Don’t Celebrate: It’s Equal Pay Day

Don’t Celebrate: It’s Equal Pay Day

Today marks Equal Pay Day, a symbolic event marking how far into the year the average American woman has to work to make up the gap with what men earned in the previous year. To mark the occasion, various organizations have issued studies and statements illustrating the persistence of the gender pay gap.

The Joint Economic Committee of the US Congress released a report this week taking a detailed look at the gap and its effects on American women. On average, the committee finds, a women working a full-time, year-round job earns on average $10,800 less than a man, adding up to nearly half a million dollars over a lifetime (a finding that squares with other recent research from the National Women’s Law Center). On a percentage basis, that means women earn 79 percent as much as men.

Here are some other highlights of the Congressional report:

  • Lower career earnings result in an even greater disparity in retirement income. Median income for women ages 65 and older ($17,400) is 44 percent less than the median income for men in the same age group ($31,200). Women 75 years and older are almost twice as likely as men to live in poverty.
  • The gender pay gap varies widely across states, from a low of 10 percent in Washington, DC, to a high of 35 percent in Louisiana.
  • Women’s median earnings are lower at every level of education. In fact, women are often out-earned by men with less education: the typical woman with a graduate degree earns $5,000 less than the typical man with a bachelor’s degree.
  • Women of color face even larger gender pay gaps. Compared to white men, African-American women, on average, are paid only 60 cents on the dollar and Latinas are paid only 55 cents on the dollar.

Skeptics argue that the way equal pay advocates talk about a 21 percent wage gap is misleading, and that any gaps actually reflect different career choices women make in their lives, as opposed to discrimination. The libertarian Manhattan Institute, for instance, insists that once circumstances such as experience, education, and industry are corrected for, the pay gap practically disappears. Other studies have found that job differences explain most, though not all, of the pay gap, but even so, occupational sorting doesn’t necessarily reflect women’s free choices: Social and economic pressure can force women into lower-paying career tracks or out of the workforce entirely, such as when they have children and get little or no parental leave.

In any case, looking at Census data, the National Partnership for Women and Families stresses in a fact sheet that wage gaps still exist within industries and specific occupations:

In the civilian industries that employ the most full-time employees – health care and social assistance, manufacturing, retail trade and educational services – women are paid less than men. In the health care and social assistance industry, women are paid just 71 cents for every dollar paid to men. In manufacturing, just 75 cents. In retail trade, 78 cents. And in educational services, 87 cents. Across all industries, women are paid lower salaries than men. …

Among the occupations with the most people working full time, year round – sales, production, management, and office and administrative support – women are paid less than men. In sales, women are paid just 62 cents for every dollar paid to men. In production, just 66 cents. In management, 80 cents. And in office and administrative support occupations, just 87 cents.

Equal pay for equal work isn’t necessarily the end of the story, either: Researchers and advocates are also starting to look at the overrepresentation of women in lower-paying jobs as part of the problem. Facebook and Microsoft both announced on Monday that they had almost completely eliminated gender pay gaps among employees of the same role and level, but both of these companies still have predominantly male workforces. When Amazon made a similar announcement last month, critics like Huffington Post business editor Emily Peck pointed out that men constitute a majority of Amazon employees, a larger majority of its managers, and and overwhelming majority of its executive team, so the apples-to-apples comparison of salaries was obscuring a bigger-picture disparity.

This criticism speaks to a larger-scale obstacle to achieving gender equality in the economy. Jeff Green and Wei Lu at Bloomberg flag another new gender gap study from Third Way, which touches on the domination of high-earning jobs by men, and look at how this plays out in the lucrative fields of finance and insurance:

Right now, men dominate 26 of the 30 top-earning jobs in the U.S., women 23 of the lowest-earning 30, according to [Third Way policy advisor Emily] Liner’s research. In many industries, men have long held most of the highest paying executive-level positions, while more women have jobs as secretaries. There’s been progress: A women early in her career makes 90 cents on the dollar, according to the research, up from 68 cents on the dollar 35 years ago.

In finance and insurance today, women earn 59 cents for every dollar a man does, according to data compiled by Bloomberg. Geographically, the gap is widest in the Bridgeport-Stamford-Norwalk metro area, congruent with Fairfield county, Connecticut, where hedge funds are concentrated. Women there earn 44 cents on the dollar.

The job search site Hired, meanwhile, dug into its own data, analyzing more than 100,000 job offers across 15,000 candidates and 3,000 companies, to compare what kind of salaries men and women were requesting and being offered for various jobs:

On average, we found companies offer women 3% less than men for the same roles, with some companies offering as low as 30% less. In fact, our data—which spans technology, sales and marketing roles—shows that 69% of the time, men receive higher salary offers than women for the same job title at the same company. It’s difficult to determine whether this is a symptom of unconscious gender bias in the hiring process or results from an ongoing cycle of women being underpaid, setting their salary expectations too low, and ultimately receiving less in subsequent roles. …

One of the most noteworthy findings in our report relates to what’s known as the “expectation gap.” Overall, Hired’s data shows that the average woman on our platform sets her expected salary at $14k less per year than the average man on our platform. When we break the expectation gap down by role —comparing women and men in the same job category— we found as the ratio of men to women in the role increases, so does the gap.

Hired’s finding of an “expectation gap” evokes the conventional wisdom that women tend to earn less than men because they are less willing or able than men to negotiate a higher salary. In the Harvard Business Review, Christine Exley, Muriel Niederle, and Lise Vesterlund reveal that their latest research into this phenomenon shows that it’s not as simple as it looks:

[I]t is not that women never negotiate. Indeed, it depends on the conditions of the negotiation. Women who are given an initial offer below what they bring to the table reject the wage and initiate a negotiation 88% of the time. The reluctance to negotiate is instead seen when the initial wage offer equals or exceeds what a woman brings to the table; in this case, only 44% of women negotiate. While women largely gain from negotiating, they are less likely to enter negotiations when they are already being paid at or above their market value. …

To determine if avoiding negotiations 34% of the time was financially wise, we examined how the distribution of wages changed when women were instead forced to negotiate every time. When women were forced to negotiate every time, women’s overall wages actually decreased. To put a finer point on it: final wages exceeded the initial wage offer at exactly the same rate as when they had a choice to avoid negotiations – 49% of the time — but the rate by which final wages fell short of the initial wage offer increased from 9 to 33%. Comparing these two scenarios, we concluded that when women in our choice treatment opted out of the negotiation they made a financially wise choice.

The implication here, that attempts to secure a higher salary often backfire on women, is why some equal pay advocates have suggested banning salary negotiations entirely. Another, less radical solution that appears to be gaining popularity is to stop asking job candidates for salary histories, which critics say disadvantages women and minorities by ensuring that those who under-earn earlier in their careers continue to be paid less later on.

Yet another potentially promising strategy for combating wage gaps is to encourage pay transparency, which has numerous benefits on top of helping to uncover pay discrimination. A new global Glassdoor survey finds that “nearly 7 in 10 employees globally wish they had a better understanding of what fair pay is for their position and skill set at their company and in their local market.” Glassdoor also found that women were less likely than men to say they had a good understanding of how people are compensated at all levels in their company.