Close the Gender Pay Gap, Change the Way We Work
For all the progress made on women’s rights, one measure of inequality still stands out: Females earn less than males, even in the same occupations. Closing this gender gap will require changing the way employers think about work.
It’s hard to overstate how far women have come in the last century. They are now almost as active in the labor market as men, and equally or even better educated. They account for about half of all law and medical school enrollments, and lead men in fields such as biological sciences, pharmacy and optometry.
Still, women have yet to reach the same level of pay. As of 2010, the annual earnings of the median full-time, full-year female worker stood at 77 percent of the median male’s -- up from 56 percent in 1980 but still far from parity. For college graduates, the number was an even lower 72 percent.
Why the persistent difference? U.S. data provide two clues. First, the gap increases with age: Women start their careers close to earnings parity with men, then fall behind over the next several decades. Second, wage differences are concentrated within occupations, meaning that women earn less not because they choose lower-paid professions.
The earnings gap is most pronounced in occupations such as law that place a premium on the willingness and ability to work long hours, be in the office at specific times and build face-to-face relationships with co-workers and clients. In these professions, the penalty for working part time or taking time off -- to give birth or care for a child, for example -- is particularly large. Small differences in time away or in hours translate into large differences in pay.
Consider the case of women with master degrees in business administration. At 10 to 16 years into their careers, they are typically earning only 55 percent of what men do. Child bearing is a primary reason for the divergence. A year after giving birth, women’s workforce participation rate declines 13 percentage points. Three to four years later, the decline increases to 18 percentage points. In other words, many MBA moms try to stay in the fast lane but ultimately find it unworkable.
The huge value that so many employers place on a standard work schedule affects more than the careers of women. Anyone who, for whatever reason, needs to take time off or work flexible hours gets penalized. The broader economy suffers when businesses are unable to make full use of highly educated and productive people.
To be sure, some professions may never be able to offer much flexibility. Merger-and-acquisition bankers, trial lawyers and the U.S. secretary of state have 24/7, on-call-all-the-time jobs. That said, the universe of such jobs is probably smaller than it appears.
Many professions that once tied people to specific hours are finding ways to reduce the cost of flexibility by making employees more substitutable. Veterinarians, optometrists, pharmacists, pediatricians, anesthesiologists and primary-care providers are shifting from self-employment to group practices and corporate ownership structures that allow them to cover for one another. Smaller veterinary practices that once required staff to have weekend, night and emergency hours are giving way to larger regional hospitals. Such changes often occur because of increased economies of scale, or in response to pressure from employees.
Other businesses, too, can innovate to mitigate the costs of handing off patients, customers and clients. Online stock brokers, for example, have employed technology to give groups of employees access to the same information, making it much easier to pass clients from one broker to another.
Not everyone stands to gain in a world of greater job flexibility. Some of those willing to sacrifice their lives to work might no longer be able to reap outsize rewards. In the interests of a happier, wealthier and more equitable society, though, that would be a small price to pay.
(Claudia Goldin is the Henry Lee Professor of Economics at Harvard University and the director of the Development of the American Economy program at the National Bureau of Economic Research.)
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