Gender Earnings Gap

It’s common knowledge that economics is tightly connected with other branches of sciences, and often it just cannot do without data of sociology, anthropology, politics, law etc. On the face of it the matter of what gender one belongs to influencing his or her income would seem a little bit strange, though actually it turns to be quite natural and at the same time rather disputable.

Labor economics is a particular branch of economics that examines various issues, functioning and dynamics in particular, of labor market, how employers (referred as demanders of services and goods) and employees (referred as suppliers of services and goods) interact, and ultimate pattern of wages, salaries, and income establishment. In economic theory labor appears as a measure of work one does, and as a factor of production it is contrasted to land and capital. To produce this or that kind of work a supplier of service needs to spend energy, and for this lost energy he must receive compensation, like in physics ”“ law of conservation of energy. In economics labor relations are compensated by wages. Compensation stands for a monetary benefit provided for employee for the services he supplies. Usually the term wage is used to imply payment for an hour, for some unit of time. Payment for a period of time, usually a week, a month and a year, is called earnings. When you summarize earnings with other benefits for labor, you receive total compensation, which in its turn results in income.

In economic theory labor is measured in hours worked, in total wages and also, less specifically, in efficiency (Orley and Layard 35).

Wage expresses the cost of production, in economics it is determined by the value of marginal revenue product, or marginal value product provided by employee. This value is calculated the following way: the price of resulting product or service is multiplied by the marginal physical product of the employee. The applicant is hired when the marginal revenue product exceeds company’s marginal revenue, or marginal cost.

Wage measure is always different, and those wage differences proceed from a great number of reasons and factors, some of them are economical, others are not. The difference between various kinds of professions is based on those barriers which rise on the way to job placement, i.e. education or training needed, physical or mental ability, the demand of the society or level of competition within the labor market (Borjas 122). But among those reasons listed many economists and sociologists see unfair gender factor, and there is a good deal of debate whether gender-based wage discrimination takes place, or whether it is just a fiction and a myth.

This problem is typically associated with the term gender earnings gap, or gender gap in earnings. It is also identified as income gender gap, gender wage gap or gender pay gap, and finally male”“female income disparity in the United States. Under these terms specialists usually mean a statistical indicator of the index of the status of female earnings in relation to male earnings. The gender earnings gap is stated as a percentage (for example, in 1951, women earned 64% as much as men) and is estimated by dividing the median annual female earnings by median annual male earnings. This issue is continuously under discussion, and plenty of research is conducted in this direction.

Women have been struggling for equal rights and social justice for many decades of years. From its very beginning feminist movement was positioned as a humanist one, as women were an oppressed group living under rigid social codes and suffering from sexual double standard.

They were usually uneducated and had no financial resources of their own. It goes without saying, that it couldn’t last forever, and more and more women realized their position and began to take efforts for changes. At the end of 18th century and at the beginning of the 19th century men were actively discussing enlightened ideas of parity, liberty and democracy, so women couldn’t stand aloof. However, their demands were not obvious for men, and female oppression based on economic conditions went on. Eventually women received access to higher education, special colleges were opened as well as coeducational institutions. Feminists went on fighting for dress reform, improved working conditions and higher wages, but met serious resistance. In 1898 Charlotte Perkins Gilman published her book “Women and Economics” where she conducted a critical analysis of female oppression and stated the demand for economic parity. That was one of the first serious studies of gender wage gap.

Finally in 1920, long after many other countries of civilized world, the United States provided the right to vote for women by the 19th amendment to the Constitution. Nevertheless, unequal compensation for equal work, keeping women out of influential posts, overall economic exploitation of women were not over and equal opportunities were still just an ideal. For their rebelliousness feminists were accused of collaboration with communists. Though, in 1923 Congress introduced “Equal Rights Amendment”, which still couldn’t satisfy women. The society was like a sick body suffering from fever heat.

