Equal Pay

The Bureau of Labor Statistics (BLS) has issued a report, entitled “Highlights of Women’s Earnings 2012.” The President has decided to seize on this report (http://www.bls.gov/cps/cpswom2012.pdf) to claim that there is a disparity in the earnings of women compared to men. Like many issues addressed by politicians, the claims made by politicians don’t follow from the source document. Here I want to mention two reasons why typical claims about the “evidence” backing up these unequal pay claims are bogus.

Adjusting for Hours Worked

Suppose that I told you that a woman earned $150.00 last week and that a man earned $300.00 in the same week. Does this imply unequal pay? Superficially it does but suppose further that the woman worked 10 hours to earn her income for the week but the man worked 30 hours. The woman was paid $15.00 per hour while the man earned $10.00 per hour. When we look at hourly wages, the impression conveyed by weekly earnings is clearly reversed. Any claims about unequal pay should be based upon hourly wages so that account is taken of hours worked. Advocates of the unequal pay viewpoint typically look at weekly earnings to support their claims but, as our simple analysis shows, weekly earnings are not informative. Hourly wages are the better measure. My point is simply that hours worked must be taken into account for a useful analysis of pay differences.

Adjusting for Occupations

Wage rates vary across occupations. BLS provides data for various occupations (to find this data, use the phrase “wages by occupation” to search the BLS web site). You will turn up data on incomes for many occupations and you will see how different incomes can be. Suppose that a woman works as an Community Health Worker (BLS reports mean wages 0f $37,640 for this occupation) and a man works as a Computer and Information Analyst (BLS reports an income of $86,100 for this occupation). The income difference is substantial but does this reflect discrimination or unequal pay? Of course not. Wage differences across occupations occur for many reasons, including the risk of the job and the scarcity of workers with the skills needed for the occupation. So to look for some sort of discrimination, it is important to look at the same occupation to search for pay disparities.

Is There Pay Discrimination?

The examples given here make two simple points about how to go about searching for evidence of labor market biases against women; adjustments need to be made for hours worked and occupations. There are reports in the press (see this article for a discussion of evidence on incomes by gender) that once appropriate adjustments are made permitting valid comparisons, pay differences narrow enormously. And there may not even exist statistically significant differences in income. Thus inappropriate use of data provides wildly inaccurate implications about labor market pay differences between men and women.

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Economics One

A blog by John B. Taylor

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One economist's views on economic policy.

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