The Gender Wage Gap: Fact vs. Myth

22 Jun 2018 - Alice Wang

In this article, we examine a basic statistical perspective to evaluate to what extent the gender wage gap truly exists, and we offer some thoughts about what could be done about it.

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Median Weekly Earnings By Gender
Source: Bureau of Labor Statistics

Since the 1900’s, multiple equal pay laws have been implemented, resulting in the earnings ratio rising from 60.7% in 1960 to 80.5%. However, the average female employee today still only earns approximately 81 cents for each dollar their male counterparts earns. After decades of equal rights movements, why haven’t women reached equal pay in the workplace?

By comparing raw data of weekly earnings between men and women (as in the figure above), the unadjusted wage gap appears to have remained the same from 2010 through 2017. However, much of the gender earnings ratio resulting from raw data is skewed due to the “explained factors”, such as college major, marriage status, and hours worked that impact the earnings ratio. Researchers and statisticians have found that the gender wage gap is narrowed greatly when variables such as college major, age, experience, and marriage status have been accounted for. Equation 1 below illustrates the wage regression as a multi-linear regression analysis, with dummy variables to represent factors of human capital.

Wage Regression Equation 1: Wage Regression

According to a Glassdoor research study conducted in 2016, after accounting for differences in education, experience, age, location, job title, industry, and company, the adjusted earnings ratio increased to 94.6%. Nearly 54% of the unadjusted earnings ratio was a result of occupational sorting, or the differences in which women and men choose their fields of study. This is a likely result of married women facing societal pressures to take familial responsibility for childcare while men are expected to be breadwinners of the family. Another explanation is simply women have different preferences from men when choosing college majors. Males have been more inclined to pursue STEM majors, and as a result a large concentration of males work in tech firms. Now, the question becomes, what causes the 5.4% gap that persists even after accounting for bias in the gender pay ratio?

Perhaps the earnings ratio can be explained by societal pressures women face in the workplace. Researchers have found that when comparing women and men with the same educational backgrounds and experience, women had significantly lower salaries. For example, in the 2014 First Destination survey provided by UNC-Chapel Hill Career Services, where recent graduates reported their starting salaries, approximately one-third of the majors had males receiving higher starting salaries than their female counterparts.

Starting Salaries of UNC Grads--2014
Source: UNC-CH 2014 First Destination Survey

Narrowing the Gap

Women and the Minimum Wage, State by State

Finding solutions to narrow the wage gap remains difficult, even after numerous anti-discrimination policies have been passed. Societal pressures and gender roles may result in workplace discrimination and discourage women from salary negotiations. First steps towards equal pay should include employers and employees understanding the gender wage gap. Many employers and employees do not fully understand why the gap exists and remains a major issue, despite the increasing amount of women in the labor force. Additionally, policies toward salary transparency in the workplace are crucial to ensure employees are truly paid based on their value. Other suggestions include raising the minimum wage, since a large concentration of women work in minimum wage occupations, and would also especially benefit women in the lower end of the income distribution. While social norms will continue to persist in the workplace, continuous research on the gender wage gap shows ways in which the gap can be narrowed to ensure gender equality.

What do you think? Connect with us and help us use data to illuminate the tools, levers, policies and programs most likely to drive the kind of change we need in the world.

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Sources:
Bureau of Labor Statistics, 2018. https://data.bls.gov/pdq/SurveyOutputServlet
Chamberlain, Andrew. 2016. https://www.glassdoor.com/research/demystifying-the-gender-pay-gap/
National Committee on Pay Equity, 2017. https://www.pay-equity.org/info-time.html

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