Myths and Facts About the Gender Pay Gap
I don’t think I know a single woman that is not concerned about the reported gender pay gap in the USA. Moreover, I know several women in my business that believe it’s a personal problem for them.
That’s understandable, given the data reported ad nauseum in the mainstream press. According to the oft-quoted statistics, for example:
* Latina women get 53% of what men get.
* Black women get 61%.
* White women get 77%.
* Asian women get 85%.
The same data, by the way, identify pay gaps between racial groups. On average:
* Asian women earn 81 cents for every dollar earned by Asian men.
* Black women earn 82 cents for every dollar earned by black men.
* Hispanic women earn 88 cents for every dollar earned by Hispanic men.
* White, non-Hispanic women earn 75 cents for every dollar earned by white, non-Hispanic men.
White, non-Hispanic women, on average, lose $10,000 to the pay gap annually. Over a 40-year career, that translates to a loss of more than $400,000. And for women of color, the loss is even greater: nearly $900,000 for African-American women; more than $1 million for Latinas.
Needless to say, 30 or 40 years of earning less every year means that women will be able to save less than men. Sure enough, studies show that, on average, women end up with half the wealth men have in retirement accounts.
So the gender wage gap is something to be concerned about.
Or is it?
The problem with the above numbers is that they are gross averages based on a single variable: gender. You don’t have to be a statistician to understand that outcomes that result from multiple variables must be measured scientifically – i.e., by isolating all variables but the one measured. This is not what is being done to arrive at those alarming, and popularly quoted, numbers.
If, for example, you used the same unscientific approach in looking at race, you’d find a wage gap that is even larger than that for gender. White women, for example, out-earn black men, and by a considerable margin. And second-generation Jewish and Asian women earn more than white men.
In other words, it’s entirely unhelpful (and, in fact, misleading) to compare the average salaries of all women as measured against the average salaries of all men.
So what are the other variables? What other factors does one need to isolate to determine wage gaps?
The most obvious is education. College educated people earn, on average, considerably more than people with high school degrees. This is true for men and women, black and white, Asian and Hispanic, etc.
Another important variable is choice of profession. And when you look at the choices men make as compared to women, there is an obvious difference. In four of the five highest-paying college majors, men outnumber women by a considerable degree (between 60% and 80%). And in four of the five lowest-paying college majors (education, the arts, and social work), women greatly outnumber men.
You also have to look at the different choices made by men and women within the same profession.
Male nurses, for example, make, on average, 18% more than female nurses. The reason? Male nurses choose higher-paying specialties, work longer hours, and are willing to relocate to better-paying parts of the country. And according to Harvard economist Claudia Golden, even with lawyers that have the same education, specialty, and work the same hours, firms will quite reasonably pay more to those that are on call 24/7 and are willing to travel or relocate. It’s not surprising to learn that most (but not all) of those lawyers are men.
Similar differences between men and women account for much of the wage gap that exists in most professions. When these sorts of variables are isolated (as has been done in several large studies), the wage gap shrinks to about 3%.
And even that 3% gap can be partially explained. I’m talking about the fact that men are statistically more likely to negotiate their compensation than women and, perhaps more importantly, are more confident in negotiating their salaries.
This is no small thing. When you consider how difficult it is for a business to make a profit, it is easy to understand that management is always trying to keep raises and bonuses down. So if you don’t make an effort to push against this tendency, chances are you will end up getting less. You’ve got to be willing to squeak, as it were, to get the oil.
I’ve seen this play out more than a dozen times in my career. And more than a few times, I’ve interceded on behalf of those that did not squeak (mostly women). I didn’t do it out of a commitment to break the wage gap. I did it because I believe that, in the long run, it makes no sense to pay anyone less than he or she is worth.
Since I’m explaining my thinking here, I have to confess that I have, over the years, developed gender preferences with respect to some jobs and responsibilities. I have come to believe, for example, that women are generally better than men at work that involves noticing and tracking details. And that men are usually more willing to volunteer for leadership roles, even when they are not qualified.
It’s possible that these prejudices cloud my judgment in terms of choosing people to do specific jobs. But I’d prefer to believe that my assessments are based not on sex or ethnic/cultural identity but on performance and capability. I say that because my interest in business is based on building long-term profits. And so I favor whichever individual is better equipped to help the business attain that goal.
In fact, the only time I can remember favoring people in making compensation divisions has been to err on the side of women and minorities. I do have a social instinct, and it is one that favors affirmative action.
But maybe I’m deluding myself. Maybe despite my beliefs about what I’m doing, unconscious sexism and racism is working its way into my assessments in favoring white men.
It would be bad business if that were true, but maybe I am.
Let’s assume, then, that this sort of “institutional sexism and racism” is playing a role. The net effect of it, when you do measure the gaps scientifically, is less than 3%.
Three percent is still a gap. So what to do?
My advice to anyone that believes she (or he) is a victim of such biases should first of all figure out where and how the better money is being made. If you are an accountant, you might want to consider becoming the CFO. Or, better yet, move over to the sales or marketing side of the business, where the bigger compensations are.
Next, do everything in your power to outperform your colleagues. Get a mentor. Schmooze. And when it comes time to talk about your compensation, go into the meeting with both guns blasting.
Of course, this is the advice I would give to anyone who wants to make more money. It works for men. It should work for women, too. And if it doesn’t? Find a better job.