The Real Reasons for the Gender Pay Gap

Commentary, Economy, Matthew Lau

For decades, politicians, pundits, and activists have clamoured about a “gender pay gap” and have cited statistics purporting to show that the economy is unfair to women, who get paid only around 70 to 80 cents for every dollar earned by men. And for just as long, studies have shown that this discrepancy is not due to any unfairness, but simply due to different choices that men and women make.

The evidence shows that one of the drivers of the gender pay gap is the different types of jobs that men and women perform. For example, dangerous occupations are filled disproportionately by men. In the United States, men account for 92.5 percent of all occupational fatalities. In these relatively dangerous occupations – such as working in fishing or logging – workers have to be paid more to compensate them for the danger they accept.

Another major driver of the gender pay gap is the division of labour in the household. Women are more likely than men to take time off their jobs to raise children or do housework, meaning that on average they will be at their jobs for fewer hours per week and spend more years out of the workforce. It’s no surprise, then, that on average their earnings will be lower – not due to unfairness, but simply because of the lifestyle choices they make.

After controlling for the relevant factors, such as education, experience, occupation, and hours worked, studies find that the gender pay gap disappears. Two recent American studies highlight how different choices made by men and women – rather than any sort of bias or unfairness – contribute to different levels of earnings.

One of these studies found that male drivers for the ride-sharing company Uber earned 7 percent more per hour than female drivers. On the face, this seems surprising, because the drivers are “doing the same job in a setting where work assignments are made by a gender-blind algorithm and the pay structure is tied directly to output and not negotiated.”

So how can a gender pay gap still exist? A few reasons, according to the study. First, male Uber drivers earned more on average because they tended to drive faster than women. Secondly, because male drivers worked more hours, they became more experienced and knew better where and when to drive in order to maximize income, and when they should cancel or accept trips. Thirdly, males were more likely to target the most profitable locations to drive.

The authors of the study found no evidence of discrimination either by Uber or its customers, instead concluding that different choices made by male and female drivers – choices on what speeds to drive at, how many hours to drive, and where to drive – were what drove the 7 percent earnings gap.

Another study found that among bus and train operators from the Massachusetts Bay Transportation Authority, female workers made 11 percent less per week than their male counterparts. As with Uber, discrimination was an unlikely explanation for this pay gap since the job is in “a unionized environment where work tasks are similar, hourly wages are identical, and tenure dictates promotions.”

The authors found that “the weekly earnings gap can be explained by the workplace choices that women and men make. Women value time away from work and flexibility more than men, taking more unpaid time off using the Family Medical Leave Act (FMLA) and working fewer overtime hours than men. When overtime hours are scheduled three months in advance, men and women work a similar number of hours; but when those hours are offered at the last minute, men work nearly twice as many.”

As these studies showed, even in environments where men and women are performing the same jobs and compensation is determined in a gender-blind way, men and women will still earn different amounts of money – not due to unfairness, but simply because they make different choices to reflect their own preferences.