CAN GOVERNMENT FIX THE GENDER WAGE GAP?

Michael Kurth Sunday, February 23, 2014 0
CAN GOVERNMENT FIX THE GENDER WAGE GAP?

President Obama declared in his State of the Union address that “today, women make up about half of our workforce.  But they still make 77 cents for every dollar a man earns.  That is wrong, and in 2014, it’s an embarrassment.”

What is an embarrassment is that our president, in a major speech to the nation and the world, got his facts wrong.

According to a report released last October by the Bureau of Labor Statistics (BLS), which is the most authoritative source I know of for labor market data, “in 2012, women who were full-time wage and salary workers made about 81 percent of the median earnings of male full-time wage and salary workers.”

But the president’s statement about the earnings of women is not just a matter of a four-percentage point discrepancy. He gave the impression that women systematically take home 23 percent less than their male co-workers, and that is not correct.

The so-called wage gap compares the earnings of all women to the earnings of all men without considering factors such as occupational differences, age and experience, labor force attachment and the choices women make.kurth chart

For example, there are far more women than men working in professional and administrative occupations, such as teaching, healthcare, banking and office administration, while far more men work in construction, production and transportation. See this chart.

Men tend to seek work in harsh, often dangerous, occupations that maximize their take-home pay, while women tend to view their employment as secondary in the family, and choose occupations where they can work in a comfortable environment with little stress and generous fringe benefits.

Women often make these career choices early in life, while they’re still in high school or college. Women who later find themselves as single heads-of-households are often ill-prepared for the higher-paying career paths.

Women are also less likely than men to put in long hours at their jobs, possibly because they assume more home responsibilities than men.  According to the BLS, 26 percent of men work 41 hours or more per week, compared to 14 percent of women, while 12 percent of fully employed women work fewer than 40 hours per week, compared to only 5 percent of men.

Moreover, when an opportunity for advancement comes along that requires relocation, women are likely to quit their jobs and follow their husbands, while the opposite is seldom true.

And women are also more likely than men to interrupt their careers in order to raise their children.

These patterns have repercussions when employers consider investing time and money in training employees for higher positions in their organizations. This can be bad news for career-oriented women.

My oldest daughter, Mette, is a very successful attorney, recognized as one of the best bankruptcy attorneys in the nation and a “super lawyer” in California. She is also the mother of two young boys. It hasn’t been easy for her, juggling motherhood while competing in a male-dominated occupation.

But this isn’t the fault of the market.

Employers in competitive markets have no incentive to systematically discriminate against women or any other group of people. Their profits depend on hiring the most productive people they can for the wages they pay.  When Branch Rickey hired Jackie Robinson to play for the Brooklyn Dodgers in 1946, his primary objective was to win a World Series pennant, not break the color barrier in Major League Baseball. He knew there were superstar athletes available cheap in the Negro leagues, and once Robinson demonstrated his baseball talents, every other team had to follow suit and sign black players if they wanted to be pennant contenders. No laws were needed to integrate baseball; the market did it.

The reality is that most of the “wage gap” between women and men is due to choices both sexes make voluntarily. Few women put having a career on a par with raising a family. Similarly, many men feel they are failures if their wife has to work to pay the bills, and it can be an emotional crisis if she earns more than him.

Yet, the times they are a changin’.  In our increasingly technological economy, brainpower is more valuable than muscle power, and women have an abundance of the former. Social traditions tend to give way to economic reality, and the roles of men and women in America are rapidly evolving.

In my household, I was the cook as we raised our children, because my wife has a career operating her dance studio that keeps her busy from the time school is out until nine at night. Cathy would be a very expensive cook, and I don’t need government to tell me that.

The wage gap between men and women is real, but when all factors are considered, studies show it is more like 5 percent than 23, and is closing fast. The real issue is whether we need government to intervene in the market and manipulate our social values and choices in an effort to produce gender equality. In a free market economy, the future belongs to the competent and productive, regardless of their gender. And the future is near.