Tuesday, April 28, 2009

Clinton CBO Chief: 98% of “Pay Gap” Is Attributable to Women’s Choices

Jump in the way back machine with me to 1997, if you will. Bill Clinton was sworn in for his second term as President. The Browns had moved to Baltimore 2 years earlier and it would be another 2 years before the “new Browns” would begin play. The Indians were right in the middle of their remarkable streak of selling out 455 consecutive home games, and would reach Game 7 of the World Series before blowing it. Dennis Kucinich was learning the lay of the land during his first term in Congress. Americans who had Internet access largely relied on slow dial-up connections. The Internet was in its infancy. The economy was booming.

1997 is the year that my collegiate career began as I set foot on the campus of Cleveland’s Case Western Reserve University. At the time, I thought I was a future engineer, and so Case, with its emphasis on study in the so-called STEM fields (Science, Technology, Engineering, and Math) seemed a perfect fit. There was only one problem, as my 18-year-old self soon discovered: Case’s emphasis on the STEM fields meant that the campus was devoid of girls. The undergraduate student body was 65% male.

Soon, my fraternity brothers and I took to traveling to other campuses were the girls were. These other schools eschewed Case’s emphasis on STEM fields and instead specialized in the humanities and social sciences, which is why their student bodies were majority female.
I bring this up as part of this blog post in order to illustrate a point. Today is "Pay Equity Day", and the American Association of University Women is trying to use today to heighten awareness of the fact that, by their estimate, women on average, throughout the economy, earn roughly 78 cents for every dollar a man earns. To help illustrate this “pay gap”, Jill at WLST suggested on her Twitter feed Sunday night that bake sales should be held were women are charged 78 cents and men $1.00 for baked goods. In my opinion, however, the evidence suggests that almost the entire current pay gap has a lot less to do with sexism, and a lot more to do with the fact that women tend not to study STEM fields which lead to higher paying careers, then the AAUW or Jill probably thinks it does.

I’ll let this excerpt from Forbes magazine explain why:
June O'Neill, a certifiably female economist who served as director of the Congressional Budget Office under President Clinton, wrote a peer-reviewed paper for the American Economic Review (May 2003), trying to account for the pay gap. What she found was that women are much more likely over the course of their lives to cut back their hours or quit work altogether than men. That matters, because even though the BLS was comparing full-time workers, if you go part-time or take years out of the labor force, that has an effect on earnings down the line, due to loss of seniority or missed promotions.
More precisely, of women aged 25-44 with young children, more than a third were out of the labor force; of those women who did have jobs, 30% worked part-time. (The comparable numbers for men were 4% out of the labor force and 2% working part-time).
All told, women are more than twice as likely to work part-time as men and over the course of their lifetimes, work outside the home for 40% fewer years than men. That accounts for a significant chunk of the pay gap. Then there is a more subtle factor. Despite the many advances the women's movement has brought the U.S., what it hasn't done, thank heavens, is make men and women the same. The simple fact is - and there is nothing nasty or conspiratorial about it - the sexes continue to choose different avenues of study and different types of jobs.
Here's an illustrative example. The college majors with the top starting salaries, according to the National Association of Colleges and Employers, are: chemical engineering (almost $60,000), computer engineering, electrical engineering, industrial engineering, mechanical engineering. Men make up about 80% of engineering majors. Women predominate among liberal arts majors - whose salaries start at a little more than $30,000. Putting it all together, O¹Neill figures that these differences - in choice of work, years in the workforce, and hours of work - could account for as much as 97.5% of the differences in pay between men and women. "The unadjusted gender gap," she concludes, "can be explained to a large extent by non-discriminatory factors."
Does everyone have that? 97.5% of the pay gap can be attributed to non-discriminatory factors (a.k.a. women’s choices about their careers). Women spend less time in the workforce, more time working part-time, and freely choose lower-paying careers, and those reasons account for 97.5% of the pay gap.

Going back to that bake sale example, if you wanted to charge a price differential based only on the part of the pay gap that cannot be explained by “non-discriminatory factors,” instead of charging women 78 cents, you’d have to charge them 99.5 cents (to be precise, 99.45 cents).

In other words, a big part of the reason the pay gap exists today, is because my class at Case, and at other universities, had so few women studying STEM fields, which lead to higher paying careers in technology. In my opinion, studies like O’Neill’s indicate that almost all of the inequality has been wrung out of the system, and of course the passage of the Lilly Ledbetter Fair Pay Act will help to further reduce what inequality remains. But in the future, progress on narrowing the pay gap will depend not on passing new laws or more lawsuits, but instead on women choosing careers in the higher paying STEM fields, and choosing to spend more time in the workforce.

Fortunately, On the first measure, organizations such as the Society of Women Engineers has been on the case (no pun intended) since 1950, offering scholarships and support to women in engineering fields. In terms of public policy that would further close the pay gap, we need scholarships to encourage women to study STEM fields. In order to encourage women to remain in the work force longer, the United States needs to finally, belatedly, pass a law providing for mandatory maternity leave (we're one of what, maybe 5 countries that doesn't do this now?) and provide tax credits to companies that allow their workers to telecommute and work flexible schedules. These measures will, I think, be the most effective at closing the pay gap further.

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