This situation is reflected in the research of famous activist Borgna Brunner, “Wage Gap: A History of Pay Inequity and the Equal Pay Act”. During the Second World War a lot of women were pushed to war industries while men were at the front, and the National War Labor Board made employers balance wages and salaries of men and women for analogous quality and quantity of work within the same or similar functions. Naturally this act was ignored by employers, what is more, soon veterans returned from war and women were pushed out.

Borgna Brunner also pays attention to the fact that until 1960s in the majority newspapers under the heading “Help Wanted” it was clearly stated “male”. Sometimes there were schedules with the same jobs for men and women, but pay scales were separate, hence unequal. From 1950 to 1960 women with full time employment earned 59-64 cents for very dollar paid to men with the same job characteristics (Brunner).

Well, essential progress was made in the middle of the 20th century. In 1963 a report “American Women” was issued by the Presidential Commission where some reforms for better female status were recommended. On June 10, 1963 the US President John F. Kennedy ratified the Equal Pay Act (effective on June 11, 1964) that made it illegal to pay less on sex basis, and in 1966 the National Organization for Women (NOW) was established to become the most influential women’s organization of the century.

The Equal Pay Act was adjusted particularly by court cases. On of them (1970) stated that an employer is not allowed to alter the job titles of female workers with intension to pay less to them than to male workers. Another one made it unacceptable to pay less just because men would not work at lower rates and women would. One more document was ratified in 1972, it was the Equal Employment Opportunity Act demanding equal pay for equal work.

Another substantial research has been conducted by Francine D. Blau, Frances Perkins Professor of Industrial and Labor Relations and Labor Economics, first Vice President of the Society of Labor Economics and Chair of the American Economic Association Committee on the Status of Women in the Economics Profession, in her book “Economics of Women, Men, and Work”. Here she thoroughly studies gender issues in the labor market, specification in workplace, investigates differences in occupations and earnings, and changing gender roles in modern society (Blau and Kahn 1-42).

In 1995 Institute for Employment Studies published the report “Women in the Labor Market: Two Decades of Change and Continuity”. The report highlights the general tendencies and problems in the field of female employment over the period 1970s to 1990s. The report includes vast data on full time and pat time jobs, economic activity, industrial and economic alteration, paying shift and situation with female education. It outlines disadvantages women experienced in labor market over those two decades and turns to those areas where progress was achieved.

Figure 1 reflects that the economic activity of adult women has risen, and that of men has fallen:


Figure 1

The number of engaged women with children has also progresses, especially with children under five: 43 per cent in 1995, with only 25 per cent in 1973. Figure 2 tells that part-time work has been continuously expanding too ”“ from 30 per cent in 1971 to nearly a half in 1993:


Figure 2

It’s also interesting to trace the change in employment by branches of industry according to gender, over 1971-1993, Figure 3:


Figure 3

In mid 1970s Sex Discrimination Act was adopted, and after that there was a noticeable progress in the way to earnings parity, though further the pace began to slow down, Figure 4:


Figure 4

The figure shows that in 1970 female wages were on average 63 per cent in relation to male. By 1994, this ratio had got higher to approximately 80 per cent (Report 294).

The data from the National Longitudinal Survey of Youth referenced by the sociologists Paula England, Lori L. Reid and Barbara S. Kilbourne, in the publication “The Effect of the Sex Composition of Jobs on Starting Wages in an Organization: Findings from the NLSY” resulted in supposition that if a white woman in an entirely male place of work moved to an entirely female place of work, 7% of her previous wages would be lost. If the same happened to a black woman, 19% of her previous wages would be lost. The research of the economists Deborah Figart and June Lapidus, “The Impact of Comparable Worth on Earnings Inequality” in 1996 estimated that if there were no lower wages in female-dominated jobs, female mean hourly pay over the country would rise up 13.2% (England, Reid and Kilbourne 514).

The report of Carmen DeNavas-Walt, Bernadette D. Proctor, and Cheryl Hill Lee has demonstrated that in 2004 the mean income of FTYR (full-time year-round) male workers was $40,798, and the mean income of FTYR female workers was $31,223 (DeNavas-Walt, Proctor and Lee 200).

