The large and growing gap is not due to timid female MBAs.
Some of it is attributed to different skills, jobs before the MBA, and that male business students typically take more finance classes and women more marketing classes.
But a majority of the difference is due to women taking time out of the labor force and then working less after having children.
Women without children usually don’t take time off, and most of their earnings disparity with men can be explained by differences in their skills.
It’s notable that the earnings of some women did not fall very much after they had children and any drop in income did not persist after a few years.
But these women often had a “lower” earning spouse (income under $100,000). A large and sustained drop in income is highly correlated with having children and a high-earning husband.
Claudia Goldin has documented well that the availability of reliable contraception in the late 1960s led to an explosion in female investment in higher education, and in particular, long duration professional educations.
Although rapidly disseminated among married women once it came on the market in 1960, the pill at first was almost inaccessible to single females, due to the prevailing state laws on prescriptions of drugs.
Liberalisation of availability for single females was on a state-by-state basis and was staggered over a few years. This allowed Claudia Goldin to study what happened to investment in professional education by young women in each of those states as they reformed their laws on the dispensing of contraception to single females.
As contraception was made lawful for single women on a state-by-state basis in the USA in the late 60s and 1970s, young women started investing in long duration professional educations at an explosive rate. They stayed in high school the longer, more young women went on to college, and more of these college female students majored in long duration professional degrees.
In the 1960s, it was common to get engaged and even marry while at college in the USA. As Claudia Goldin, and her co-author Larry Katz explain:
It was a stark choice, you could be celibate, get your career started, and potentially face a very thin marriage market once you were done.
Or, you could have fun, get married earlier, and not necessarily have a career.
The availability of the pill allowed college-age women to have certainty in their career investments and therefore the payoff of investing in professional educations was much greater.
By decoupling sex for marriage, women could afford to defer marriage and shop around looking for better partners. Postponing marriage for at least a few years didn’t mean all the “good guys” would be taken. In addition, with higher career incomes for female college graduates, as Goldin explained:
You might think of it as the decline of the trophy wife, as women with careers who might not be as intrinsically good-looking became more highly valued than—or at least as equally valued as—women for whom appearance was a primary asset.
But as Goldin’s co-author Larry Katz explained:
Potential losers in this equation, in addition to trophy wives, are women with poor career prospects.
The clear winners are women with careers and, of course, the men they marry… Guys have more money, more sex, and less responsibility.
One side effect of the availability of contraception to better educated women was that young women with poor career prospects were also left with a pool of more unattractive men to marry.
Many of these young women who wanted to have baby chose just to have the child, and perhaps marry the father later if the responsibilities of fatherhood turned him into marriage material.
This reversal in order of parenthood and marriage among less well educated young women was one of the surprising social developments in the mid to late 20th century.
Women are increasingly putting their husband’s career before their own, a controversial new study of Harvard Business School graduates has found.
It canvassed over 25,000 male and female students, and found 40 percent of Gen X and boomer women said their spouses’ careers took priority over theirs.
The researchers also said only about 20 percent of them had planned on their careers taking a back seat when they graduated.
This gender gap found by Robin Ely, Colleen Ammerman and Pamela Stone can be better explained by the marriage market combined with assortative mating.
1. Harvard business graduates are likely to marry each other and form power couples.
2. There tends to be an age gap between men and women in long-term relationships and marriages of say two years.
This two year age gap means that the husband as two additional years of work experience and career advancement. This is highly likely to translate into higher pay and more immediate promotional prospects.
Maximising household income would imply that the member of the household with a higher income, and greater immediate promotional prospects stay in the workforce.
It is entirely possible that women to anticipate this situation both in their subject choices and career ambitions.
Claudia Goldin found that the wage gap between male and female Harvard graduates disappears in the presence of one confounding factor.
That confounding factor is obvious: the male in the relationship earns less. When this is so, Goldin found that the female in the relationship earns pretty much as do similar male Harvard graduates, except for the fact that they work less hours per week:
We identify three proximate factors that can explain the large and rising gender gap in earnings: a modest male advantage in training prior to MBA graduation combined with rising labour market returns to such training with post-MBA experience; gender differences in career interruptions combined with large earnings losses associated with any career interruption (of six or more months); and growing gender differences in weekly hours worked with years since MBA.
Differential changes by sex in labour market activity in the period surrounding a first birth play a key role in this process. The presence of children is associated with less accumulated job experience, more career interruptions, shorter work hours, and substantial earnings declines for female but not for male MBAs.
The one exception is that an adverse impact of children on employment and earnings is not found for female MBAs with lower-earning husbands.
This sociological evidence reported in the Daily Mail is entirely consistent with the choice hypothesis and equalising differentials as the explanation for the gender wage gap. As Solomon Polachek explains:
At least in the past, getting married and having children meant one thing for men and another thing for women. Because women typically bear the brunt of child-rearing, married men with children work more over their lives than married women.
