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A recent report by Natalia A. Kolesnikova and Yang Liu from the St. Louis Fed highlights the ever-shrinking gender wage gap. According to the BLS, the gender earnings gap has plummeted from 36.5 per cent in 1979 to just 16.5 per cent in 2011.The earnings gap alone doesn’t provide a full or accurate picture of the real wage gap – which is actually much lower, as the report indicates:
Research suggests that the actual gender wage gap (when female workers are compared with male workers who have similar characteristics) is much lower than the raw wage gap… The adjusted 2007 gender hourly wage gap is roughly 5 per cent.
These ‘adjustments’ take into account a variety of factors when comparing pay, such as education level, work experience, and occupation. Other studies have shown that comparisons based of of total compensation (in which women receive more ‘fringe benefits’ such as employer-paid parental leave, the gender wage gap would decrease even further. Also, the fact that more men work in highly paid professions such as law, medicine, and business (known as gender occupational segregation) contributes to the wage difference.
Many claim that even a 5 per cent gender wage gap is too excessive – that nothing less than equal pay is acceptable.
However, a material biological difference between men and women provides economic justification for the discrepancy in pay: childbirth.
Women are exponentially more likely to “leave their careers temporarily for childbirth or raising children.” As such, a firm with an above-average percentage of female employees is prone to an above-average turnover rate. A higher turnover rate is associated with increased training costs. Approaching the pay gap from this angle, you can argue that men deserve to be paid a premium for having a statistically higher rate of labour force attachment.
In the end, the report and studies which are cited strongly suggest that the gender gap isn’t a matter of sexism: it’s a matter of economics.