The '77 Cents on the Dollar' Myth About Women's Pay: Once education, marital status and occupations are considered, the 'gender wage gap' all but disappears
By MARK J. PERRY And ANDREW G. BIGGS
April 7, 2014 6:58 p.m. ET
April 8 is "Equal Pay Day," an annual event to raise awareness regarding the so-called gender wage gap. As President Obama said in the State of the Union address, women "still make 77 cents for every dollar a man earns," a claim echoed by the National Committee on Pay Equity, the American Association of University Women and other progressive groups.
The 23% gap implies that women work an extra 68 days to earn the same pay as a man. Mr. Obama advocates allowing women to sue for wage discrimination, with employers bearing the burden of proving they did not discriminate. But the numbers bandied about to make the claim of widespread discrimination are fundamentally misleading and economically illogical.
In its annual report, "Highlights of Women's Earnings in 2012," the Bureau of Labor Statistics states that "In 2012, women who were full-time wage and salary workers had median usual weekly earnings of $691. On average in 2012, women made about 81% of the median earnings of male full-time wage and salary workers ($854)." Give or take a few percentage points, the BLS appears to support the president's claim.
But every "full-time" worker, as the BLS notes, is not the same: Men were almost twice as likely as women to work more than 40 hours a week, and women almost twice as likely to work only 35 to 39 hours per week. Once that is taken into consideration, the pay gap begins to shrink. Women who worked a 40-hour week earned 88% of male earnings.
Then there is the issue of marriage and children. The BLS reports that single women who have never married earned 96% of men's earnings in 2012.
The supposed pay gap appears when marriage and children enter the picture. Child care takes mothers out of the labor market, so when they return they have less work experience than similarly-aged males. Many working mothers seek jobs that provide greater flexibility, such as telecommuting or flexible hours. Not all jobs can be flexible, and all other things being equal, those which are will pay less than those that do not.
Education also matters. Even within groups with the same educational attainment, women often choose fields of study, such as sociology, liberal arts or psychology, that pay less in the labor market. Men are more likely to major in finance, accounting or engineering. And as the American Association of University Women reports, men are four times more likely to bargain over salaries once they enter the job market.
Risk is another factor. Nearly all the most dangerous occupations, such as loggers or iron workers, are majority male and 92% of work-related deaths in 2012 were to men. Dangerous jobs tend to pay higher salaries to attract workers. Also: Males are more likely to pursue occupations where compensation is risky from year to year, such as law and finance. Research shows that average pay in such jobs is higher to compensate for that risk.
While the BLS reports that full-time female workers earned 81% of full-time males, that is very different than saying that women earned 81% of what men earned for doing the same jobs, while working the same hours, with the same level of risk, with the same educational background and the same years of continuous, uninterrupted work experience, and assuming no gender differences in family roles like child care. In a more comprehensive study that controlled for most of these relevant variables simultaneously—such as that from economists June and Dave O'Neill for the American Enterprise Institute in 2012—nearly all of the 23% raw gender pay gap cited by Mr. Obama can be attributed to factors other than discrimination. The O'Neills conclude that, "labor market discrimination is unlikely to account for more than 5% but may not be present at all."
These gender-disparity claims are also economically illogical. If women were paid 77 cents on the dollar, a profit-oriented firm could dramatically cut labor costs by replacing male employees with females. Progressives assume that businesses nickel-and-dime suppliers, customers, consultants, anyone with whom they come into contact—yet ignore a great opportunity to reduce wages costs by 23%. They don't ignore the opportunity because it doesn't exist. Women are not in fact paid 77 cents on the dollar for doing the same work as men.
Administration officials are (very) occasionally challenged on their discrimination claims. The reply is that even if lower average female pay is a result of women's choices, those choices are themselves driven by discrimination. Yet the choice of college major is quite free, and many colleges recruit women into high-paying science or math majors. Likewise, many women prefer to stay home with their children. If doing so allows their husbands to maximize their own earnings, it's not clear that the families are worse off. It makes no sense to sue employers for choices made by women years or decades earlier.
The administration's claims regarding the gender pay gap are faulty, and its proposal to make it easier for women to sue employers for equal pay would create a disincentive for firms to hire women.
Mr. Perry is a scholar at the American Enterprise Institute and professor of economics and finance at the University of Michigan's Flint campus. Mr. Biggs is a resident scholar at AEI.
KARL: Jay, I just want to clarify, to come back to this inequality issue. The president cited census data that women on average make 77 percent of what men make. Why is that an example or evidence of discrimination in the workforce at large, but it’s not evidence of discrimination when women here at the White House make 88 percent of what men here at the White House make?
