It is commonly said that women are systematically discriminated on the labor market and earn just 75-80 cents on the dollar that men earn. For examples of such statements, see the following articles:
- College-educated women earn $8,000 less a year than men as gap widens
- Looking for ways to tackle the gender pay gap
- The gender pay gap means that more women will be in poverty later in life, but there is something the government can do
In an effort to close the gap, President Obama has announced a plan in which businesses would be required to report the gender wage gap.
What I would like to do here is to dismantle this myth.
Dismantling the gender wage gap myth
You can easily knock down the myth with the following deductive reasoning:
1. Assumption: women earn just 75% of what men earn.
2. Employers compete with each other for labor.
3. Under competitive pressure, employers hire women that are capable to perform the same labor as man.
4. Demand for women labor increases until employers don’t benefit anymore from discriminating against man for their labor.
5. Gender wage gap decreases towards 0.
6. Men and women earn the same wages for the same labor.
What I have described up here is how the labor market would work if women would indeed earn just 75% of what men would earn for the same labor. A gender wage gap for equal labor is untenable in the free market. If there were a gap, the gap would naturally close.
Are people wrong when they say women earn 20-25% less than men on average?
No, these people are not wrong. It’s true that women in general earn 20-25% you add all women’s wages and compare that to the total wages of men. This however, tells us nothing about whether women are systematically discriminated on the labor market for lower wages.
We should adjust for age, career choices, experience, job, job position, the amount of hours put into work, ambitions etc. If we adjust for these, we will find that the gender gap is negligent. There is maybe a 1-2% difference in wages, but I think that this is due to men willing to stand stronger in their shoes during wage negotiations.
There are quite some economists who have also disproved the myth of the gender wage gap. Prof. Steve Horwitz has for example deconstructed the gender wage gap in the following video very nicely:
https://www.youtube.com/watch?v=EwogDPh-Sow
Why is it important to smash this myth?
The gender wage gap is often used as an argument that women are victims in society. If we can prove that the gender wage gap is false, we can show that the free market is much fairer than it appears. False victimization can be abused, especially when its so-called victims use their false sense of victimization to blame the other gender of oppression. It leads to a polarization of society – something we have to beware of.