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Gender pay gap

Average difference between a man's and a woman's aggregate wages or salaries.

Top 10 Gender pay gap related articles

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Activists demonstrate for Equal Pay Day in Frankfurt.

The gender pay gap or gender wage gap is the average difference between the remuneration for men and women who are working. Women are generally considered to be paid less than men. There are two distinct numbers regarding the pay gap: non-adjusted versus adjusted pay gap. The latter typically takes into account differences in hours worked, occupations chosen, education and job experience.[1] In the United States, for example, the non-adjusted average female's annual salary is 79% of the average male salary, compared to 95% for the adjusted average salary.[2][3][4][5]

The reasons link to legal, social and economic factors, and extend beyond 'equal pay for equal work'.[6]

The gender pay gap can be a problem from a public policy perspective because it reduces economic output and means that women are more likely to be dependent upon welfare payments, especially in old age.[7][8][9]

Gender pay gap Intro articles: 305

Historical perspective

Women's weekly earnings as a percentage of men's in the U.S. by age, 1979-2005[10]

According to a 2021 study on historical gender wage ratios, women in Southern Europe earned approximately half that of unskilled men between 1300 and 1800. In Northern and Western Europe, the ratio was far higher but it declined over the period 1500–1800.[11]

A 2005 meta-analysis by Doris Weichselbaumer and Rudolf Winter-Ebmer of more than 260 published pay gap studies for over 60 countries found that, from the 1960s to the 1990s, raw (aka non-adjusted) wage differentials worldwide have fallen substantially from around 65% to 30%. The bulk of this decline, was due to better labor market endowments of women (i.e. better education, training, and work attachment).[12]

Another meta-analysis of 41 empirical studies on the wage gap performed in 1998 found a similar time trend in estimated pay gaps, a decrease of roughly 1% per year.[13]

A 2011 study by the British CMI concluded that, if pay growth continues for female executives at current rates, the gap between the earnings of female and male executives would not be closed until 2109.[14]

Gender pay gap Historical perspective articles: 3

Calculation

The non-adjusted gender pay gap, or gender wage gap is typically the median or mean average difference between the remuneration for all working men and women in the sample chosen. It is usually represented as either a percentage or a ratio of the "difference between average gross hourly [or annual] earnings of male and female employees as % of male gross earnings".[15]

Some countries use only the full-time working population for the calculation of national gender gaps.[16][17] Others are based on a sample from the entire working population of a country (including part-time workers), in which case the full-time equivalent (FTE) is used to obtain the remuneration for an equal amount of paid hours worked.[15][18][19][20][21][22][17]

Non-governmental organizations apply the calculation to various samples. Some share how the calculation was performed and on which data set.[16] The gender pay gap can, for example, be measured by ethnicity,[23] by city,[24] by job,[25] or within a single organization.[26][27][28]

Adjusting for different causes

Comparing salary "within, rather than across" data sets helps to focus on a specific factor, by controlling for other factors. For example, to eliminate the role of horizontal and vertical segregation in the gender pay gap, salary can be compared by gender within a specific job function. To eliminate transnational differences in the job market, measurements can focus on a single geographic area instead.[29]

Gender pay gap Calculation articles: 3

Reasons

Decomposition of the gender wage gap (2010)

The non-adjusted gender pay gap is not itself a measure of discrimination. Rather, it combines differences in the average pay of women and men to serve as a barometer of comparison. Differences in pay are caused by occupational segregation (with more men in higher paid industries and women in lower paid industries), vertical segregation (fewer women in senior, and hence better paying positions), ineffective equal pay legislation, women’s overall paid working hours, and barriers to entry into the labor market (such as education level and single parenting rate).[30]

Some variables that help explain the non-adjusted gender pay gap include economic activity, working time, and job tenure.[30] Gender-specific factors, including gender differences in qualifications and discrimination, overall wage structure, and the differences in remuneration across industry sectors all influence the gender pay gap.[31]

Eurostat estimated in 2016 that after allowing for average characteristics of men and women, women still earn 11.5% less than men. Since this estimate accounts for average differences between men and women, it is an estimation of the unexplained gender pay gap.

Industry sector

U.S. women's weekly earnings, employment, and percentage of men's earnings, by industry, 2009[32][33]

Occupational segregation[34] or horizontal segregation[35] refers to inequality in pay associated with occupational earnings.

