Mind the Gender Pay Gap
An Excerpt from The Shortest History of Economics by Andrew Leigh
Worldwide, hourly wages for women are 20 per cent less than for men.?This represents a sizeable gap, though it has narrowed over time. On average, the gender pay gap was twice as large in the 1960s as it is today.?In Europe from 1300 to 1800, the gender pay gap was larger still, with women often earning only half as much as men.
?What explains the gender pay gap? Historically, one factor was that women had less formal education than men. That’s no longer true, with women’s educational attainment exceeding men’s in most countries. But a significant factor is the occupations that men and women work in. Jobs in the care economy are dominated by women and tend to pay lower wages. Occupations such as engineering and computer programming are male-dominated and tend to pay above-average wages.
In the past, some economists thought that men and women were freely choosing their occupations. Recent research has questioned this view. For example, we know that women are more likely to be sexually harassed at work, and that this harassment can deter women from certain occupations. If technical jobs have higher rates of sexual harassment, then this can widen the gender pay gap by discouraging women from choosing those career pathways.
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Another factor is discrimination. Women report higher levels of discrimination at work, although this has diminished over the past century. One intriguing study following transgender men and women finds that those who transition female tend to experience a wage drop, while those who transition male tend to experience a wage gain.
Perhaps the largest contributor to the gender pay gap in the modern era is the motherhood penalty. In many nations, earnings trajectories for childless men and women are not dramatically different. But among those who have children, women generally spend more time out of the labour force than men. When women have children, their earnings typically fall or flatline. This is not only because mothers often work part time, but also because they can find themselves on a less attractive career trajectory, sometimes dubbed ‘the mummy track’. With less experience in the labour market, women are paid lower wages than men.
This pay gap is particularly large in what Harvard economist Claudia Goldin calls ‘greedy jobs’.?In many countries, women are severely underrepresented in time-intensive roles such as chief executives, law firm partners, politicians and surgeons. Occupations that make it difficult to combine career and family tend to have the highest gender pay gaps. Likewise, gender gaps are larger in countries where access to childcare is more limited. One consequence of the motherhood penalty is that the gender pay gap tends to be much bigger if we measure it in terms of lifetime earnings rather than hourly wages. Even in advanced countries, the average lifetime earnings of mothers are only about half the lifetime earnings of men – similar to the hourly wage gap five hundred years ago.