond between mothers and infants, it is far less clear that this extends to older children. Indeed, it is common in Scandinavia for fathers to take leave from work to mind the children once the mother finishes breast-feeding, in part because by this stage the baby is quite large and it helps to have a burlier parent around. 

A second example of how social, cultural and policy settings encourage women to make choices that make them economically dependent on men is the range of cultural cues that encourage women into professions that are paid less than men. Advocates of the myth argument are quick to point out that a major reason why the gap is so large is that men are overrepresented in the highest paid professions, like finance and engineering. They are even overrepresented in the highest paid subfields of particular professions. For example, most surgeons are men while most paediatricians are women.

I am an economist, so I am inclined to believe that the wage differentials across professions predominantly reflect the forces of supply and demand. It might still be worth fighting these forces, but supply and demand at least don’t discriminate based on gender. Becker famously demonstrated mathematically that if women are more productive than men at a task then prejudiced firms will be outcompeted and eventually bankrupted by firms happy to hire women. Nonetheless, we can still ask why so many more men are in the high-paying professions, and whether there is some way that we can encourage more women to participate in them. I do not doubt that there are many biological reasons why there are gender differences in career choice (Peterson explains some of them very neatly in the interview linked above), and personally I do not think fighting those biological reasons is a particularly constructive way to reduce the wage gap. But there are also undeniably some social, cultural and policy settings underpinning gender differences in career choices, and these seem much more worth combating. 

Consider the following. A range of experimental studies have shown that female students in all-girls classes are more comfortable with risk and competition than similar students in co-educational classes. This might be a case of stereotype threat: where people conform to a stereotype in the moment even when that stereotype does not reflect their true nature simply because they feel social pressure to behave in accordance with that stereotype.

Another recent experimental finding is that top performing female students of economics are more likely to major in that discipline if they receive some encouragement from their professors. The same effect is not observed for men. Again, stereotype threat might be at play: women don’t see it as appropriate to their social role to study economics, even when they are interested in it and competent at it. Economics is one of the highest paid professions globally, so this should be concerning to anybody who worries about women being socially encouraged into choices that make them financially dependent on men.

Consider this in light of recent data gathered by Betsy Stevenson of Michigan University showing that even in the most balanced case, women feature in less than half as many of the examples used in economics textbooks as men. This subliminally suggests to women that they are alien to the discipline and would fit in better elsewhere. This is a social setting—it has nothing to do with the natural order.

The point to underline here is that while it is perfectly understandable that some professions are paid more than others it is not perfectly understandable why men are disproportionately represented in these fields. And furthermore, if one of the reasons why they are disproportionately represented is because of social and cultural signalling that discourages women from entering these fields, then the gender wage gap is partially a function of the patriarchal oppression of women (and men) and we should work to reverse this.   

This isn’t prejudice. It’s not that men hate women. It isn’t that men think women are stupid (though some men absolutely do, as evinced by recent data scraped from www.econjobrumours.com showing a common view that women are just bad at maths—tell that to Maryam Mirzakhani). It is subtler than that, but no less cause for concern.

This is something that liberal feminists like Christina Hoff-Sommers and others who deride radical or equity feminists should be able to get behind. Addressing the gender wage gap in the manner I have described here is not about pushing people in directions they are not inclined to go. It is not about forcing women to work or men to be stay-at-home parents. It is about removing obstacles to free social, legal, economic and political choice.

It is not “liberal” to say to women: “you’re free to pursue a career, but we’re going to heap all these incentives on you to have kids instead”. And similarly to say to men: “you’re free to be a house husband, but we’re going to heap all these incentives on you to work instead”. Likewise, it is not liberal to actively discourage (wo)men from entering certain professions and encourage them to enter other, lower-paid professions and brush of their concerns with the excuse that “well you’re still free to have a go, it’s just more costly for you than others”.

I suspect many readers will want to say at this point that such incentive structures merely follow and support the natural inclinations of most men and women. Most men want to be breadwinners, and most women want to be carers. The genders are biologically wired for their respective roles. But just because it is the natural inclination of some or even most (wo)men to be the carer/breadwinner doesn’t mean that society should push people in those directions. That is oppressive to the people who deviate from the norm—and liberalism is substantially about protecting such people. If we follow Sen and Nussbaum’s definition of development as freedom, then advanced societies should help everyone be who they want to be and do what they want to do. This is precisely what liberalism has always advocated for. If social, cultural and policy settings are running counter to this goal, then liberal feminists should be arguing for change.   

Now I would be largely willing to accept that Scandinavian countries have done about as much as can be done on this front, at least in the short term. But the rest of the OECD is miles away from the circumstances that prevail in Scandinavia. Paternity leave policies and daddy bonuses rarely exist. Child-care is crazy expensive. There is little cultural encouragement of men to be stay-at-home fathers, and men consequently avoid the tropes of this archetype out of a fear that it will reduce their sexual currency. Medium-sized firms are not required to hold a role for an employee while they go on paternity leave, even though the costs to such firms are trivial. The list goes on. These are all settings that can be changed rapidly, with models ported across from Scandinavia. Until this is done, claims that the gender wage gap is a myth or entirely a function of biology will ring false.