In Jacobs (1995), Boyd et al. refer to the horizontal division of labor as "high-tech" (predominantly men) versus "high-touch" (predominantly women) with high tech being more financially rewarding.[36] Men are more likely to be in relatively high-paying, dangerous industries such as mining, construction, or manufacturing and to be represented by a union.[37] Women, in contrast, are more likely to be in clerical jobs and to work in the service industry.[37]

A study of the US labor force in the 1990s suggested that gender differences in occupation, industry and union status explain an estimated 53% of the wage gap.[37] A 2017 study in the American Economic Journal: Macroeconomics found that the growing importance of the services sector has played a role in reducing the gender gap in pay and hours.[38] In 1998, adjusting for both differences in human capital and in industry, occupation, and unionism increases the size of American women's average earnings from 80% of American men's to 91%.[39]

A 2017 study by the US National Science Foundation's annual census revealed pay gaps in different areas of science: there is a much larger proportion of men in higher-paying fields such as mathematics and computer science, the two highest-paying scientific fields. Men accounted for about 75% of doctoral degrees in those fields (a proportion that has barely changed since 2007), and expected to earn $113,000 compared with $99,000 for women. In the social sciences the difference between men and women with PhD's was significantly smaller, with men earning ~$66,000, compared with $62,000 for women. However, in some fields women earn more: women in chemistry earn ~$85,000, about $5,000 more than their male colleagues.[40]

A Morningstar analysis[41] of senior executive pay data revealed that senior executive women earned 84.6 cents for every dollar earned by male executives in 2019.[42] Women also remained outnumbered in the C-Suite 7 to 1.[42]

Discrimination

A 2015 meta-analysis of studies of experimental studies of gender in hiring found that "men were preferred for male-dominated jobs (i.e., gender-role congruity bias), whereas no strong preference for either gender was found for female-dominated or integrated jobs".[43] A 2018 audit study found that high-achieving men are called back more frequently by employers than equally high-achieving women (at a rate of nearly 2-to-1).[44]

The European Commission divides discrimination, as it impacts the EU wage gap, into several categories.

Direct discrimination is when a woman is paid less than a man for the same job.[45] According to Harvard Economist, Claudia Goldin, by and large women receive equal pay for equal work in the US.[46] A more persistent difference is the sectoral or industry discrimination, with women being paid less for a job of equal value in careers dominated by women.[47][48]

Motherhood

Studies have shown that an increasing share of the gender pay gap over time is due to children.[49][50] The phenomenon of lower wages due to childbearing has been termed the motherhood penalty. A 2019 study conducted in Germany found that women with children are discriminated against in the job market, whereas men with children are not.[51] In contrast, a 2020 study in the Netherlands found little evidence for discrimination against women in hiring based on their parental status.[52]

Motherhood can affect job choices as well. In a traditional role, women are the ones who leave the workforce temporarily to take care of their children. As a result, women tend to take lower paying jobs because they are more likely to have more flexible timings compared to higher-paying jobs. Since women are more likely to work fewer hours than men, they have less experience,[53] which will cause women to be behind in the work force.

Another explanation of such gender pay gap is the distribution of housework. Couples who raise a child tend to designate the mother to do the larger share of housework and takes on the main responsibility of child care, and as a result women tend to have less time available for wage-earning. This reinforces the pay gap between male and female in the labor market, and now people are trapped in this self-reinforcing cycle.[54]

Gender norms

Another social factor, which is related to the aforementioned one, is the socialization of individuals to adopt specific gender roles.[55][56] Job choices influenced by socialization are often slotted in to "demand-side" decisions in frameworks of wage discrimination,[57] rather than a result of extant labor market discrimination influencing job choice.[58] Men that are in non-traditional job roles or jobs that are primarily seen as a women-focused jobs, such as nursing, have high enough job satisfaction that motivates the men to continue in these job fields despite criticism they may receive.[59]

According to a 1998 study, in the eyes of some employees, women in middle management are perceived to lack the courage, leadership, and drive that male managers appear to have,[60] despite female middle managers achieving results on par with their male counterparts in terms of successful projects and achieving results for their employing companies.[60] These perceptions, along with the factors previously described in the article, contribute to the difficulty of women to ascend to the executive ranks when compared to men in similar positions.[61]

Societal ideas of gender roles stem somewhat from media influences.[62] Media portrays ideals of gender-specific roles off of which gender stereotypes are built.[63] These stereotypes then translate to what types of work men and women can or should do.[62] In this way, gender plays a mediating role in work discrimination, and women find themselves in positions that do not allow for the same advancements as males.[62]

Some research suggests that women are more likely to volunteer for tasks that are less likely to help earn promotions,and that they are more likely to be asked to volunteer and more likely to say yes to such requests.[64]

Gender pay gap Reasons articles: 10

Consequences

Female filmmakers protesting the gender pay gap and other inequalities in the film industry, during the 2018 Cannes Film Festival.

The gender pay gap can be a problem from a public policy perspective because it reduces economic output and means that women are more likely to be dependent upon welfare payments, especially in old age.[7][8][9]

For economic activity

A 2009 report for the Australian Department of Families, Housing, Community Services and Indigenous Affairs argued that in addition to fairness and equity there are also strong economic imperatives for addressing the gender wage gap. The researchers estimated that a decrease in the gender wage gap from 17% to 16% would increase GDP per capita by approximately $260, mostly from an increase in the hours females would work. Ignoring opposing factors as hours females work increase, eliminating the whole gender wage gap from 17% could be worth around $93 billion or 8.5% of GDP. The researchers estimated the causes of the wage gap as follows, lack of work experience was 7%, lack of formal training was 5%, occupational segregation was 25%, working at smaller firms was 3%, and being female represented the remaining 60%.[65]

