Thoughts on the Gender Pay Gap

The gender pay gap is something I’ve written about elsewhere, so I don’t intend to rehash every argument I’ve ever presented on the subject. Instead, I just want to write about some interesting research.

First, Armin Falk and Johannes Hermle published a research article in Science in October 2018 entitled “Relationship of Gender Differences in Preferences to Economic Development and Gender Equality.” The article, which studied some 80,000 people across 76 countries of varying wealth, tested competing hypotheses about the relationship between gender preferences and gender equality as they relate to economic development.

The first, called the “social role hypothesis,” predicts that as gender-specific roles disappear with increasing wealth and egalitarian attitudes, the preferences of men and women will tend to become less different on average. By contrast, the “resource hypothesis” predicts that the wealthier a nation, the more the preferences of men and women will tend to diverge from one another because the basic concern of merely surviving until the next meal is no longer the only concern.

Falk and Hermle find that the empirical evidence supports the latter hypothesis:

Our results highlight the critical role of availability of material and social resources, as well as gender-equal access to these resources, in facilitating the independent formation and expression of gender-specific preferences.

Given their finding, it’s not terribly surprising that, as Gijsbert Stoet and David C. Geary find in a 2018 paper published in the journal Psychological Science, women in more gender-equal societies tend to prefer to study and work in non-STEM fields.

And, from the standpoint of economic theory, maybe it makes sense that they would. After all, as George Mason University’s Alex Tabarrok points out, if girls match or exceed boys in math and science, but also outperform them in reading, history, and other non-STEM fields (and, as Stoet and Geary point out above, the research shows that they usually do), then girls have a comparative advantage in non-STEM subjects. By comparison, boys are just “least worst” in math and science.

Of course, STEM fields tend to be comparatively high-paying, so choosing a non-STEM field carries something of an “earnings penalty” for anyone, male or female, who makes such a career choice. That’s really the salient point, though: individual choice is a crucial factor in determining the difference between two individuals’ pay.

In a working paper entitled “Why Do Women Earn Less than Men? Evidence from Bus and Train Operators,” Harvard economists Valentin Bolotnyy and Natalia Emanuel examine data gathered from the Massachusetts Bay Transportation Authority (MBTA) and discover that a gap in wages exists even in an environment where factors such as work responsibilities, hourly wages, and opportunities for promotion are strictly governed. In these heavily regulated circumstances, which act as something of a natural experiment, Bolotnyy and Emanuel find that the 11% disparity in pay that exists between men and women is an artifact of individual choice rather than the result of discriminatory practices in the workplace.

Interestingly, disparity-as-artifact was also the conclusion of a study conducted by Uber’s Cody Cook, Stanford University economist Rebecca Diamond, Uber economist Jonathan Hall, University of Chicago economist John A. List, and Stanford University economist Paul Oyer entitled “The Gender Earnings Gap in the Gig Economy: Evidence From Over a Million Rideshare Drivers.” Rather than being a result of discrimination, the 7% difference in pay between men and women discovered by Cook, et al., is explained by experience (male drivers work longer hours and quit less often), driving speed (male drivers drive an average of 2.2% faster), and where drivers choose to operate (male drivers tend to drive in low-wait, high-surge areas). Cook, et al., conclude:

We have shown that, even in the gender-blind, transactional, flexible environment of the gig economy, gender-based preferences (especially the value of time not spent at paid work and, for drivers, preferences for driving speed) can open gender earnings gaps.

And, interestingly:

Overall, our results suggest that on-the-job learning may contribute to the gender earnings gap more broadly in the economy than previously thought.

[emphasis added]

Now, obviously, this is not an exhaustive repository of research on the gender pay gap, but it does help to highlight an important principle: individual choices made by free people who have a range of preferences result in outcomes different from that which third-party onlookers might want or expect. Nevertheless, individual choice should be respected and generally not interfered with.

I conclude with a quote I like from a book I loved:

This is not to say that all attempts to help lagging individuals or groups are futile. On the contrary, many dramatic rises from poverty to prosperity, and even rises to the forefront of human achievements, have occurred at various times in countries around the world. But seldom, if ever, has this been a result of policies based on the fallacy of assuming equal outcomes in the absence of group discrimination or on the basis of an assumption of a fictitious sameness among peoples.

Thomas Sowell, Discrimination and Disparities