CARNEY: Again, Jon –
KARL: It’s the same measure, it’s the same metric, and there’s a big gab on both sides.
CARNEY: We are hard at work here at the White House in the most transparent of ways to make sure women compete for and earn senior positions, that women are recruited for more junior positions so that they’re put in the pipeline for senior positions in the future. In fact, virtually every woman who sits in a senior staff office today was promoted from within the White House to that position, which demonstrates the president’s commitment to a diverse workforce here at the White House and in the administration, and demonstrates his commitment to having the very best talent around him advising him. Because it’s not just a question of fairness, it’s a question of quality. And there have been great studies in the private sector about having more women in top positions of fortune 500 companies improves the performance of those companies and improves the bottom line of those companies. And I know the president feels that the quality of debate and discussion and advice that he gets within this White House and more broadly this administration is improved by the presence of women, and more broadly of a diverse body of advisers. So look, there's no question that everybody needs to do more to get this right. One of the reasons why, one of the factors that goes into the figures that exist here at the White House is an aggressive effort to bring in young, talented women and others to help the workforce here to be diverse, and to make sure that there are people in the pipeline to be promoted within this White House and future White Houses and administrations so that that talent base is here in the future. It goes to fairness, and it goes to quality.
KARL: But Jay, I'm asking about the metric here. You would say there's no pay discrimination here at the White House, right? There's no pay discrimination at the White House. Is that your --
CARNEY: It is absolutely true that there is equal pay for equal work at the White House.
KARL: OK. But you're using the same metric to argue that there's pay discrimination in the workforce at large. Explain to me why the metric works in the economy at large, but it doesn't work here at the White House?
CARNEY: Again, the fact that there is indisputable census data that women earn 77 cents on the dollar that men earn. A lot of things go into that discrepancy. Discrimination and lack of transparency and the inability of women to find out what they're paid vis-a-vis their male coworkers is part of the problem. That is something we, in the administration via the president's authorities, and Congress through legislation can address. That is what the president is saying today. That is why he took the action he took That is why he's calling on Congress to do what it can do to address those problems. I'm not disputing that there are a lot of factors that go into that, but the discrepancy is real. And the again, I --
KARL: But I still don't understand why you're saying that's evidence of discrimination outside the White House, but the same metric is not evidence of discrimination inside the White House. I mean, it's the same metric.
CARNEY: Again, Jon, what I'm saying --
KARL: Well, you're not going very well -- 88 percent?
CARNEY: Well, first of all, again, if you want to compare metrics, we're doing better.
KARL: So is that the goal, to do a little bit better than the outside?
CARNEY: No, the goal is to do absolutely the best that we can do and that what we're striving to do here. And that's what the legislation the president calls on Congress to pass would ensure that others are doing across the country. And what astounds me about this debate is the suggestion -- and you don't hear a lot of women making it -- is that there isn't pay discrepancy.
KARL: I'm not making a suggestion, I'm asking about the metric you use outside the White House --
CARNEY: I don't think we dispute anything you're saying except that we have transparency here, what this law, if passed, would provide would be greater transparency for women. It exists at the White House, it should exist everywhere. And women should have the protections and tools in order to fight for paycheck fairness and transparency. Republicans object to this strenuously using the same arguments that conservatives used when they objected to every bit of progress made on civil rights for women and minorities for his -- over the past many decades. And they were wrong then, and they're wrong now. But I want to have this debate. I want you guys to -- let's talk about this every day until they pass it. (transcript via Grabien)
According to BLS data, the average woman working full time works 94 percent as many hours as the average man working full-time. (The “hour gap” gets slightly larger if you only consider, say, workers over 25.) Once you account for the “hour gap,” full-time working women make 87 percent what men make for the same amount of work.
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Now for the latest salvo in the wage gap myth, a report entitled "Graduating to a Pay Gap" from the American Association of University Women.
Authored by AAUW anthropologist Christianne Corbett and Director of Research Catherine Hill, the press release states that "just one year out of college, millennial women are paid 82 cents for every dollar paid to their male peers. Women are paid less than men even when they do the same work and major in the same field."
The AAUW recommends passing more pay equity legislation, such as the failed Paycheck Fairness Act, to require firms to provide more information to the government about pay practices and increase penalties for discrimination.
Buried in the report is the finding that, accounting for college majors and occupations, women make 93 cents (not 82) on a man's dollar. The remaining seven cents, the authors contend, is likely due to discrimination, because they cannot explain it. So let me offer a possible explanation for them: The study's occupational categories are too broad. One cannot draw precise conclusions about pay equity when comparing workers within fields such as "Other White Collar," "Business and Management" and simply, "Other Occupations."
