The roots of the gender pay gap are deeper than discrimination

Men and women are paid equally early in their careers. Then what happens?
Men and women are paid equally early in their careers. Then what happens?
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This story is part of How We’ll Win in 2019, a year-long exploration of workplace gender equality. Read more stories here

For decades, women have been discriminated against in the modern workplace. Harassed and underpaid, working women have often been forced to accept lower wages,  and lower odds of being hired (paywall) or promoted (pdf). And in spite of progress, this disparity persists today. In January, the US Department of Labor sued enterprise software company Oracle for discriminating against women and people of color, allegedly costing such workers $400 million in unpaid wages. (Oracle denied the allegations.) 

But when economists look at the source of the pay gap across the US economy as a whole, discrimination is not the culprit. “This doesn’t mean that gender discrimination doesn’t exist,” says economist Federico Anzil, who recently conducted a study on the wage gap using US Bureau of Labor Statistics (BLS) data. “[It] just shows that, at the aggregate level, most of the gap is not explained by gender discrimination.”

So what does explain the pay disparity? Anzil is one of a number of researchers searching for an answer. It’s not simple, but much of it comes down to inflexibility at work (which hurts women most), cultural norms about who takes time off when children arrive, and personal preference. 

There has been progress. As recently as 1960, the average woman in the US earned less than 60 cents for every $1 earned by men (and minority women earned even less). Today, they earn about 82 cents (pdf) for every man’s dollar. The average woman earns an annual median of $40,000, compared to $48,900 for men.

OECD countries have seen a similar narrowing of the gender pay gap. Yet progress has recently stalled out. In Scandinavia, which saw most of the gap narrow by the end of the 20th century, the pay gap remains stuck at about 15% (pdf), just less than the US.

The reason is starting to emerge in analyses of experiments and national datasets. Anzil looked at earnings data for more than 3 million people in the 2017 American Community Survey. Early in their careers, he found, single men and women without children have almost no pay gap, on average. During this period, women’s wages per hour are equal to, or even slightly higher than, men’s wages. 

But things begin to change once women get married and/or have children. A small or non-existent pay gap turns into a large pay gap for married women and those with children. In both cases, men earn more in this stage in their careers. Anzil found this pattern repeated even in occupations where single women were initially paid more than single men, such as office clerks, administrative assistants, and secretaries.

The source of this discrepancy, Anzil argues, is the difference in the number of hours women were working (whether or not they had children) compared to their male counterparts. Using US Census data, Anzil estimated men worked an average of 41 hours per week at their jobs, while women worked an average of 36 hours per week. Over time, those hours added up. And not just to earning less money—women who work fewer hours also gain less experience over time. This means their hourly wage stagnates, along with their annual incomes.

A related reason, suggests Michelle Budig, a sociology professor at the University of Massachusetts, Amherst, are employers’ expectations around parenthood. Her 2014 paper for Third Way, a policy group,  found men’s earnings rose at least 6% on average after having children (who lived with them at home), while women’s fell 4%. One of the major reasons, she proposes, is a “daddy bonus” compared to a “motherhood penalty,” she writes. “Employers read fathers as more stable and committed to their work; they have a family to provide for, so they’re less likely to be flaky,” Budig said. “That is the opposite of how parenthood by women is interpreted by employers. The conventional story is they work less and they’re more distractible when on the job.”

It’s all about flexibility

The data suggests the gender pay gap comes down to one major factor: workplace flexibility.

Certain occupations value long, unpredictable hours, such as lawyers on track to make partner at a major law firm. Curtailing a long workday in this context incurs a far greater penalty in some professions than others. As men and women make different decisions when it comes to their working hours—for all sorts of reasons, but childcare and household work foremost among them— their earnings change accordingly. 

This is what Harvard economics research Valentin Bolotnyy found in a 2018 study (pdf). He says today’s pay gap is a result of how workplace flexibility interacts with people’s personal life preferences and constraints. As men and women make different choices about how to spend their time, workplace inflexibility harms women most.

Bolotnyy and his co-author Harvard economics researcher Natalia Emanuel sorted through years of administrative records for Boston’s transit agency, the MBTA, to find out why women still earned $0.89 of men’s weekly earnings. This was despite the fact that MBTA’s union meant men and women were paid identical hourly wages for similar tasks, and promotions came as a result of tenure, leaving fewer opportunities for outright gender discrimination.

Their conclusion was that the major source of the pay discrepancy was men and women’s choices about working hours: not just how many hours, but when they were worked. Men tended to work longer hours, took on more last-minute shifts, and arranged schedules to secure 83% more overtime hours per year. Women, meanwhile, took more unpaid time off through the Family Medical Leave Act, accepted fewer last-minute overtime hours, and avoided weekend and holiday shifts. They even worked more dangerous routes (those with more accidents) in exchange for more desirable times. That mirrored experimental results in a separate study in which women with young children reported they were willing to give up almost 40% of their earnings to avoid irregular schedules.

