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In his State of the Union speech last week, President Obama again invoked the provocative statistic that women earn only 77 percent as much as men. With Hilary Clinton increasingly viewed as a prospective successor, rhetorical attacks on gender-based wage differentials will only rise.
The problem is that the 77 percent statistic-combined with the assertion that it is an “embarrassment,” and “wrong,” and that women “deserve equal pay for equal work”-misdiagnoses a complex issue and can only mislead policy.
The 77-percent statistic is not based on a comparison of men and women doing “equal work,” but simply compares the annual earnings of women and men who are full-time, year-round workers. Because men who work “full-time” work 8 to 10 percent more hours per week than full-time women, it fails to compare men and women who spend equal time at work. Nor does it take into account any other productivity differences.
However, over the years gender gap has narrowed as the wage ratio between women and men-based on full-time year-round work-has increased, from 59 percent in 1961 to 77 percent around 2005. By an alternative measure, earnings per hour rose from 66 percent in 1979 to 81 percent currently. These trends suggest that it is men, not women, who have been falling behind in recent years. Men’s wages have stagnated, particularly for those who work in blue collar jobs like construction and manufacturing that have been negatively affected by changes in the economy.
Women’s wages have been rising relative to those of men because women have been increasing their work-related skills, most notably through advances in education. In addition, women have been accumulating more years of continuous work experience.
It is still the case, however, that women assume greater responsibility for child rearing than men. They are more likely to work part-time and to take more career breaks than men, and thus accumulate fewer years of continuous work experience. As a result, childless women who never marry earn more than married women and as much as similarly-situated men. Thus a gender wage gap may never disappear-not because of persistent discrimination, but because of differences in choice related to family concerns.
Despite a large body of economic research indicating that discrimination is unlikely to play a significant role in explaining the gender pay gap, organizations such as the National Committee on Pay Equity continue to call for legislation that would directly impose measures to close it. The most recent example is the Paycheck Fairness Act, which, though supported by President Obama, failed to garner the votes to pass in the Senate. Recently Senators Elizabeth Warren and Barbara Mikulski have been gearing up to give the Paycheck Fairness Act another chance.
Paycheck Fairness is similar in spirit to “comparable worth” pay systems, and is generally supported by the same groups that have supported the implementation of such systems. Comparable worth is a mechanism for raising women’s pay directly by requiring firms to equalize pay between occupations dominated by women and occupations dominated by men when these occupations are determined by a job evaluation to be of “comparable worth”. Since there is no meaningful way to rank occupations by worth, a comparable worth policy would ultimately lead to politically-administered wages that depart from a market system of wage determination.
Comparable worth has been rejected in the courts, notably by the Ninth Circuit Federal Court of Appeals in 1985 (AFSCME v. Washington). Overturning the decision of the district court in the state of Washington, the court upheld the state’s right to base pay on market wages rather than on a comparable worth job evaluation, writing, “Neither law nor logic deems the free market system a suspect enterprise.”
Moreover, we do not lack federal anti-discrimination policies. In addition to Title VII of the Civil Rights Act, we already have an Equal Pay Act on the books. We also have the EEOC, which enables any aggrieved worker to bring a complaint of discrimination against her employer. Paycheck Fairness would help the legal establishment, but it is unlikely to truly aid women.
Government intervention to coerce so-called “equal pay” when the differentials are based on personal choice would ultimately hurt the very women it purports to help. By raising businesses’ costs of retaining female workers, it may push firms to avoid hiring them in the first place. That is not a result that equal pay advocates should want.
June O’Neill is an adjunct scholar at the American Enterprise Institute (AEI), and a professor of economics at Baruch College. She is a former Congressional Budget Office director and author of The Declining Importance of Race and Gender in the Labor Market (AEI Press, 2013).
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The Declining Importance of Race and Gender in the Labor Market: The Role of Employment Discrimination Policies
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