The Wage-Gap Fallacy

As of late the Obama Administration, and the Democratic party at large, have seemed to have switched their rhetoric from healthcare and economic issues, to bringing awareness to other social ills such as income inequality and the gender wage-gap; perhaps the two main issues that preoccupy the interests of their political base.  And while there is undoubtedly empirical evidence of the former (although whether or not this is an actual issue has yet to be proven), the same cannot be said for the latter, and it is most concerning that a major political party and several national political interest groups can repeat such a flawed and easily refutable statistic such as this with what seems to be near perfect immunity.  

We have heard it since well before the Jimmy Carter years, we hear it during the most recent State of the Union address, and we will likely continue to hear it for quite some time; apparently women make $.77 for every $1 a man makes.  Now as a gut reaction, and perhaps also as a reason why we keep hearing this extremely misleading statistic, this sounds like a glaring injustice and seems to suggest that some systemic, sexist discrimination runs rampant throughout the American workforce and labor market.  After all, a 23% wage gap grows to be quite a large monetary difference after only a few years, large enough to justify a second civil rights movement, in fact.  However, once we have passed the stage of knee-jerk reactions and enter the realm of logic and reason, we begin to see that, while the 23% wage-gap statistic is not necessarily false, it certainly does not represent reality in any way.  Allow me to explain.

According to the U.S. Department of Labor[1] and the White House Council’s report “Women in America,”[2] the annual medium pay for full-time female workers is 77% of the medium pay of their full-time male counterparts, which essentially means that women make 77% of what men make. However, and herein lies the problem, these studies may be correct, but they are also full of confounding variables, leading to a gross over-simplification of the matter at hand.  To begin with, both studies look at the aggregate annual incomes of “full-time” men and women without making any, or adequate, distinctions for occupation type, work experience, degree received, and differences in education among other things.  In short, these “studies” do not compare wage rates among similar positions, and instead, opt out for an apples-to-oranges like comparison.   For any other research institution or publisher, this would be enough to throw the whole study out and nullify the results, since it is not rational to compare, say, a male baker to a female Wall Street Executive.  Of course they are going to have different hourly wages, this should be an elementary assumption and does not in any way denote some underlining discrimination, as it is commonly (mis)used to suggest. 

In addition, “full-time” is defined by both reports as 35 hours a week or more, which means there is no accounting for the fact that some people work more hours a week than others and subsequently will earn more annual pay, even at similar hourly wages.  But how does this explain a 23% wage-gap between genders?  Interestingly enough in 2007, according to the U.S. Bureau of Labor statistics, 27% of full-time males and 15% of full-time females worked 41 hours or more a week, while 73% of full-time males and 85% of full-time females worked 35-40 hours a week. These trends showed no major changes when they popped up again in the 2010 U.S. Census, the data for which was omitted from the two reports.  As it turns out, it seems that full-time males tend to work longer hours than full-time females, which is consistent with the aforementioned conclusion and, again, does not denote any underlining discrimination between male and female. 

Now that we have shown the limits and fallacies in the “23% wage-gap” statistic, it is important for us to ask ourselves if there is a pay gap, and if so, what is it?  Well spoiler alert, it’s about 5-9% depending on what year and which study you look at.  Many statisticians and social scientists, like economist Claudia Goldin of Harvard University, prefer to look at weekly wages as opposed to annual wages, as it eliminates variables such as time off or yearly bonuses and provides us with a more accurate measure, and when you organize the data this way, the 23% wage-gap becomes a 13% wage gap.[3] Furthermore, when you account for differences in occupation and industry, as seen in the Stanford paper “The Gender Wage Gap” by Francine Blau and Lawrence Kahn[4], the pay-gap is further reduced to 9% – ultimately a much smaller difference than what President Obama and many feminists groups claim.  However, many of these same groups also claim that women make less money than men for doing the exact same jobs.  Again, this seems to be more the result of statistical meddling and political bias than a representation of reality.  For example, the Labor Department’s occupational categories are extremely vague and misleading.  Under the occupation “physicians and surgeons,” women make 62.4% of what men make, however, when you dig deeper into that data, you will find that “physicians and surgeons” is a single category that contains dozens of specialties with a wide range of annual salaries, like pediatricians and surgeons.  What these ambiguous occupational categories don’t tell you is that 16% of surgeons and 50% of pediatricians are female, which means women make less because they, on average, work less hours at different levels of expertise then men.  Another apples-to oranges comparison rears its ugly head.  But the final nail in the coffin for the gender wage-gap debate ironically comes from the two sources from which it began; the U.S. Department of Labor and the American Association for University Women. 

The American Association of University Women (AAUW), a feminist advocacy group, published a study in late 2012 titled “Graduating to a Pay Gap,”[5] which documented the differences in earnings between male and female college graduates while adjusting for differences in occupation, college-major, and hours worked.  However, while boasting about findings that supported the conclusion of a gender wage-gap in press releases, the group failed to mention that the ultimate conclusion of the study was that women seemed to make only 6.6% less than men did, despite making similar mistakes as the Labor Department and White House Council, such as grouping together majors such as economics (66% male with a median income of 70 K) and sociology (68% female with a median income of 40 K) into one category.  In addition, the study’s data gave no evidence that gender discrimination was the cause of this wage-gap, and their finds were surprisingly consistent with a 2009 Labor Department study that, after examining 50 peer-reviewed papers and studies on the wage-gap, found that the 23% difference among total medium salaries was “almost entirely the result of individual choices being made by both male and female workers.”[6]  No matter how you look at it, there is absolutely no empirical evidence of gender discrimination in the workplace. 

So the question remains; why, in light of an easily assessable body of research that not only refutes the 23% wage-gap but challenges the notion of gender discrimination altogether, do the president and other prominent social leaders reject the empirical evidence and dogmatically assert a misleading statistic? And as the nation slowly becomes amped up for the 2016 presidential elections, it seems that, with likely-democrat candidate Hillary Clinton in the race, the gender wage-gap fallacy will continue on to become the proverbial “boogeyman” that splits voters and motivates bases with emotion rather than reality.

By: Christian Welborn