Explaining the Wage Gender Gap

May 29, 2014

While many believe that employers pay women less than men simply based on their gender, they ignore many of the other factors that influence pay, explain Rachel Greszler and James Sherk, senior policy analysts at the Heritage Foundation.

Differences in male and female compensation (the most common statistic purports to show that a woman earns 77 cents for each dollar earned by a man) are the product of education, choice of occupation, hours worked, experience, non-cash benefits and career interruptions. All of these factors affect productivity, and pay differences arise naturally based on an employee's background, choice of industry and work ethic. Dangerous, labor-intensive jobs such as construction, for example, pay relatively high wages to attract employees to these jobs. Men, not women, tend to fill these positions.

One of the best ways to view the natural pay gap is to look at federal employees, whose pay is set by Congress through the General Schedule (GS). Under the GS, an employee's gender, market rates and individual productivity play little role in salary-setting. Rather, pay is the product of grade and seniority, according to the schedule.

  • There is a gap between male and female wages among federal employees: the average female earns 89 cents for every dollar earned by a male.
  • This is because more females choose jobs in lower grades on the salary schedule. Females, for example, comprise 75 percent of all social workers (who earn $79,569) but just 17 percent of all general engineers (who earn $117,894).
  • Within each occupation, however, there is little wage gap between men and women. Female social workers earn 97 percent as much as male social workers, not accounting for education, experience or hours worked.

Looking at differences in pay in the aggregate reveals that male and female pay disparities are largely the product of choices made by the individual employee. For example, in 1979, a median woman earned 62.5 percent as much as a median man. But by 2013, that figure had risen to 82 percent.  The rising number reflects the fact that women have become more highly educated and thus moved into higher paying industries.

When accounting for all of the factors that influence compensation, the difference between the average male and female wage is reduced to just five cents on the dollar.

Source: Rachel Greszler and James Sherk, "Equal Pay for Equal Work: Examining the Gender Gap," Heritage Foundation, May 22, 2014.

 

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