An October 2012 study by the American Association of University Women found that over the course of 47 years, an American woman with a college degree will make about $1.2 million less than a man with the same education.[66] Therefore, closing the pay gap by raising women's wages would have a stimulus effect that would grow the United States economy by at least 3% to 4%.[67][68]

For women's pensions

The European Commission argues that the pay gap has significant effects on pensions. Since women's lifetime earnings are on average 17.5% (as of 2008) lower than men's, they have lower pensions. As a result, elderly women are more likely to face poverty: 22% of women aged 65 and over are at risk of poverty compared to 16% of men.[69]

For learning

Analysis conducted by the World Bank and available in the 2019 World Development Report on The Changing Nature of Work[70] connects earnings with skill accumulation, suggesting that women also accumulate less human capital (skills and knowledge) at work and through their careers. The report shows that the payoffs to work experience is lower for women across the world as compared to men. For example, in Venezuela, for each additional year of work, men's wages increase on average by 2.2 percent, compared to only 1.5 percent for women. In Denmark, by contrast, the payoffs to an additional year of work experience are the same for both men and women, at 5 percent on average. To address these differences, the report argues that governments could seek to remove limitations on the type or nature of work available to women and eliminate rules that limit women's property rights. Parental leave, nursing breaks, and the possibility for flexible or part-time schedules are also identified as potential factors limiting women's learning in the workplace.

Gender pay gap Consequences articles: 5

Economic theories

Neoclassical models

In certain neoclassical models, discrimination by employers can be inefficient; excluding or limiting employment of a specific group will raise the wages of groups not facing discrimination. Other firms could then gain a competitive advantage by hiring more workers from the group facing discrimination. As a result, in the long run discrimination would not occur. However, this view depends on strong assumptions about the labor market and the production functions of the firms attempting to discriminate.[71] Firms which discriminate on the basis of real or perceived customer or employee preferences would also not necessarily see discrimination disappear in the long run even under stylized models.[72]

Monopsony explanation

In monopsony theory, which describes situations where there is only one buyer (in this case, a "buyer" for labor), wage discrimination can be explained by variations in labor mobility constraints between workers. Ransom and Oaxaca (2005) show that women appear to be less pay sensitive than men, and therefore employers take advantage of this and discriminate in their pay for women workers.[73]

Gender pay gap Economic theories articles: 4

Policy measures

Anti-discrimination legislation

According to the 2008 edition of the Employment Outlook report by the OECD, almost all OECD countries have established laws to combat discrimination on grounds of gender. Examples of this are the Equal Pay Act of 1963 and Title VII of the Civil Rights Act of 1964.[74] Legal prohibition of discriminatory behavior, however, can only be effective if it is enforced. The OECD points out that:

herein lies a major problem: in all OECD countries, enforcement essentially relies on the victims' willingness to assert their claims. But many people are not even aware of their legal rights regarding discrimination in the workplace. And even if they are, proving a discrimination claim is intrinsically difficult for the claimant and legal action in courts is a costly process, whose benefits down the road are often small and uncertain. All this discourages victims from lodging complaints.[75]

Moreover, although many OECD countries have put in place specialized anti-discrimination agencies, only in a few of them are these agencies effectively empowered, in the absence of individual complaints, to investigate companies, take actions against employers suspected of operating discriminatory practices, and sanction them when they find evidence of discrimination.[75][76]

In 2003, the U.S. Government Accountability Office (GAO) found that women in the United States, on average, earned 80% of what men earned in 2000 and workplace discrimination may be one contributing factor. In light of these findings, GAO examined the enforcement of anti-discrimination laws in the private and public sectors. In a 2008 report, GAO focused on the enforcement and outreach efforts of the Equal Employment Opportunity Commission (EEOC) and the Department of Labor (Labor). GAO found that EEOC does not fully monitor gender pay enforcement efforts and that Labor does not monitor enforcement trends and performance outcomes regarding gender pay or other specific areas of discrimination. GAO came to the conclusion that "federal agencies should better monitor their performance in enforcing anti-discrimination laws."[77][78]

In 2016, the EEOC proposed a rule to submit more information on employee wages by gender to better monitor and combat gender discrimination.[79] In 2018, Iceland enacted legislation to reduce the country's pay gap.[80]

Awareness campaigns

Civil society groups organize awareness campaigns that include activities such as Equal Pay Day or the equal pay for equal work movement to increase the public attention received by the gender pay gap. For the same reason, various groups publish regular reports on the current state of gender pay differences. An example is the Global Gender Gap Report.

Job flexibility

The growth of the "gig" economy generates worker flexibility that, some have speculated, will favor women. However, the analysis of earnings among more than one million Uber drivers in the United States surprisingly showed that the gender pay gap between drivers is about 7% in favor of men. Uber's algorithm does not distinguish the gender of its workers, but men get more income because they choose better when and in which areas to work, and cancel and accept trips in a more lucrative way. Finally, men drive 2.2% faster than women, which also allows them to increase their income per unit of time.[81][82][83] The study concludes the "gig" economy can perpetuate the gender pay gap even in the absence of discrimination.[81][82][83]

Gender pay gap Policy measures articles: 9