Prof. Steve Horwitz The Myth of the Gender Pay Gap - YouTube

Another contemporary economic myth is that women make 75 cents for every dollar men make

because they’re discriminated against in labor markets.

Like other myths, this does have a kernel of truth to it.

So for example, if you add up all the incomes of women and divide by the number of women

in the labor force and then do the same thing for men, what you’ll find is, on average,

women do make about 75% of what men do.

What’s happening here is not discrimination in the labor market, but differences in the

choices that men and women make (about investing in their knowledge, their education, their

skills, and their job experiences) that lead to them getting paid different salaries.

Economists talk about people’s human capital.

By human capital, we mean the knowledge, the skills, the education, and the job experience

that people have.

And economics argues that people get paid wages according to that human capital.

It turns out that men and women invest very differently in their human capital, and we

can see that in four different ways.

First of all, educational choices: Men, for example, tend to go into fields like engineering;

women tend to go into social sciences, into psychology, into nursing, and so, where men

are making higher salaries as engineers or perhaps in the business world, women tend

to end up in jobs in which their salaries are somewhat lower.

So even though they may have the same years of schooling, the different choices they’ve

made about their majors lead to them working in different areas and getting paid differently.

Secondly, men and women have different expectations about work.

For example, if women expect down the road to take time off to raise children, they’ll

make different choices today about what kinds of skills they acquire than if they imagine

they’ll be working full time for the rest of their lives.

And we know, historically, that many women in the 1960s and 70s didn’t imagine that

they would be working full time at age 40 and ended up making choices that led them

to have jobs when they were working at age 40 that didn’t pay as well as it might have

otherwise.

Younger women today, of course, are more likely to imagine themselves working at age 40 and,

therefore, make different investments today.

Another difference between men and women is full- versus part-time work.

Women are much more likely than men to work part time.

Men are more likely to work full time.

And part-time work, even for the same kinds of jobs, tends to pay less than full-time

work.

And women tend to prefer part-time work more than men because women still tend to take

on the majority of the responsibility for children and the home.

Finally, men and women differ in terms of their tenure on the job or the way in which

their careers get interrupted.

If it’s the case that women take time off from the workforce to raise children, that

will have an impact on their salaries down the road.

So we put these four things together, what we get is that the difference between men

and women’s pay is not a result of labor market discrimination but of the choices that

men and women make before they enter the labor market, or even when they’re in the labor

market, about the kinds of jobs they want to have and the way they want to balance a

family and work.

Studies that have tried to control for all these factors have shown that if you take

a man and a woman (same experience, same education, same job) and compare their salaries, what

you find is that women make about 98% of what men do, so that gender wage gap pretty much

disappears.

And in some jobs women actually make more.

Now it might well be the case that women are being discriminated against or that sexism

is a problem in the choices that women make.

For example, girls are guided away from math classes and guided into other kinds of classes.

It’s also certainly the case that our expectations about women’s roles versus caring for children

in the household, men’s roles about caring for children in the household are very different.

If we think those are poor choices, if we want to see women’s pay more equal to men,

what we need to do is convince more women to go into areas such as the sciences and

mathematics and engineering, and we need to convince men to take more responsibility for

children and the house.

When those begin to even out, we’ll see wages begin to even out as well.

But in the mean time, whatever choices men and women make, the wages they’re paid in

the market will reflect the productivity associated with those choices and are not the result

of discrimination.