The 2005 Census Statistics gathered by the U.S. Census Bureau, as part of the Current Population Survey, comparing mean men’s wages to mean women’s wages, has shown that men 25 and older got higher annual income than women of the same age along with all races. Here is a diagram from the U.S. Census Bureau:


Figure 5

In April 2005 the United Nations Statistics Division promulgated statistics and indicators on women and men “Women’s wages relative to men’s” in different countries, Figure 6:

Country  Wage %
Botswana 53
Colombia 65
Paraguay 53
Japan 60
Singapore 61
Sri Lanka 81
Denmark 87
France 78
Germany 74
Hungary 74
Ireland 69
Latvia 82
Lithuania 77
Malta 92
Sweden 91
Ukraine 69
United Kingdom 79
New Zealand 80
Kenya 123
Panama 93
Myanmar 112
Qatar 194
Turkey 97
Switzerland 133

Figure 6

As we see, wage ratios differ significantly from state to state.

Apart from that, a study at Cornell University performed in 2005, found out that women with children were less expected to be hired and if hired would be provided lower wages than their male counteracts. At the same time male applicants with children were often offered higher salary than female with children or people without children.

The U.S. Women’s Bureau and the National Committee on Pay Equity have investigated women’s earnings from 1951 to 2008, and they have demonstrated that gender wage gap has narrowed, but it still does exist. In 1951, women earned nearly 64 cents for every dollar made by men, and by 2008, this rate has reached 77 cents for every male earned dollar. The situation is reflected in Figure 7 (Lips):

Year Percent Year Percent Year Percent
1951 63.9% 1970 59.4% 1989 68.7%
1952 63.9 1971 59.5 1990 71.6
1953 63.9 1972 57.9 1991 69.9
1954 63.9 1973 56.6% 1992 70.8
1955 63.9 1974 58.8 1993 71.5
1956 63.3 1975 58.8 1994 72.0
1957 63.8 1976 60.2 1995 71.4%
1958 63.0 1977 58.9 1996 73.8
1959 61.3 1978 59.4 1997 74.2
1960 60.7 1979 59.7 1998 73.2
1961 59.2 1980 60.2 1999 72.2
1962 59.3% 1981 59.2 2000 73.3
1963 58.9 1982 61.7 2001 76.3
1964 59.1 1983 63.6 2002 76.6
1965 59.9 1984 63.7% 2003 75.5
1966 57.6 1985 64.6 2004 76.6
1967 57.8 1986 64.3 2005 77.0
1968 58.2 1987 65.2 2006 76.9
1969 58.9 1988 66.0 2007 77.8
2008 77.1 2009 2010

Figure 7

Numbers were calculated for year-round earnings concerning only full-time employment. The authors state that an improvement of something like half a penny per dollar earned every year doesn’t mean the situation has seriously improved, and this rate is not accepted as an optimistic one, as at the best it would take 150 more to overcome the gender earnings gap and end up with discrimination (estimated by the Centre for Economic Performance (CEP) at the London School of Economics), but even these data are doubtful in view of other specialists and not so consoling for women living today any way (though one labor economist, the representative of the Economic Policy Institute conducted broadly-quoted approximation that the gender wage gap would be closed within 30 years, rather more optimistic but still unwarranted in views of commentators).

It is admitted that female earnings in relation to male rose speedily from 1980 to 1990 (from 59.2% to 71.6%), and less speedily from 1990 to 2004 (from 71.6% to 76.6%). However, according to the publication of Sam Roberts in the New York Times from August 3, 2007, entitled “For Young Earners in Big City, a Gap in Women’s Favor”, young female have begun to out-earn young male in a number of big urban centers, the first earning up to 20% more than their counterparts among men (Roberts 14).

