What some managers still see.

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The Real Reason Women Still Get Paid Less

Cass R. Sunstein is a Bloomberg View columnist. He is the author of “The World According to Star Wars” and a co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.”
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When it comes to discrimination, Americans pride ourselves on how far we’ve come. Racial segregation is history. Explicit sex discrimination is banned. Same-sex marriage is the law of the land. But amidst all the progress, the male-female wage gap persists, and it’s big.

A new essay by Cornell economists Francine Blau and Lawrence Kahn offers by far the most comprehensive and illuminating discussion to date of that gap. They find that for every dollar earned by a man working full time, women working full time earn about 79 cents. More alarming, the gap hasn’t closed much since 1990. Sex discrimination is probably a big part of the explanation.

It’s true that things were a lot worse in 1980, when women earned about 62 percent as much as men. By 1989, women were earning about 74 percent as much, cutting the gap by nearly one-third. But since then, progress has been slow. Interestingly, the gap is now highest at the top of the income distribution, suggesting the possibility of a glass ceiling.

Blau and Kahn do find some good news. Women have reversed men’s longstanding educational advantage. They now have higher average levels of schooling than men, and are more likely to have advanced degrees.

Women have also come close to obliterating the experience gap. In 1981, men had almost seven years more full-time experience in the labor market than women. Right now, the gap is around 1.4 years. Here again, much of the improvement for women occurred in the 1980s.

Blau and Kahn find that gains in education and experience account for the lion’s share of the post-1980 reduction in the wage gap. In 1981, men had a strong majority of managerial jobs; now men and women are nearly equal on that count.

Why, then, does the gap persist, and why is it so big? The difference in experience levels, while vastly reduced, continues to be a contributing factor. And because women are more likely to leave work to care for children, men also benefit from a significantly lower rate of workforce interruptions.

But more important are the areas in which women work. The occupations and industries historically dominated by women (such as administrative support and service jobs) pay less than the occupations and industries historically dominated by men (such as managerial and professional jobs and high-wage craft positions).

While women are increasingly entering traditionally male jobs, occupational segregation remains substantial. According to Blau and Kahn, occupation and industry differences now account for 51 percent of the remaining male-female pay gap.

Which brings us to the question of sex discrimination, pure and simple. Controlling for everything else, Blau and Kahn find a big chunk of the gap comes from “unexplained factors” -- that is, factors that do not amount to measurable differences between men and women (such as work experience).

There’s good reason to think that sex discrimination is among those “unexplained factors.” (It might not be all of it; for example, men might have productivity advantages that the data cannot capture.) Studies of law school graduates find that controlling for a wide range of variables, men earn 11 percent more than women; a similar study of business school graduates finds a gender gap of 7 percent.

As Blau and Kahn note, discrimination is a complicated matter, and it takes multiple forms. Employers might be consciously biased; they might just prefer men (maybe because they think their customers do). Or employers might have implicit or unconscious biases: Formally committed to sex equality, and not intending to discriminate, they might nonetheless favor men over women when it comes to setting salaries.

A lot of employers act on the basis of stereotypes, which may or may not be accurate. For example, they might think that women are especially likely to leave the work force if they have children, and their decisions about women’s wages might reflect that belief. Research strongly suggests that women are penalized for being mothers. (Men are not penalized for being fathers.)

For those who want their daughters to have the same opportunities as their sons, the new research has two implications. The first involves the continuing importance of women’s education and work experience, which have been the main drivers of the post-1980s reduction in the wage gap.

The second is the urgent need for creative reforms, from both the private and public sector, to address the role of “unexplained factors” -- discrimination above all else -- in accounting for the remarkably slow progress since 1990.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Cass R Sunstein at csunstein1@bloomberg.net

To contact the editor responsible for this story:
Christopher Flavelle at cflavelle@bloomberg.net