A footnote tells readers that "Other White Collar" includes "social scientists and related workers ... ; lawyers, judges, and related workers; education, training, and library occupations ... ; arts, design, entertainment, sports, and media occupations; social science research assistants; and law clerks." So, the AAUW report compares the pay of male lawyers with that of female librarians; of male athletes with that of female communications assistants. That's not a comparison between people who do the same work.
"Other Occupations" includes jobs in construction and mining, a high-paying, male-dominated occupation, and also jobs in food preparation and serving occupations, a low-paying, female-dominated occupation. If a waitress is paid less than a miner, does it follow that it's because she's been discriminated against?
In order to show discrimination, the report should document differences in salaries of men and women in the same job with the same experience. If there's a big difference under those circumstances, then there may be discrimination, giving women grounds to sue. The AAUW study didn't even look at men and women in the same field, much less on the same job.
Why would the AAUW put out such shoddy material? Lisa Maatz, director of public policy and government relations at AAUW, answered this question at the AAUW media conference call when the study was released.
Maatz said that part of the reason the AAUW wants to do this work is that it has an extensive get-out-the-vote movement. In this sense, she continued, this report is very well-timed. The AAUW get-out-the-vote program has been targeting millennial women to get to the polls. This particular year, the AAUW has made a huge investment in trying to get millennials to vote.
It seems that the AAUW is twisting the data to get young women to feel that they are victims of discrimination and march out and vote for President Obama, who is promising pay equity.
But since Obama assumed office in January 2009, women have fared poorly. The percentage of employed women in the population has declined from 57 percent in January 2009 to 55 percent in September 2012. (Data for October are expected Friday.) Over the same period, the number of unemployed women increased from 4.4 million to 4.9 million.
President Obama says he's in favor of equal pay, but women staffers in his White House are paid 90 cents on a man's dollar -- if one calculates the figure incorrectly based on simple averages.
If women actually were paid 82 cents on the dollar for the exact same work as men, they could sue. They are too smart to believe the AAUW's political propaganda.
Examiner Columnist Diana Furchtgott-Roth (email@example.com), former chief economist at the U.S. Department of Labor, is a senior fellow at the Manhattan Institute for Policy Research.
“Today, the average full-time working woman earns just 77 cents for every dollar a man earns…in 2014, that’s an embarrassment. It is wrong.”
–President Obama, remarks on equal pay for equal work, April 8, 2014
In 2012, during another election season, The Fact Checker took a deep dive in the statistics behind this factoid and found it wanting. We awarded the president only a Pinoochio, largely because he is citing Census Bureau data, but have wondered since then if we were too generous.
We also called out the president when he used this fact in the 2013 State of the Union address. And in the 2014 State of the Union address. And yet he keeps using it. So now it’s time for a reassessment.
The Truth Teller video above also goes through the details.
The FactsFew 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.
Obama is using a figure (annual wages, from the Census Bureau) that makes the disparity appear the greatest—23 cents. But the Labor Department’s Bureau of Labor Statistics shows that the gap is 19 cents when looking at weekly wages. The gap is even smaller when you look at hourly wages — it is 14 cents — but then not every wage earner is paid on an hourly basis, so that statistic excludes salaried workers.
In other words, since women in general work fewer hours than men in a year, the statistics used by the White House may be less reliable for examining the key focus of the proposed Paycheck Fairness Act — wage discrimination. For instance, annual wage figures do not take into account the fact that teachers — many of whom are women — have a primary job that fills nine months out of the year. The weekly wage is more of an apples-to-apples comparison, but it does not include as many income categories.
June O’Neill, a former director of the Congressional Budget Office, has noted that the wage gap is affected by a number of factors, including that the average woman has less work experience than the average man and that more of the weeks worked by women are part-time rather than full-time. Women also tend to leave the work force for periods in order to raise children, seek jobs that may have more flexible hours but lower pay and choose careers that tend to have lower pay.
Indeed, BLS data show that women who do not get married have virtually no wage gap; they earn 96 cents for every dollar a man makes.
Economists at the Federal Reserve Bank of St. Louis surveyed economic literature and concluded that “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.” They cited one survey, prepared in 2009 for the Labor Department, which concluded that when such differences are accounted for, much of the hourly wage gap dwindled, to about 5 cents on the dollar.
“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 report for the Labor Department said. “The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.”