Here we come up to the other side of the coin. The idea of women discrimination in labor market is broadly criticized and the wage gap myth is likely to be debunked. Arrah Nielsen, in the article “Gender Wage Gap Is Feminist Fiction” looks for reasons for statistical difference between female and male earnings: “A female receptionist working 40-hour weeks is tossed in with the male orthopedic surgeon putting in 70-hour weeks,” he claims. Warren Farrell, member of the directors’ board in the National Organization for Women New York City, in his book “Why Men Earn More” illustrates occupations requiring bachelor’s degree in which women’s starting earnings even go over men’s. Female dieticians and investment bankers, for instance, are likely to earn 116 percent to 130 percent of their male analogs.

Moreover, W. Farrell states: “Jobs that expose you to the sleet and the heat pay more than those that are indoors and neat.” (Farrell 48). In this way women earning less are blamed for their occupational choice, for preference given to less dangerous and more flexible jobs, for they are keener on social and family activities than on their careers. But this answer doesn’t seem to be so easy for other scholars.

First of all, the earnings gap between men and women is proved to exist in a wide range of occupations. The Bureau of Labor Statistics stated that in 2007 financial advisors among women earned 53.7% of the mean weekly wages of financial advisors among men, and female in sales being paid just 64.8% of male wages in corresponding positions. Figure 6, taken from the National Committee on Pay Equity, shows the gender earnings gap by selected occupations:

Occupation Percent
Occupations with estimated earnings of under $20,000
Waiter/waitress 69% 87%
Cleaning and building service occupations 40 80
Cashiers 76 88
Food preparation and service 50 90
Maids and housemen 80 85
Occupations with estimated earnings between $20,000 and $34,000
Bus driver 45% 79%
Sales worker; retail and personal 56 64
Mechanics and repairers 5 97
Construction trades 2 79
Truck drivers 4 71
Occupations with estimated earnings above $34,000
Accountants and auditors 60% 72%
Securities and financial serivces sales 33 57
Physicians 31 58
Teachers, college and university 38 79
Lawyers and judges 29 73
Economists 48 68
Occupations in which the majority of workers are women
Registered nurse 91% 88%
Social worker 71 92
Admin. support, including clerical 77 80
Teachers, except college and universities 74 81

Figure 8

Similar statistics is analyzed by Deborah Kolb, Judith Williams, and Carol Frohlinger (2009). The General Accounting Office reported that in seven out of ten economy branches the gap had actually started to widen. By 2000 women had achieved equality more or less in educational services, taking 91 cents per dollar, up from 86 in 1995. Meanwhile, over the same period a female manager engaged in the entertainment and recreation services was paid 62 cents for every dollar earned by a male manager, down from 83 cents in 1995. And according to Gallup, American Management Association, female managers are paid only 62.7% of male managers’ earnings. Deborah Kolb, Judith Williams, and Carol Frohlinger insist that the gender wage gap exists at all economic levels, from waitresses and maids to corporate lawyers and CEOs (Kolb, Williams and Frohlinger 216).

As for orientation on family and children, it is certainly true. Anne York, an economics professor at Meredith College in North Carolina, had conducted a study of high school graduates in the United States. She reports that female graduates expect to earn $74,608 on average, while male graduates expect to earn $97,734. The normal reason for such a gap in expectations, according to the report in 2009 New York Times, is their concern about uniting family responsibilities and career.

Another alternative explanation is that market of female-oriented jobs is overcrowded, so wages are driven down. Sociologist Reeve Vanneman with his colleagues estimated that if in each labor market in the United States men and women were equally distributed by activities, there would be no gender wage gap at all (Farrell 41).

Further, men’s rights activists represented by Warren Farrell declare that unmarried women without children are paid 117 percent of their male counterparts without children (proved by Census data from 2001). However, economists (for instance, F. Blau and L. Kahn) even after taking to account education, parenthood status, job title, and other aspects, still see an essential wage disparity in men’s favor (Blau and Kahn 22).

