How to End the Gender Pay Gap Once and for All

A Harvard economist makes the case that greater autonomy and work flexibility would bring us closer to equal pay
Reuters

When it comes the gender pay gap there is (a) one famous statistic that everybody knows; (b) a couple famous rebuttals to that statistic; and (c) one big unanswered question about equal pay for men and women.

The statistic is that a woman earns $0.77 for every $1 earned by a man. The 77-cent talking point is everywhere, and too often the conversation ends with the double-sevens.

The rebuttals matter. The 77-cent stat doesn't account for the fact that women choose different jobs than men (often in lower-paid occupations and industries). It doesn't account for the fact that many women choose to work part-time,* or choose to leave the workforce for extended periods of time, which means they have less work experience by the time they turn 40 or 50.

But even when you equalize for all these variables, a pay gap of about 9 percent persists between men and women, and it's particularly cavernous at the top end of the income scale. Why?

It could be rampant discrimination against women, or against mothers, in particular. It could be that women are less likely to push for a promotion. It could be that they're less aggressive about moving up the corporate ladder for fear that they won't be able to fulfill the work demands of a bigger job once they have a family. (This is one reason why equal-pay advocates support more paternity leave, which would put men and women on an equal plane with respect to time off after the baby.)

Harvard economist Claudia Goldin has an idea that doesn't rely on government, or bolder women, or more men doing diapers (although all that could help, she says). Instead, she suggests the most important factor in gender inequality is for companies to see the benefits of work flexibility.

"The gender gap in pay would be considerably reduced and might even vanish if firms did not have an incentive to disproportionately reward individuals who worked long hours and who worked particular hours," she writes in a new study.

It's About Time

The gender pay gap sounds simple when you reduce it to a 77-cent (or 91-cent) soundbite. The reality is more dynamic. In many industries, men and women enter the workforce earning equal wages. But as they enter their 30s and 40s, men open up a big lead.

This graph of the gender-wage gap, from Goldin's paper, tells two clear stories. First, the wage gap is closing with each new generation (each individually colored line represents a new cohort). Second, the pay gap starts small and grows quickly (i.e.: the colored lines fall) into one's 40s and 50s. The x-axis here is age; the y-axis is log ratio of female/male earnings.

What does this graph tell us? It tells us the gender gap isn't just about gender. It's also about time—time since entering the workforce and time spent working.

In winner-take-all jobs (e.g.: a CEO, law partner, or a tenured professor), contenders are rewarded for working longer hours, Goldin writes. It's as if, for the most coveted and high-paying jobs, hours in the office acts as a kind of tie-breaker between similarly talented and deserving candidates for top spots. And it's a tie-breaker that often goes to the guys because many women take time off to be moms.

Among female Harvard students graduating around 1990, taking off 18-months in their first 15 years was associated a penalty of 41% of earnings for eventual MBAs, 29% for lawyers, and 15% for doctors. In other words, corporations and law firms punish women who take time off much more than the health industry.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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