77 Cents is really more Like 91 Cents, but It’s Still Not a Dollar

Here is a very interesting interview with leading labor economist Francine Blau’s at The Atlantic Monthly about differences between male and female pay.

The topic is one that you have probably heard before — “women only make 77 cents for every dollar men make.”  Now why would that be?  Is it because of discrimination?

Many economists discount the idea that discrimination is the driver, because bigotry is such an expensive vice.  Consider the following: Suppose Bigoted Bob’s hires only men and has annual labor costs of $100 million per year.  If the difference in male and female earnings is due solely to discrimination, then it should be possible to hire a staff of women who are exactly the same quality and produce exactly the same quality and quantity of output for only $77 million per year.  So, it hardly takes benevolence to hire women — simple greed, er, profit maximization will do — the “benevolent” employer can presumably pocket the $23 million in labor savings!  In other words, a business that wants to exercise its discriminatory preferences for men over women for whatever reason will have to pay a steep price on the labor market.

So, perhaps it’s some other factors, and this is partly true.  If you control for human capital accumulation (education and experience, for example) and industry choice, the gap is less than the largely purported, but there is still a gap of about nine cents on a dollar. In other words, controlling for what we control for, women only make 91 cents for every dollar men make.

You might also take a look at this WSJ piece on the pay to female executives.  Hmm.