Gender pay gap

The gender pay gap is the difference between male and female earnings expressed as a percentage of male earnings, according to the OECD. The European Commission defines it as the average difference between men’s and women’s hourly earnings. It is generally accepted that the majority of the wage gap is not due to explicit discrimination, but rather is due to differences in the choices made by each gender. However there is still debate over whether any of the wage gap is due to explicit discrimination, as well as over the extent to which women and men are forced to make certain choices due to social pressure.

Overview

The most basic way to examine differences in pay between the genders is to look at the median wages of men and women. However, such a comparison is of limited usefulness. Men and women tend to exhibit very different characteristics in the workplace, which can have a significant impact on their overall wages. For example, men tend to enter fields with higher average wages , and tend to work more hours per week . These differences should be controlled for in order to accurately determine what effect discrimination has upon the wages of men and women in the workplace. However, the raw median wages of men and women are often used in misleading ways to inform public policy. (See Woozle Effect) A study commissioned by the United States Department of Labor concluded:

"There are observable differences in the attributes of men and women that account for most of the wage gap. Statistical analysis that includes those variables has produced results that collectively account for between 65.1 and 76.4 percent of a raw gender wage gap of 20.4 percent, and thereby leave an adjusted gender wage gap that is between 4.8 and 7.1 percent."

The study also noted that in theory, more of the wage gap could be explained by the differences observed between men and women. However, the data that would be required to account for possible additional factors was unavailable. While the data resulting from the study generally matches the data found in other research, there is disagreement on what factors explain the remaining wage gap. Some studies assert that this gap is due to discrimination against women, while others, such as the study commissioned by the Department of Labor, have arrived at different conclusions. Many researchers also believe that the differences between the choices which men and women make are actually a result of discrimination or social pressure.

Gender pay gap over time

Women's weekly earnings as a percentage of men's in the U.S. by age, 1979-2005

Looking at the gender pay gap over time, the United States Congress Joint Economic Committee showed that as explained inequities decrease, the unexplained pay gap remains unchanged. Similarly, according to economists Francine D. Blau and Lawrence Kahn and their research into the gender pay gap in the United States, a steady convergence between the wages of women and men is not automatic. They argue that after a considerable rise in women's wages during the 1980s, the gain decreased in the 1990s. The 2000s are characterised by a mixed picture of increase and decline. Thus Blau and Kahn assume:

"With the evidence suggesting that convergence has slowed in recent years, the possibility arises that the narrowing of the gender pay gap will not continue into the future. Moreover, there is evidence that although discrimination against women in the labour market has declined, some discrimination does still continue to exist."

A wide ranging meta-analysis by Doris Weichselbaumer and Rudolf Winter-Ebmer (2005) of more than 260 published adjusted pay gap studies for over 60 countries has found that, from the 1960s to the 1990s, raw wage differentials worldwide have fallen substantially from around 65 to 30%. The bulk of this decline, however, was due to better labor market endowments of women. The 260 published estimates show that the unexplained component of the gap has not declined over time. Using their own specifications, Weichselbaumer and Winter-Ebmer found that the yearly overall decline of the gender pay gap would amount to a slow 0.17 log points, implying a slow level of convergence between the wages of men and women.

According to economist Alan Manning of the London School of Economics, the process of closing the gender pay gap has slowed substantially and women could earn less than men for the next 150 years because of discrimination and ineffective government policies. A 2011 study by the British Chartered Management Institute revealed that if pay growth continues for female executives at current rates, the gap between the earnings of female and male executives would not be closed until 2109. Despite this promising trend, women Chief Financial Officers are still paid 16% lower on average as compared to their male counterparts.