This division of labour is exacerbated by the extent to which married women are, on average, younger and less educated than their husbands.
This pattern of earnings behaviour and human capital and career investment will persist until women start pairing off with men who are the same age or younger than them.
Solomon Polachek was minding his own business back in 1975 looking for evidence to show occupational crowding and that women were pushed into low paid occupations by sex discrimination, and in particular, employer discrimination. About 60 per cent of women still work in just 10 occupations. the occupations which are female-dominated are often relatively poorly paid jobs
By chance, Polachek departed from the usual empirical strategy for estimating the male-female wage gap at that time.
Rather than include a dummy variable to estimate discrimination after various factors have been taken into account, he introduced dummy variables that took account of both gender and marital status. His results were startling.
He previously was able to explain about 35% of the wage gap using the data at hand and variables he was using.
This 35% gap dropped to 18% for single never married males and females, but his ability to explain the gender wage gap increased dramatically to over 60% for married spouse present males and females.
What more, the presence of children exacerbated the gender wage gap. Each child of less than 12 years old widened the female male pay disparity by 10%. Furthermore, large spacing intervals between children widened this gender wage disparity even further.
Subsequent research showed that marital status had the same effects on gender wage gaps in Germany, the UK, Austria, Switzerland, Sweden, Norway and Australia. Factors associated with dropping out of the labour market to care for children could explain up to 93% of the gender wage gap.
These findings are devastating to the notion that there is some sort of discrimination against women on the demand side of the labour market. As Polachek explains:
The gender wage gap for never marrieds is a mere 2.8%, compared with over 20% for marrieds. The gender wage gap for young workers is less than 5%, but about 25% for 55–64-year-old men and women.
If gender discrimination were the issue, one would need to explain why businesses pay single men and single women comparable salaries. The same applies to young men and young women.
One would need to explain why businesses discriminate against older women, but not against younger women. If corporations discriminate by gender, why are these employers paying any groups of men and women roughly equal pay?
Why is there no discrimination against young single women, but large amounts of discrimination against older married women?
… Each type of possible discrimination is inconsistent with negligible wage differences among single and younger employees compared with the large gap among married men and women (especially those with children, and even more so for those who space children widely apart).
The main drivers of the gender wage gap is simply unknown to employers such as whether the would-be recruit or employer is married, their partner is present, how many children they have, how many of these children are under 12, and how many years are there between the births of their children. These are the main drivers of the gender wage gap – all of which are factors totally unknown to employers and of no relevance to them in making a profit.
The drivers of the gender wage gap on the supply side of the labour market regarding the choices women make about having children, when they have children, and how this influences their investment in human capital, and in particular, in human capital that does not depreciate by that much because of intermittent labour force participation due to motherhood.
Occupational crowding hypotheses of the gender wage gap have the drawback of being an invisible hand explanation of social outcomes. Each individual, acting only to best secure her own rights and interests, act in such a way that the unintended outcome of a complex social interaction.
The specific unintended outcome that must arise from millions of choices of people acting in their own interest throughout their lives is occupational segregation.
The market process of the invisible hand has both a filter and and equilibrating mechanism. The filter is profits and loss to exclude through insolvency and bankruptcy those entrepreneurial choices that do not further consumer’s interests. The equilibrating mechanism – the mechanism that tells people which choices they should make – is price signals. Price signals guide individual choices towards the unintended outcome.
Those that argue that women are socialised to make particular choices such as mother were not paying attention to the 20th century and the radical social change over the course of that century, in particular in the role of women. As Gary Becker explains:
… major economic and technological changes frequently trump culture in the sense that they induce enormous changes not only in behaviour but also in beliefs.
A clear illustration of this is the huge effects of technological change and economic development on behaviour and beliefs regarding many aspects of the family.
Attitudes and behaviour regarding family size, marriage and divorce, care of elderly parents, premarital sex, men and women living together and having children without being married, and gays and lesbians have all undergone profound changes during the past 50 years.
Invariably, when countries with very different cultures experienced significant economic growth, women’s education increased greatly, and the number of children in a typical family plummeted from three or more to often much less than two.
Men are far more likely to choose careers that are more dangerous, so they naturally pay more under the principle of compensating differences. Top 10 most dangerous jobs: Fishers, loggers, aircraft pilots, farmers and ranchers, roofers, iron and steel workers, refuse and recyclable material collectors, industrial machinery installation and repair, truck drivers, construction labourers. They are male-dominated jobs.
Men are far more likely to enter higher-paying fields and occupations (by choice). Men are far more likely to take work in uncomfortable, isolated, and undesirable locations that pay more. Men work longer hours than women do. The average fulltime working man works 6 hours per week or 15 percent longer than the average fulltime working woman.
