Economic Reasoning Behind the Gender Wage Gap
According to the U.S. Census Bureau in 2005, women earned 77 cents for every dollar men earned. Furthermore, women’s average annual earnings were $31,858 between 2004 and 2005, as compared to men’s earnings of $41,386 (Income Climbs, 2006). This difference between male and female earnings is known as the gender wage gap. Indeed, the real question is not whether this gap exists, but why it exists.
Justifications of the gender wage differential are well debated. Supporters of the discrimination side of the debate suggest that the gender wage gap is primarily due to discrimination against women. However, discrimination is not the only possible reason. On the other side of the debate, supporters of economic reasoning suggest that the gender wage gap is due to individual choice.
These economic factors include differences in educational attainment, work experience, occupational choice, and division of labor within a family (Policy Debate, 2003). Each of these economic factors will be discussed as well as the role that discrimination might play in influencing individuals choices in each of these areas.
One economic factor for the gender wage gap is the differences in educational attainment among men and women. Although the number of women in college today exceeds the number of men in college, this is a fairly recent occurrence that has taken place over the last 20 years.
Furthermore, as compared to older males in the workforce, older women, on average, have lower levels of educational attainment. Therefore, part of the wage differential is attributed to the lower average level of education by women.
However, as more women with higher levels of education enter the workforce, and older women with lower levels of education retire, the relative amount of the wage differential influenced by level of educational attainment can be expected to narrow (Policy Debate, 2003).
As previously discussed, women with higher levels of education can help lower the part of the wage gap directly influenced by this factor. However, discrimination can still exist in a labor market for female applicants with advanced degrees.
For example, if an employer negatively perceives a female applicant as less productive and motivated because of her gender, will her higher level of education help her overcome this gender discrimination?
According to Montgomery and Powell, there is a possibility. The employer may be reassured by an advanced degree because the employer may perceive that applicants with higher levels of education are more intelligent, motivated, and aspiring than applicants without this education.
Therefore, a positively perceived attribute such as a higher level of education could outweigh a negatively perceived attribute of being a female (Montgomery & Powell, 2003).
The next economic factor relating to the gender wage gap is amount of work experience. Men generally have continuous work histories. Women, on the other hand, tend to enter and exit the labor market more frequently.
The reason behind this is time to give birth to and take care of children. When women reenter the labor market afterwards, they generally will receive lower average wages than they received before leaving because their skills have deteriorated from prolonged lack of use. In anticipation of this fact, some women will choose occupations where their skills will lose the least value, such as teaching or nursing.
Typically, these fields also tend to penalize workers less because of discontinuous work history. In other words, “women who do not expect to work continuously would want jobs that offer a smaller reward for additional work experience than would continuous workers” (Levine, 2001, p. 5).
Discrimination can also influence the amount of work experience obtained by a woman, but it is an indirect influence. Due to lower wages and less advancement opportunity, a woman perceives her leaving the labor market as having less to lose in the process than a man would (Policy Debate, 2003).
However, the main assumption in this scenario is that the lower wages and chance of promotion are influenced by gender discrimination. If gender discrimination is low or nonexistent, then individual choice is the main reason behind the lower income and opportunity of advancement.
Another economic factor, and probably the main factor, that contributes to the gender wage gap is occupational choice. Female-dominated occupations tend to be lower paying as compared to male-dominated occupations. Several reasons help explain why women enter into these lower paying jobs.
One of these reasons is that women try to find jobs that better accommodate their daily schedules and their intentions of labor market participation. Another reason is that society influences how people view occupations as either male-oriented or female-oriented.
Because of these and other reasons, there is a large supply of workers, mainly women, entering into these lower-paying, female-dominated jobs resulting in a crowding effect. Consequently, the workers in these occupations earn even lower wages as more workers enter into crowded labor markets (Boraas & Rodgers, 2003).
The deciding factor of whether women are being discriminated against in occupational choice is just that, choice. If they voluntarily choose to enter lower paying occupations, then discrimination is not the culprit. But, on the other hand, if women were forced to enter these fields due to barriers, which prevented them from entering male-dominated, higher-paying jobs, then discrimination could be a possible reason (Policy Debate, 2003).
Lastly, the division of labor within the family unit is a factor that helps explain the gender wage differential. Generally, within a family the wife tends to have more responsibilities with childcare and household work. These extra responsibilities usually require high levels of energy and leave the wife with a lower amount of effort to apply towards the labor market.
Assuming that income is relative to market work effort, then the wife within the family would earn lower wages due to lack of effort applied to her job. This factor also affects women’s choice of occupation by impelling them to look for jobs that are less demanding (Levine, 2001).
As with work experience, the possibility of discrimination influencing division of labor within a family is more an indirect influence. The only real role discrimination could play in this economic factor is in the perception of women.
If a woman perceives her role within the family unit as required by society, then discrimination could be to blame. However, if a woman accepts her role by choice, then her individual choices are the reason and not discrimination.
In conclusion, while not completely ruling out discrimination as a possible reason for the gender wage gap, other economic factors do exist that better explain the reasons for the gap.
Individual choices of educational attainment, work history, occupation, and responsibilities within the family unit all influence the amount of income earned by the worker. So, to assume that the gender wage differential exists only due to discrimination would be ignoring the fact that differences in individuals play a key role in justification.
Nevertheless, as more women enter the work force that are more highly educated, have more continuous work histories, and enter into more male-dominated occupations the wage differential is expected to decline and narrow. In the meantime, as long as the wage gap still exists the debate over discrimination versus economic reasoning is likely to continue.
