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Women are Paid Less

Women are Paid LessThey and Their Families Deserve Pay Parity

By Heidi Hartmann

Equal pay is a bread-and-butter issue for America's working families. Two-earner families are the norm among today's married couples, and a growing number of single women provide all or most of the support for themselves and their children. Yet women today earn on average only 74 percent of what men earn.

A recent report, Equal Pay for Working Families, researched by the institute for Women's Policy Research (IWPR), shows that America's families lose a staggering $200 billion of income annually to the wage gap. Each family with a working woman loses an average of more than $4,000 every year because women suffer from low pay. And, for women of color who experience a pay gap of 63 percent (African Americans) and 54 percent (Latinas) compared with white Anglo men (for full-time, year round work), the dollar cost of inequality is even larger, approximately $5,000 for African American women and $6,000 for Latina women and their families.

Given this family budget gap caused by pay inequity, it is particularly stinging to working women when the wage gap is discounted as non-important or even non-existent. In their recent book, Women's Figures, co-authors Diana Furchtgott-Roth and Christine Stolba tell American women that the pinch they feel in their pocketbooks doesn't really exist. They say there are plenty of good reasons for women to earn less than men, such as their own preferences, and they dismiss the findings of many economists (including myself) that women still face substantial wage discrimination in the labor market.

The 74 percent figure, which Furchgott-Roth and Stolba dismiss as misleadingly large, comes from using government data (the Current Population Survey) to compare all men and women who work full-time year round, regardless of which jobs they work in or the attributes they bring to the labor market. We all know that, despite considerable progress in integrating many occupations, women and men still tend to work disproportionately in different jobs-male truck drivers and female secretaries, for example. Men still bring (on average) more (and different) education into the labor market and have accumulated more years of experience, all factors which affect productivity on the job and therefore, legitimately affect wages.

But is a wage gap figure that reflects all this misleading? No. The wage gap is a valid indicator of economic inequality between women and men. It accurately reflects men's and women's different life probabilities of having equal access to earnings from employment. it is a number that is used routinely not only by the US government but by governments around the world. In fact, since the usual wage gap figure excludes women and men who work part time (and more women work part time than men do), it understates gender-based economic inequality. The Canadian government includes part-timers and calculates a wage ratio of 65 percent; in the US a similar calculation results in a wage ratio of 62 percent rather than the 74 percent commonly used.

The common use of the wage gap as a measure of inequality reflects an understanding that, in a perfect world, where all children could get as much education as they wanted in an environment free from stereotyping and where women had as much freedom as men to choose occupations regardless of family responsibilities (because men did an equal share of child care and because subsidized high-quality child care and paid family leave were available to all), women and men would pursue more similar educational tracks and make more similar choices about how much time to spend in and out of the labor market. In other words in a more perfect world, men's and women's choices and opportunities would be more equal and their wages would also be more equal. in fact, a 100 percent wage ratio between women and men is a reasonable goal to work toward. As a society, beginning with a wage ratio of 57 percent in 1959, we are nearly two-fifths of the way toward achieving this goal (since the wage ratio now stands at 74 percent, and 74 percent is about two-fifths of the way from 57 percent to 100 percent).

Studies that do investigate some of the factors that cause the gender wage gap and try to isolate the effects of productivity -related factors, such as education and time spent in and out of the labor market, repeatedly show that one-quarter to one-half of the overall gender pay, gap cannot be explained by such legitimate factors. Many economists conclude that labor market discrimination accounts for much of the unexplained portion. Thus, of the 26 percent average remaining pay gap, perhaps about 9 to 13 percentage points are unexplained by anything else and are likely to be due to continuing discrimination.

A 1998 report by the President's Council of Economic Advisers, Explaining Trends in the Gender Wage Gap, estimates that as of the late 1980s, when the most recent comprehensive study was done, the unexplained portion of the wage gap stood at 12 percentage points, having fallen from as much as 22 percentage points in earlier years when the overall wage gap was much larger. Progress has clearly been made in reducing discrimination against women in the labor market, but few economists believe discrimination has been entirely eliminated.