It wasn’t that women weren’t willing to work overtime—Bolotnyy and Emanuel found when scheduled at least three months in advance, men and women worked comparable overtime—but that women value time and flexibility more than men. “Our research suggests that at least two-thirds of the current gender gap can be explained not by outright gender-based discrimination, but by the interaction between (seemingly gender neutral) inflexible workplace policies and people’s personal life preferences and constraints,” says Bolotnyy.

This work builds on research by another Harvard University economist, Claudia Goldin. In her 2014 paper, she found that time constraints, which typically fall harder on women responsible for the bulk of childcare and family labor, lead to decisions that chip away at their earnings. And that’s because workplaces still value long, inflexible hours. 

Goldin dug into the subject further in a 2016 study of pharmacists (pdf). Today, it’s a female-majority occupation with high pay and a very small pay gap (8%). But it wasn’t always that way. Before the 1980s, medicines were often dispensed by individuals working long, inflexible hours in their own pharmacy businesses. That meant female pharmacists who took time off to raise children, or needed more flexible schedules, saw their incomes heavily penalized. In 1970, female pharmacists earned just 66 cents for every dollar a man earned, according to Goldin’s study.

But three changes in the industry lead to greater equality: standardized medicines, technology for sharing customer information, and growing domination of chains like CVS. Together, these changes made pharmacists, in economists’ parlance, more substitutable. That is: instead of owning a business, pharmacists could easily hand off customers or fill in for one another. The marginal value of working longer, inflexible hours virtually disappeared—and with it, most of the pay gap. “In all of these ways, pharmacy has become one of the most egalitarian of US professions,” Goldin writes.  

One obvious answer, Goldin writes in her study, is to make most workplaces look a bit more like pharmacies. While government policies or more shared responsibility at home “wouldn’t hurt,” the main changes she says involve how employees pay for workers’ time and encourage flexible schedules. “The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours,” she argues.

Not every occupation allows for this flexibility. But there is progress in that direction. Workplace flexibility has been steadily increasing over the past few decades. In 1985, only 12% of workers had flexible schedules outside a 9-to-5 day and a five-day week. By 2000, it stood at about 29%, and has remained relatively stable since then. 

The value of parenting

Then, of course, there are the complications that come from motherhood, and conventional gender roles  For now, women still shoulder most unpaid labor worldwide, from childcare to cleaning, worth $10 trillion per year. Life-insurance clearinghouse put the market value for stay-at-home parents at $68,875 in the US. Without workplaces that respond to the current reality and parent’s desire to spend more time with their children as they grow up, occupations with less flexibility will disproportionately harm women’s earning potential, and miss out on more women’s skills and abilities.

For a long time, we’ve heard about the kinds of policies that can make workplaces better suited for parents. Shift sharing, dynamic cover lists (where employees can trade time), and more predictable schedules can help employees balance work with their obligations at home. The improvements and ubiquitousness of technology like laptops mean that virtually any white-collar job is able to be performed remotely. Daycare, when offered by employers or by the government, can ease the burden on parents scrambling with the logistics or funding of their own.

While those kinds of policies help (paywall), they don’t close the pay gap altogether. Even in a place like Denmark, which gives new parents 52 weeks of leave and subsidized daycare, the arrival of a child still leads to a 20% gender pay gap for women (pdf). The arrival of the first child tends to set off a chain reaction that lowers women’s lifetime earnings when they switch to jobs to more “family friendly” firms. The reasons sound familiar: reductions in labor force participation, hours of work, and wage rates, according to a 2017 study (pdf).

If society wants to narrow the pay gap, the answer may be simpler — and harder — than we think. The choices that women make about their careers don’t happen in a vacuum. Strong structural issues and social pressures influence, or erode, their ability to choose whether to stay at home or reenter the workforce. Even a woman’s childhood influences the pay gap. Researchers in Denmark found (pdf) the motherhood penalty was higher for women raised in traditional families in which the mother worked less than the father (the paternal family’s context had no effect). That, the authors argue, suggests women’s preferences for family and career are often formed early in life, and transmitted from generation to generation.

“Choice is some combination of people’s preferences and their personal life constraints, which can be shaped by social structure and norms,” says Harvard’s Bolotnyy. ”The two are very closely interconnected. But if we work on social norms that apply to men similarly to women, perhaps that would be a better way forward.”

There is hope for change. Households in which fathers took parental leave experienced greater equality at home and work, labor economist Ankita Patnaik of Mathematica Policy Research concludes in forthcoming paper in The Journal of Labor Economics. Mothers were more likely to be employed full-time in the workplace, and fathers spent more time with the families and shared daily housework. Years after taking “daddy-only” leave, gender specialization in households fell significantly with increase parental time with children.

The way to get more dads to take parental leave? It might just be in the marketing. A Canadian program in Quebec that started setting aside five weeks of leave for fathers labeled as “daddy-only” instead of the standard name of parental leave. That name change, and a decrease in the perceived stigma and professional penalties, increased participation by 250%.

“It presents us with a rare win-win scenario,” she writes.

This story is part of How We’ll Win in 2019, a year-long exploration of workplace gender equality. Read more stories here