The "77 Cents on the Dollar" Myth

April 9, 2014

It is a myth that a woman makes 77 cents on every dollar earned by a man, say Andrew Biggs and Mark Perry of the American Enterprise Institute.

According to the Bureau of Labor Statistics (BLS) report, "Highlights of Women's Earnings in 2012," full-time wage and salaried female workers had median weekly earnings of $691, compared to male median earnings of $854 (an 81 percent gap). That might seem to support the 77-cents-on-the-dollar claim, until you look at what else BLS said.

  • While this was a comparison of "full-time" workers, what actually qualifies as "full-time" varies within that designation.
  • Men were nearly twice as likely to work more than 40 hours a week than women were, and women were almost twice as likely to work only 35 to 39 hours per week.
  • Taking that into account shrinks the pay gap -- women working 40-hour weeks earned 88 percent of male earnings.

Moreover, marriage and children change the calculus even further. The BLS report shows that single, never-married women earned 96 percent of men's 2012 earnings. What do marriage and children have to do with it? Not only do mothers leave the labor market to have children, but when they return, they have less work experience than men of their age. Moreover, working mothers generally seek flexibility in their jobs, much more so than men. That flexibility pays less.

Other factors include:

  • In college women tend to major in fields that pay less in the labor market than others.
  • Men are four times more likely to negotiate their salaries in the job market than are women.
  • Men constitute the majority of the employees in the most dangerous jobs, such as logging; in 2012, 92 percent of work-related deaths were male deaths. These risky, dangerous jobs pay high salaries in order to attract workers, and it is men who flock to these jobs.
  • Similarly, men in general are more likely to pursue occupations with risky compensation, such as finance. The average pay in those jobs tends to be higher, in order to compensate for that risk.

Discrimination is not producing this pay gap. A simple look at labor market incentives illustrates how illogical this claim is. If women are paid 77 cents on the dollar, then any business looking to maximize its profits can cut its labor costs by replacing its male workers with female workers. Why are businesses ignoring this opportunity? Because it doesn't exist -- women are not paid 77 cents on the dollar for the same work as men.

Source: Mark J. Perry and Andrew G. Biggs, "The '77 Cents on the Dollar' Myth About Women's Pay," Wall Street Journal, April 7, 2014.

 

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