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October 24, 2011 / Anna Louie Sussman

Is the gender pay gap sort of like a unicorn?

See, it's real!

I ask because my macroeconomics professor at the Stern School of Business at NYU, Michael Waugh, doesn’t seem to think it exists. Maybe he’s kidding, or maybe he’s pretending he doesn’t believe me so I can work harder to prove my ideas (I’m hoping this is the case), or maybe he’s in deep denial, because our class discussions and after-class discussions go something like this:

Him: I don’t believe the government should mandate equal pay for men and women.

Me: But women earn an average of 23% less for performing the same work as men.

Him: How do you know it’s the same work?

Me: [Sputter in disbelief]

Him: Can you prove it? If women were really so much more productive, firms would hire them away from the companies that are underpaying them. The market would solve it.

I’m going to go ahead and take the not-very-radical step of asserting that the gender pay gap does, in fact, exist, and that its root cause is discrimination, and not that women are, across the board, 23% less productive and efficient than their male co-workers.

The longtime feminist economist blogger Echidne (with whom I hope to do a Shoulder Pads interview in the near future) has meticulously documented and explained not only its existence, but the myths surrounding it, here. She neatly does away with the rudimentary objections voiced by my professor, which Daniel Davies of Crooked Timber called “Stone Age labor economics,” or rather, “Stone Age labour economics,” because he’s British.

I asked some finance people, wonks and feminists about this, and drew really excellent responses.  Since they said it way better than I could, I quote/excerpt them here [all emphases mine]:

From public policy whiz Kathleen Geier:

Even if there is no discrimination against young women, the fact that there still is a substantial pay gap among older workers, and that so few women make it to the top ranks of corporate America, politics, etc., is compelling prima facie evidence that a lot of discrimination is still going on.

The best studies on the gender gap in pay have all shown that such a gap definitely exists, *even when* you control for every observable factor like education, experience, hours worked, type of work, etc. Now, there are two ways you can explain that. One is simply that there is some discrimination going on. The other is that there is some difference in unobservable characteristics between men and women — e.g., that men are harder working, or more motivated, or more intelligent or more able in ways that are not outwardly observable but which quickly reveal themselves on the job.

Which scenario seems more plausible to you? Many free market economist types have a bias toward believing that markets function efficiently almost all the time, so they’re not going to think that discrimination is happening and that any group is getting paid less, or more, than it is worth. So they’re going to go with the “unobservable skill differential” story. But “unobservable skill differential” is basically a polite way of saying, straight up, that women are innately inferior to men. That’s basically what Larry Summers implied in his notorious remarks, when he mentioned biological differences as a possible explanation for women’s underrepresentation in the hard sciences.

Biological differences, or “unobservable skill differential,” or what have you, basically amounts to saying that women are biologically inferior. Aside from the fact that that’s a profoundly ugly aspersion to be casting, there’s not very much empirical evidence for it. Whereas there is literally mountains of evidence that women have been discriminated against — tons of excellent, scientifically rigorous studies have shown this.

We know very well what equal work is, in a legal sense. (Oh yeah, the law!  That old thing! – ALS)

From Daniel Davies of Crooked Timber:

For some purposes (including, probably some macroeconomics) it makes sense to think of the labour market as a continuous spot auction in this way but a labour market like that has never really existed (the docks in Liverpool at the start of the 19th century probably closest). Economists really often need to take a step back and say “if I was a business, how would I actually do that?”  In any deep and realistic model of the labour market, search costs and recruitment costs would eat you alive if you tried to arbitrage away the gender pay gap.  In general, people in economics departments are much too quick to help themselves to arguments which assume that various versions of the law of one price will hold – I was inoculated against this at an early age when I sat next to a guy who spent all day trying to arb Royal Dutch against Shell.

From Katha Pollitt, feminist writer and thinker par excellence:

Anyone who’s ever had a job knows the best person doesn’t always get hired or promoted. I’m sure your prof can think of examples in his own department!   There’s collegiality, nepotism, old boy networks, sexism and racism. People don’t always like working with people who are ‘different.’  Just ask a black guy. There are also huge assumptions about who is good at what, who the customers want to see, who suppliers can deal with easily –assumptions that usually favor white men. For example, if socializing with customers and clients includes visits to strip clubs and other male playgrounds, then being a man becomes an unacknowledged job qualification.

Katha also added this very important point:

etc! 

Thank you, everyone, for your contributions and readers — please, please weigh in with thoughts and resources on this one.

One Comment

Leave a Comment
  1. Rousselle / May 23 2012 5:00 pm

    Most women use the cheap’ insurance as an exucse to say behold, we pay cheap insurance because we are in less accidents, therefore better drivers than men’, and of course there is NO facts in that at all, lets be thankfull for equality AND common sense

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