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A COLUMN BY MICHAEL HICKS

Women’s wage gap is diminishing through time

Tuesday, October 30, 2012 - 12:01 am

No observer of the presidential debates will have found the discussion about pay and gender satisfying. At best it was stumbling and, to be honest, I find much of the talk condescending towards women who make difficult career and family choices in full knowledge of the costs and benefits. In short, the matter needs some clarification.

With regard to the data there's little debate. The average working woman, in 2010, earned 81 percent of the average working man. Likewise, there's no debate that the gap is closing, especially for younger women, for whom the current gap is under 5 percent. These are the data, and by themselves offer no cause or understanding of the issue, much less an explanation of potential policy interventions. For that we need to analyze the data, a step much feared by demagogues.

Studies of the gender gap are typically performed using a statistical model that estimates how various factors, such a schooling, occupation, hours worked, age, time on the job, gender and unexplained factors predict wages. It should not be surprising that the majority of wage differences between men and women can be explained by schooling, occupational choice, and experience. Early studies showed that gender and unexplained factors explained about half the wage gap. We cannot measure discrimination, but this is a pretty good proxy. However, over time, the best research points to an evaporation of unexplained factors, and a small (perhaps 2 to 5 percent, sometimes zero) wage gap attributable to gender. These issues are as well understood as the links between smoking and cancer (with clearer statistical inference), and roughly of the same vintage. So why then does the issue still offer such misdiagnosis among political discourse?

Surely election-year politics and a philistine electoral base play some part in this tactic. It is of course banal to note that sexism is unworthy of a great republic, yet it still haunts us, even as the best research points to its shrinking influence. I think that in the flurry to score electoral points, most politicians have missed the bigger point, or at least spelled it out clumsily. Here's why.

Today a disproportionate share of college students are young women. So, policies to force equal pay come at a time when markets will have finally adjusted (it only took a lifetime). Moreover, what is creating differences in salary isn't primarily discrimination, rather it is women choosing occupations that are flexible enough to accommodate childbirth and its associated duties. These occupations often pay less, which is quite natural given higher non-wage benefits.

So, big financial gains for women (and their families) would come by introducing young women to a wider variety of occupations. We can urge businesses to be more flexible, but that won't always be possible. Of course, there's no sweeping legislative agenda for a candidate to claim credit. It is a good bit harder than that, resting as it does on how we teach our sons and daughters to prepare for life.

Michael J. Hicks is director of the Center for Business and Economic Research and associate professor of economics at Ball State University.