The figures from IWPR's report Equal Pay for Working Families given at the outset take into account differences in years of education, age, and hours worked between women and men and thus control for some of the productivity -related differences between women and men in the labor market. Therefore, much of the approximately $4,000 loss per woman due to unequal pay estimated in this study probably stems from discrimination, either in wage rates or in hiring, job placement, or promotion.

And what of Women's Figures' 98 percent figure - the much ballyhooed claim that young women earn only 2 percent less than young men? This figure is misleading at best. It is based on a comparison of women and men age 27 - 33 who have never had a child, from unpublished research by economist June O'Neill - a summary of which appeared in an opinion piece she wrote for the Wall Street Journal five years ago. In her unpublished paper, O'Neill claims that these groups of young men and women who never had a child are similar in unmeasurable qualities related to their productivity, such as commitment to their job and work intensity. But are they? Women who have never had a child by that age are likely to be especially committed to work and career since the median age for a first childbirth is 23.9 years in the United States. Men without children by that age may be more likely than the women to be drop-outs, low rather than high achieving males, since for men, having a family and children is a mark of their economic success. So this figure probably does not compare equals at all, but rather highly committed and work-oriented women to much less committed men. Perhaps, in the absence of discrimination these women should be earning more than the men to which they are inappropriately compared!

But the most telling aspect of the Women's Figures' claim is that it seems to imply that such a small proportion of the labor force should be the norm. When the vast majority of women and men marry and have children, why imply that to have wage equality with men, women must forego marriage and childbearing? The reality today is that the vast majority of women and men are combining work and family and do not wish to give up either. Surely that should not be required. Perhaps because they have implemented pay equity policies and provide much better supports for working families, such as more and better child care and paid and extended family leaves, many other countries are enabling women to achieve greater equality with men in earnings. The United States can and should do better.

Despite the fact that women are increasingly working outside the home and increasingly choosing similar careers to men's (women are earning almost 40 percent of the MBA's and more than 40 percent of law and medical degrees, for example), evidence of discrimination in the U.S. labor market is still ample. Recent case studies of scientists at the Massachusetts Institute of Technology and lawyers who are members of the New Hampshire bar found pay differences that could not be explained by differences in qualifications, age, or experience. In New Hampshire, more than $17,000 in average annual pay differences between full-time male and female lawyers remained unexplained. At MIT, the president of the university said, "I have always believed that contemporary gender discrimination within universities is part reality and part perception. True, but now I understand that reality is by far the greater part of the balance." MIT has taken corrective measures.

Several new studies of the entire labor force, referenced in the Council report, also document substantial unexplained differences in pay. Workers in the 1990 Census were matched to data about their employers; fully one quarter of the wage gap was found to be the result of pay differences between women and men working in similar jobs and establishments. Using a similarly large matched data set, a National Bureau of Economic Research Working Paper reports that women were 85 to 96 percent as productive as men but were paid only 66 - 68 percent as much as men.

Virtually no one claims that the entire pay gap between women and men is due to discrimination, and virtually no serious scholar claims that none of it is. The evidence is simply too overwhelming that discrimination continues to play a significant part in the labor market, to the detriment of women and their families.

The real story of the gender gap is that most of the progress that was made in narrowing the gap occurred in the 1980s. Progress has been much slower in the 1990s. Government action-stronger enforcement of our equal pay and equal opportunity laws and new laws to ensure equal pay for jobs of equal value-is very much needed to get the wage gap closing again. Perhaps that's why some try to convince women there is no problem. No problem means no intervention, and businesses, schools, and the traditional division of labor in the family can all continue unmolested, perpetuating the status quo forever.

With stronger government action, girls can continue to gain access to math and science classes, to competitive athletic scholarships, to training programs in skilled crafts, and to business and professional schools, and women can continue to gain access to better paying jobs and promotional opportunities and receive fair pay for the work they do. Today women have virtually the same legal rights as men and are increasingly exercising their political power, yet their economic rights lag behind. It is past time for women to attain full equality. Our society, economy, communities, and families will all benefit.

Heidi Hartmann, Ph.D., is the president and director of the Institute for Women's Policy Research and a 1994 MacArthur Fellowship winner for her "pioneering work in the field of women and economics."


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