Meanwhile there is another serious reason that can explain gender disparity in earnings. It turns to be quite natural that men usually get more credit as professionals. First of all, men receive more credit from employers, as those risks and ending costs experienced by firms when a female employee leaves the responsible post (like CEO or upper management) to nurse a baby ”“ sometimes for indefinite period of time ”“ usually do not pay their way. It is just here where feminists see the display of sexism and discrimination, as such ideas spread to all the women, even those who decided to sacrifice maternity in favor of career. In this way women have changed, but social expectations stay the same, and that is the situation they are fighting against

Hilary M. Lips, Professor and Chair of Psychology, Director of Gender Studies, stresses that even if we accept the suggestion that to a large extent pay gap is coming from such middle-of-the-road factors as college major, occupation, experience, training, and parenthood, almost 5 per cent of the earnings gap is not explained by these factors ”““and it is that 5 percent that represents the impact of discrimination,” Hilary insists using the data of the 2007 American Association of University Women report (Lips).

There are also opinions that male work is frequently appreciated as higher-quality, more efficient and productive than work by women.

From this men also get a post, mentoring, and eventually promotion. For instance, Wenneras and Wold have studied the tends in distribution of research grants in scientific world, and came to the conclusion that to win equal credit female scientists had to be as a minimum twice more accomplished than their male colleagues (Figart and Lapigus 299). To support this idea, we turn to the data of the Institute for Employment Studies. It informs that in teaching women make up 70%, but only one fifth of them get access to the post of secondary school head teacher. What is more, another illuminating explanation appears from David R. Hekman. He found out that clients (no matter male or female) prefer white men more often than equally-well working women or minority employees. Patients also consider white male doctors more competent and reliable than equally-skilled women. This statistics (19% more clients’ satisfaction by male performers) influences customer-driven employers’ decisions and, consequently, resulting female earnings (Hekman 15).

To go on, many researchers claim that women do not get more because they don’t ask for more. Nancy Clark, CEO of WomensMedia, for instance, advises not to accept the first offer of employer. According to her investigation, when women start to demand, their salaries do grow, and therefore the way out for a female employee is to prove self-worth and know her own price, and defend that value At the same time the 2007 study of the Carnegie Mellon Professor Linda Babcock has shown that female applicants were rather not hired by male managers if they tried to negotiate and asked for higher pay, whereas men demanding more money were not taken negatively, with their demands often satisfied. Finally the report of D. Kolb, J. Williams, and C. Frohlinger has demonstrated that while men negotiating entry wages or boosts reach about 4.3% raise from the opening figure, negotiating women experience twice less, only 2.7% raise. Such situation is interpreted as a statement that it is easier to say no to a woman, as she will sacrifice her needs in order to save good relations, not conflict and so on, while habitually employers rather perform single fine rather than introduce serious changes in their companies, which would be in favor of women (Kolb, Williams and Frohlinger 196).

Nevertheless, much is done in this direction, and while feminists and men’s rights activists brilliantly compete in polemics, in the interim non-governmental organizations throughout the world efficiently introduce and practice various initiatives on protection of female labor.

For instance, World Bank’s Middle East and North Africa Social and Economic Group works for better incomes of women as the participants believe that women in economics are a stimulating and indispensable factor. Hence World Bank Group Gender Action Plan proclaims “gender equality as smart economics.” Goldman Sachs, a bank holding company, finds it rational to invest in women. Many world-known companies in different corners of the world (INSEAD, Cisco, Sungjoo Group, Nike, Ernst & Young etc.) support female employees with education, training, mentoring, and recognition. Besides, recent data has shown that the world downturn has played into the hands of women. At the beginning of 2009 the Office for National Statistics (ONS) reported that the employment rate for women in December 2008 was 0.3 points lower than in December 2007, whereas the ratio for men was 1.0 point lower than the previous year. It’s partly explained by the fact that more women are employed in public sector, and according to the Labour Force Survey, public sector employment has risen by 14,000 (0.2 per cent) over  June-September 2008, whereas private sector has decreased by 128,000 (0.5 per cent).

All in all we see that the situation is not as frightening as some observers try to draw. Economists are free to manipulate with figures the way it is advantageous for them, but when we subjectively analyze the situation, we come to the conclusion that this issue of labor market is under control.

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