Equal pay for equal work is not the way to close the gender pay gap

Flickr/John WalkerTo close the gender pay gap, we need to change how jobs are structured and paid.

Closing the gender pay gap isn’t as simple as championing equal pay for equal work.

The US Census Bureau’s latest data indicates women earned 82% of what men earned in 2016. According to the World Economic Forum (WEF), women earn about 57% of what men earn globally. The global gender pay gap is widening, and at the rate things are going, WEF predicts the economic gap between men and women won’t be closed for another 217 years.

But Claudia Goldin, a professor of economics at Harvard University who has spent years researching gender economics, said statistics citing annual earnings between male and female full-time, full-year workers don’t tell the full story of what’s causing the gender pay gap.

“What economists do is they use data to figure out whether the individuals are the same; they try to make them comparable as possible; they squeeze out these differences and productive attributes; they look for individuals who have the same education, the same labour-force participation rates over their life cycle, etc.,” Goldin explains to Freakonomics Radio host Stephen J. Dubner.

When doing this, we still see a gender wage gap. But as Goldin ponders, “does that mean that women are receiving lower pay for equal work? That is possibly the case in certain places, but, by and large, it’s not that. It’s something else.”

When looking at gender earnings gaps by occupation, Goldin found something that might surprise people.

By comparing the 469 occupations in the US Census, she found that women disproportionately holding certain jobs only accounted for about 25% of the difference in earnings between men and women. Factors within each occupation overwhelmingly accounted for differences in pay.

Goldin tells Dubner, “the lion’s share of the difference is due to the fact that in every occupation, just about, women receive less than men.”

And they’re receiving less than men for a host of reasons, she explains, one of which is that they’re not working the same amount of time. “And in many occupations, working more hours or being there when the firm wants you to be there earns you a lot more.”

Focusing on individuals in the top 105 occupations with an average annual compensation of more than $US60,000, Goldin found that men almost always out-earned women. When classifying these jobs in categories like Business and Finance, Health, Science, and Technology, Goldin saw a larger gender earnings gap in Business and Finance occupations, where full-time, full-year working women earned about 78 cents on their male counterpart’s dollar, than in Technology and Science, where, when combined, women earned closer to 89 cents on a man’s dollar.

Goldin also found that those in a Business or Finance occupation who worked 50 hours per week were paid on average disproportionately more than those who worked 40 hours per week. In Technology or Science, though, people who worked 50 hours per week only saw an increase in their earnings that was proportionately more than those working 40 hours a week.

A major difference between these categories, Goldin argues, is how flexible work is approached.

In Business and Finance especially, caregivers, the majority of whom are women, pay a high cost for the ability to work flexible hours, work from home, or work outside the typical corporate schedule.

What’s more, wage inequality has a compounding effect.

In the finance world, when you start saving money is far more important than how much you save. If you start early, you see greater returns over the long term.

In terms of pay, a little less money for a younger woman who may arrange flexible work to care for a new child ultimately results in quite a bit less for that woman further along in her career. And, as we see with compound interest, trying to correct the issue later on is often too little too late.

For Goldin, pay parity isn’t so much about fighting outright discrimination or fixing differences in competitive drive or bargaining ability, nor does does she think it has to involve government intervention.

Closing the gender wage gap involves changing how jobs are structured and remunerated in a way that enhances flexible work schedules, she says.

Goldin looks to the technology, science, and health sectors as examples of industries beginning to lower the cost of flexibility. Many companies are increasingly using information technology, substitute employees, and handing off clients, patients, and customers from one employee to another.

“I don’t think it’s easy to mandate,” Goldin notes. “How can you mandate that firms all figure out ways of reducing the cost of temporal flexibility and reducing the costs of having people be puzzle pieces? We’re simply not going to do that. It’s going to happen organically.”

But Goldin believes this organic process has already begun.

“Go to Silicon Valley and they don’t talk about family time, they talk about play time, and it’s work-life balance rather than just work-family balance. So the more and more people in our society who value that, the more firms are going to be searching for methods to reduce the cost of this amenity,” she tells Dubner.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.