A 2013 article in the Daily Beast, citing a Georgetown University survey on the economic value of different college majors, showed how nine of the 10 most remunerative majors were dominated by men:
1. Petroleum Engineering: 87% male
2. Pharmacy Pharmaceutical Sciences and Administration: 48% male
3. Mathematics and Computer Science: 67% male
4. Aerospace Engineering: 88% male
5. Chemical Engineering: 72% male
6. Electrical Engineering: 89% male
7. Naval Architecture and Marine Engineering: 97% male
8. Mechanical Engineering: 90% male
9. Metallurgical Engineering: 83% male
10. Mining and Mineral Engineering: 90% male
Meanwhile, nine of the 10 least remunerative majors were dominated by women:
1. Counseling Psychology: 74% female
2. Early Childhood Education: 97% female
3. Theology and Religious Vocations: 34% female
4. Human Services and Community Organization: 81% female
5. Social Work: 88% female
6. Drama and Theater Arts: 60% female
7. Studio Arts: 66% female
8. Communication Disorders Sciences and Services: 94% female
9. Visual and Performing Arts: 77% female
10. Health and Medical Preparatory Programs: 55% female
The White House discovered this week that calculations using average wages can yield unsatisfactory results. McClatchy newspapers did the math and reported that when the same standards that generated the 77-cent figure were applied to White House salaries, women overall at the White House make 91 cents for every dollar men make. White House spokesman Jay Carney protested that the review “looked at the aggregate of everyone on staff, and that includes from the most junior levels to the most senior.” But that’s exactly what the Census Department does.
Betsey Stevenson, a member of the White House Council of Economic Advisers, acknowledged to reporters that the 77-cent figure did not reflect equal pay for equal work. “Seventy-seven cents captures the annual earnings of full-time, full-year women divided by the annual earnings of full-time, full-year men,” she said. “There are a lot of things that go into that 77-cents figure, there are a lot of things that contribute and no one’s trying to say that it’s all about discrimination, but I don’t think there’s a better figure.”
Carney noted that the White House wage gap was narrower than the national average, but the White House actually lags the District average calculated by the BLS: 95 cents.
The Pinocchio TestFrom a political perspective, the Census Department’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.” (His line in the April 8 speech was almost word for word what he said in the 2014 State of the Union address.) The president must begin to acknowledge that average annual wages does not begin to capture what is actually happening in the work force and society.
Thus we are boosting the rating on this factoid to Two Pinocchios. We were tempted to go one step further to Three Pinocchios, but the president is relying on an official government statistic–and there are problems and limitations with the other calculations as well.
A White House adviser had to walk back the oft-repeated myth that women make 77 cents on the dollar that men make after being questioned about the figure during a conference call Monday.
While detailing executive actions President Obama plans to take Tuesday regarding equal pay for women, Betsey Stevenson, a member of the White House Council of Economic Advisers, said very defiantly that despite women contributing 44 percent of their household incomes, they continue to make less than men. Obama has declared Tuesday "Equal Pay Day" to highlight his administration's focus on that issue.
“They’re stuck at 77 cents on the dollar, and that gender wage gap is seen very persistently across the income distribution, within occupations, across occupations, and we see it when men and women are working side by side doing identical work.”
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That sounds awfully specific. Stevenson certainly sounds like she’s saying men and women doing the exact same job are earning very different pay.
Myth debunked. Women, we are oppressed. I take back everything I wrote about the 77-cent claimbeing a myth.
Except, as soon as Stevenson was actually questioned about the statistic by McClatchy reporter Lindsay Wise, the White House adviser crumbled, admitting her earlier comments were inaccurate.
“If I said 77 cents was equal pay for equal work, then I completely misspoke,” Stevenson said. “So let me just apologize and say that I certainly wouldn’t have meant to say that.”
Oh, I’m sorry, I guess when Stevenson said “we see it when men and women are working side by side doing identical work” — that was an accident?
“Seventy-seven cents captures the annual earnings of full-time, full-year women divided by the annual earnings of full-time, full-year men,” Stevenson clarified. “There are a lot of things that go into that 77-cents figure, there are a lot of things that contribute and no one’s trying to say that it’s all about discrimination, but I don’t think there’s a better figure.”
No one’s trying to blame discrimination? Isn’t that what the entire Paycheck Fairness Act and Equal Pay Day are based on?
And while we're at it, let's not forget that the White House pays women less than men. But that's okay, said White House press secretary Jay Carney, because they still pay "better than the national average."
Apparently a little discrimination is OK in Obama's White House.
Don’t expect Obama to admit any of this as he travels around the country continuing to claim that women don’t earn as much as men.
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Christina Hoff Sommers