Study helps clarify wage equality for women

By James McCusker

In a world where certitude is scarce one of things we could count on in our economy was that for every dollar men earned, women earned 77 cents. But it turns out that, in the words that Ira Gershwin wrote for his brother George’s music, “It Ain’t Necessarily So.”

A team of two economists at the Federal Reserve Bank of New York, Jason R. Abel and Richard Deitz, have reexamined the issue, and their just-published study, “When Women Out-Earn Men,” shows that, for college graduates, when educational attainment and job responsibilities are equal, the overall gap between men’s and women’s pay is reduced to 3 percent. And for some types of education, women actually receive bigger paychecks than men. As their careers progress, though, this premium for women’s pay disappears and by mid-career reverses so that men earn considerably more.

The study was published under the aegis of Liberty Street Economics, which is a blog site of the New York Fed that allows the fruits of economic research to be shared without being confused with Ex Cathedra statements of official policy of the Federal Reserve. It promotes discussion of important economic issues without provoking the usual political dogma. At its best, it allows economists to be economists.

The Abel-Deitz study is particularly useful for its insight into female-male wage differences in the post-recession economy. They examined U.S. Census American Community Survey data covering 2009 through 2013 — a period which included not only the recession itself but the painfully slow economic recovery that followed. Economic pressure usually worsens discrimination issues.

Of particular interest to the researcher, and to us, is that the data series allowed them to, “…estimate the extent to which the gender wage gap varies across seventy-three undergraduate college majors, ranging from a 21 percent male wage premium for agriculture majors to a 16 percent female wage premium for social services majors.”

As careers progress, though, the pattern changes substantially. The authors found that for mid-career college graduates aged 35-45, “…men earn about 15 percent more than women, much larger than the 3 percent figure we found for recent college graduates.” They also discovered that “…the male wage premium widens substantially across nearly every major.” This was especially noteworthy in social services majors. There, “…the 16 percent female wage premium among recent grads turns into a 10 percent male wage premium at mid-career, a whopping change of more than 25 percentage points.”

The authors point out that theirs is a cross-sectional study comparing people of different ages at a single point in time. A time-series, by contrast, would be looking at the same group of people over a time period. This is an important distinction in analyzing the existence, extent, and magnitude of gender discrimination wages and other dimensions of the workplace. People born in the 1990s do not have the same perspective as people born in the 1980s, 1970s, or earlier and this is an important factor in analyzing all forms of discrimination.

The study reminds us of the dangers of overusing averages to describe economic or social phenomena. The gender gap exists for some people, but not for all people, and not even for all people in broad categories like “recent college graduates.” The differences are important and we need to pay attention to them if we want to understand the issue of gender-based wage differentials. Of course, if we just want to bloviate about the issue, we don’t really have to pay attention to anything.

The authors’ findings regarding the financial rewards of different college majors are illuminating, but not totally unexpected. Even the premium for women in some fields of study is easily enough explained in today’s quota-conscious legal and regulatory environment.

The more fascinating aspect is what happens to the relative wages of men and women as they and their careers mature. Are the higher mid-career wages for men caused by gender discrimination and evidence of the “glass ceiling,” or are they a by-product of lifestyle preferences that exert greater force as women workers mature? Are they generation-related and will disappear over time? And is the post-recession lethargy of our economy a factor, or not?

It is important that we know the answers to these and other questions about wage inequality and gender discrimination — if for no other reason than improving the current law covering equal pay for equal work. To paraphrase one authority on gender issues, “It depends on the meaning of equal.” Once we get beyond the simplest cases, our understanding is plagued by puzzles and uncertainty. Wage equality and workplace opportunity have come a long way, but to continue making progress we need studies like this to point us in the right direction and illuminate the way.

James McCusker is a Bothell economist, educator and consultant. He also writes a column for the monthly Herald Business Journal.

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