Women tend to work in fields dominated by women because these fields best satisfy women’s’ dual careers as workers and household managers. This can include less stressful work environments (noise, strenuous activity, etc.), more flexible policies regarding time off, and a number of other factors.
Men work longer hours than women do. The average fulltime working man works 6 hours per week or 15 percent longer than the average fulltime working woman. Even within the same career category, men are more likely to pursue high-stress and higher-paid areas of specialisation.
Women business owners make less than half of what male business owners make, which, since they have no boss, means it’s independent of discrimination. The reason for the disparity is money is the primary motivator for 76% of men versus only 29% of women. Women place a higher premium on shorter work weeks, proximity to home, fulfillment, autonomy, and safety.
Women lean toward jobs with fewer risks, more comfortable conditions, regular hours, more personal fulfillment and greater flexibility. Many women are willing to trade higher pay for other desirable job characteristics.
Men often take on jobs that involve physical labour, outdoor work, overnight shifts and dangerous conditions (which is why men suffer the overwhelming majority of injuries and deaths at the workplace). They choose to put up with unpleasant factors because they can earn more.
This study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action.
Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.
I wonder who will pay for this? Caregiver wages are funded out of a fixed budget allocated by the government.
A higher wage will change the type of worker that the caregiving sector will seek to recruit, as happened after increases in the teenage went minimum wage.
When the teenage minimum wage went up in New Zealand, employment of 17 and 18-year-olds fell, while the employment of 18 to 19-year-olds increased because the latter were more mature and reliable than the younger contemporaries.
“The Court of Appeal’s decision declining the employers’ appeal in the Kristine Bartlett case is a huge victory for women workers” said Pay Equity Coalition Challenge spokesperson Angela McLeod.
“The Courts’ decision that equal pay may be determined across industries in female-dominated occupations revitalises the Equal Pay Act 1972 and will be a major factor in closing New Zealand’s stubborn 14 percent gender pay gap”.
The judgement by the Court of Appeal upholding the Employment Court decision again validates the work of caregivers and that they are underpaid, she said.
“We commend the Service and Food Workers Union Nga Ringa Tota in taking this case and exposing the underpayment and undervaluation of aged care workers. And the decision is a victory for all the women’s organisations who have never given up fighting for equal pay,”…
When Donald at the age of 52 told his university dean, a conservative economist, he had decided to become a woman a stunned silence was followed by:
Thank God … I thought for a moment you were going to confess to converting to socialism.
The dean also joked it would be good for the department’s affirmative action program – one less man, one more woman – and that McCloskey’s pay could now be cut to about 70¢ in the dollar, since she would be a female.
Sadly, his son, daughter and former wife turned away from this new person.
His sister and one of her academic colleagues conspired to have him committed as mentally incompetent — unfit to sign papers for optional surgical procedures.
They devised a theory that he was manic and that his mania could be treated with psychopharmacology.
Twice during his determined journey into womanhood, they managed to have him incarcerated — handcuffed, locked away where he could not harm himself, at first in the University of Iowa Hospital’s mental ward and later in the University of Chicago Hospital.
Deirdre McCloskey’s mother and brother were bulwarks of support; her sister is moving toward reconciliation. She has finally stopped calling her ”Donald.”
McCloskey expected to lose everything because of the gender transition but her academic career survived. McCloskey’s former wife and two adult children have not spoken to her since 1995.
Her 16 books and 400-odd academic articles range from highly technical economics to philosophy, ethics and transgender advocacy. McCloskey’s Twitter biography is a reasonable 15-word summary of her:
Postmodern, quantitative, literary, ex-Marxist, economist, historian, progressive Episcopalian, coastie-bred Chicagoan woman who was once not.
More unusually for an American, she loves cricket. McCloskey even played wicket-keeper for the University of Illinois cricket team, which was made up mostly of players from the subcontinent and Jamaica.
Few experts dispute that there is a wage gap, but differences in the life choices of men and women — such as women tending to leave the workforce when they have children — make it difficult to make simple comparisons.
…From a political perspective, the Census Bureau’s 77-cent figure is golden. Unless women stop getting married and having children, and start abandoning careers in childhood education for naval architecture, this huge gap in wages will almost certainly persist. Democrats thus can keep bringing it up every two years.
…There appears to be some sort of wage gap and closing it is certainly a worthy goal. But it’s a bit rich for the president to repeatedly cite this statistic as an “embarrassment.” …The president must begin to acknowledge that “77 cents” does not begin to capture what is actually happening in the work force and society.
In premiere episode of ‘Factual Feminist’ Christina Sommers explains how the gender wage gap is based on bogus statistics
Why Evolution is True is a blog written by Jerry Coyne, centered on evolution and biology but also dealing with diverse topics like politics, culture, and cats.
In Hume’s spirit, I will attempt to serve as an ambassador from my world of economics, and help in “finding topics of conversation fit for the entertainment of rational creatures.”
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