The Myth of the Gender Wage Gap

Econometrics

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Equal Pay Day on March 15th, 2022

This date is supposed to symbolize how far into the year women must work to earn what men earned in the previous year.

The idea is to illustrate the alleged pay gap between the genders.

Since this date is approaching soon, I thought it was appropriate to write about why the gender pay gap is a myth.

Aha statistics

The reason Equal Pay Day and the gender wage gap is so prevalent is because of statistics from the census bureau. These statistics show that women earn 82 cents for every dollar a man earns. The actual number varies depending on what study you look at but it hovers around 75 to 85 cents to the mans dollar.

The way this wage gap is calculated is by looking at the median wages for women and median wages for men and comparing them. You will find that the median wages for a woman is only 82% of what the median wages for a man.

Then a claim is made using this statistic. Typically it’s along the lines of “women only make 82 cents for every dollar a man makes. This is due to the misogynistic and patriarchal society we live in” then there is a call to action like “we want equal pay for equal work”.

The way the census bureau and other groups push that this rhetoric is supposed to be very shocking and appalling. It’s supposed to prove their preconceptions.

This is what Thomas Sowell calls an Aha statistic. Many people don’t challenge these statistics since they already have the preconceived notion that women earn less than men. Then when a statistic is consistent with their bias there is no reason to challenge their idea since in their mind it has been confirmed.

These statistics are accurate but don’t tell the whole truth.

Single variate analysis

When claiming that women earn 82 cents for every dollar a man earns, you are doing a single variate analysis.

This means there is only one variable in your regression model. And that’s gender. No other factors are taken into account. You are taking an aggregate of all women and all men and seeing on average how much they earn, disregarding any other variables.

By doing so your result would be women earn 82 cents of every dollar a man earns. Like I said this statistic isn’t wrong, it is just highly misleading.

By making this claim that women earn less than men and using this single variate regression to back up your argument, you at the same time are claiming that no other factors go into how much some earns besides their gender. So this disregards different jobs, education, hours worked, and any other possible factors.

The proper way to tell a story using statistics is to use a multivariate regression analysis.

Multivariate analysis

A multivariate analysis uses multiple variables in a regression to find causation.

Multivariate regressions are essential for fully understanding how things actually correlate. The difficult part of multivariate regression models is finding which variables actually have an effect on one another. Some variables can correlate but that doesn’t mean causation, but the correlation is required for causation.

It’s a fine line in statistics you must walk to get the full picture.

The problem with claims of a gender wage gap is they use a single variate analysis, gender. But if you do a multivariate analysis you’ll see the wage gap almost entirely disappear. Some variables that are taken into account include:

When taking into account these other factors the wage gap shrinks to about 98 cents to the dollar. I will explain the 2 cent difference shortly, but why did almost the entire wage gap shrink by taking into account more variables?

Occupation

Women are more likely than men to choose career paths that lead to lower-paying jobs. Similarly, women are more likely than men to choose majors which pay less than the average.

This largely has to do with the biological differences in interests between men and women. Men are more likely than women to be interested in things and women are more likely than men to be interested in people.

This leads to more men in the science and engineering fields while women lean toward the social sciences. And these STEM fields pay more on average than the social sciences. Hence, men being paid more on average.

Men are also more likely to choose more physically demanding and dangerous jobs. Because of the physical exertion required and the added risk, these jobs pay more.

This doesn’t mean that women don’t work in the STEM fields or men in the social sciences or that women don’t work physically demanding and dangerous jobs. It’s just that a majority of the people who work in the STEM fields and work the more dangerous jobs are men.

Some may claim that more engineers are men and more teachers are women because of social and cultural norms, this just isn’t true. When societies become more egalitarian, meaning there are fewer gender social norms, the differences in these fields between men and women become even greater.

So the massive push in the United States for more women in STEM might actually be hurting women because statistic shows men are just more interested in those fields than women. So forcing people to work in a field that’s not in their interest is not the best for our society.

