Sizing Up The Pay Gap

Equal Pay

To mark “Equal Pay Day,” Obama is signing two executive orders setting new pay equity rules for federal contractors. Waldman explains what these EOs will do:

The first order will bar contractors from retaliating against employees who discuss their compensation with each other. This was a factor in [Lilly] Ledbetter’s case — like many victims of pay discrimination, it took her years to discover she was being paid less than her male colleagues, because no one talked about it. And there are many employers who actually bar their employees from discussing their pay. The second order requires contractors to provide data to the government on employee compensation, broken down by sex and race. With those data in hand, the government will be able to see whether employees are being treated equally.

Jay Newton-Small examines the Democrats’ full-court press on pay equity. But Z. Byron Wolf notes that the much-cited “77 cents on the dollar” figure is misleading:

[That figure] is calculated by adding all the wages of women and dividing the total by all the wages of men. But that doesn’t take into account a lot of factors, like women taking time off work to have children or choosing different career paths. Professional fact checkers at (“exaggeration”), Politifact (“Mostly False”) and The Washington Post (“one Pinocchio”) have all found problems with the claim. The American Association of University Women released a report that concluded the pay gap was closer to 7% than 23%.

Andrew Biggs and Mark Perry argue that the wage gap is even smaller:

While the BLS reports that full-time female workers earned 81% of full-time males, that is very different than saying that women earned 81% of what men earned for doing the same jobs, while working the same hours, with the same level of risk, with the same educational background and the same years of continuous, uninterrupted work experience, and assuming no gender differences in family roles like child care. In a more comprehensive study that controlled for most of these relevant variables simultaneously—such as that from economists June and Dave O’Neill for the American Enterprise Institute in 2012—nearly all of the 23% raw gender pay gap cited by Mr. Obama can be attributed to factors other than discrimination. The O’Neills conclude that, “labor market discrimination is unlikely to account for more than 5% but may not be present at all.”

Bryce Covert pushes back against these claims:

It’s fair to say that not all of the gap is due to discrimination. Certainly women are clustered in low-wage work — they are about two-thirds of the country’s minimum wage workers — and often have to interrupt their careers to care for family members, all of which impacts their earnings.

But even when various factors like these are taken into account, the entire gap doesn’t disappear. When the Government Accountability Office last looked at the gap, it couldn’t explain 20 percent of the disparity in pay between men and women, something that could be at least in part caused by discrimination. A more recent study by economists Francine Blau and Lawrence Kahn found that while experience, occupation, and industry explain much of the gap, there is still more than 40 percent of it that remains unexplained, the part that could be chalked up to discrimination. We can also look to the real world to see instances where it’s clear that outright discrimination is still at play, such as the details of a recent class action lawsuit against the country’s largest jewelry store, where female employees across the country and with substantial experience say they were still paid less than less qualified men.

(Chart from The American Association of University Women (pdf))