Years of education

When you take into account years of education the wage gap decreases. You need to look at other factors that would increase the individual’s value, like years of education. Taking this out of the regression model would then lead you to compare people who have vastly different knowledge and thus different value.

You would pay someone more money for the same job if they have more education. They bring greater value to the position.

Years of Experience

Similar to years of education, you would pay more money to someone with more experience than someone with less for the same job because they bring more value to the position. Their experience can make them more efficient, solve problems they have seen before, and understand what to do in more situations because of their experience.

Women early on in their life have to make a decision on what they want for their future. They have to make this decision earlier than men because women only have a certain period of time when they can have children and raise a family.

Many women want to have children and raise a family, understandable. But it comes with a cost, that is the loss of experience in the workforce. Having to take crucial time off in the fast pace, ever-changing workforce to raise a family will lead you to lose value in the workplace quickly.

Men don’t have to bear this cost as they can raise a family and still work at the same time. Women have to make a choice early in their life, choose their careers, or choose to have a family. Many choose family, the ones who choose their career become very successful in their field.

The choice that women make reflects greatly on why there is a wage gap between men and women.

It is very foolish to leave these out of the regression model as everyone varies in years of education and years of experience which both contribute to how much you earn.

Hours Worked

Another factor that contributes to how much you earn is how much you work. Make sense. The more you work the more you earn.

Turns out that men on average work longer workdays and work more hours in a week. This leads to more income on average for men. So when taking into account how many hours you work you greatly decrease the wage gap.

Like hours worked, what time of the day you work also contributes to how much you earn. The night shifts and weekend shifts are less desirable, therefore they are paid more for whoever works them. On average men work more night and weekend shifts compared to women.

Some women do work longer hours and work night shifts. Just the majority of the people who do work longer hours and less desirable shifts are men. This must be accounted for in the model as the single variate model ignores how many hours someone works.

Agreeableness

Taking into account all these important factors greatly decreases the gender wage gap to almost nothing. But there is still about a 2% gap between the genders. Some may claim that it is the misogynistic patriarchy that explains the discrepancy; like they claimed with the original model of a 17% gap. But psychologists have another idea for it.

Psychologists think that the remaining 2% gap is due to the fact that women on average are more agreeable than men. Agreeableness is one of the Big 5 personality traits. On average women are more agreeably than men. This means that at the extremes the most agreeable people in the world are all women.

The idea is that since more women on average are more agreeable they are less likely to ask for a raise and be content with the wages they are currently earning. While men on average are less agreeable, the least agreeable people in the world are all men, and are more likely to ask for a raise.

An employer would be less likely to give you a raise if you never ask for one. If you are stubborn and less agreeable and keep nagging your boss on why you deserve a raise your boss would more than likely give you the raise over the person who never asked for one.

It has nothing to do with your gender, race, or sexuality. It’s the classic “you don’t get if you don’t ask”.

Make yourself valuable

To maximize the amount you earn, maximize the factors that affect your income.

Choose an occupation that earns you a lot of money.

Go back to school or learn new hard skills to gain experience to increase your knowledge and value in the workplace.

Work more hours and undesirable shifts as they earn you more money.

Stop focusing on thinking if you were the other gender you would earn more income. According to the data if you worked the same job, same hours, had the same experience, and same education but were the opposite gender your income would remain the same.

Racial wage gap

Most of the wage gap is centered around the gender wage gap, the difference in income between men and women. But there are some studies that claim that there is also a wage gap between black women and white men, trying to claim that the racial wage gap is even greater than the gender wage gap.

This is also not true. Just like how there isn’t a gender wage gap there is no racial wage gap either. The reason there is a claim that the racial wage gap is larger than the gender wage gap is that black women are even more likely than white women to choose an occupation or major that is in social sciences and other lower-paying jobs.

If you were a white man or a black woman with the same education, same experience, same occupation, and worked the same hours, you would earn the same amount of money.

Conclusion

The wage gap has been a debunked topic of debate for years now but every year there are these “facts” that show up saying how women don’t make the same as men when it’s just not true. The people who do these studies just don’t take anything else into account besides gender, which completely ignores major factors that affect income.