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Which Gender Gap?

by Reihan Salam

Policymakers are focused on the wrong one.

Just over a century ago, a small number of states, led by Massachusetts, established minimum wages, a policy experiment that reverberates to this day. What is striking about these early minimum-wage laws is that they applied only to women and minor children, as minimum-wage laws for adult males were seen as an unacceptable infringement of their right to free contract. Adult females, however, were placed in an entirely different category of human being. Women were deemed physically and morally fragile and in need of the state’s protection from the vicissitudes of the labor market. Moreover, working women were seen as a potential threat to male breadwinners and their central role in family life. As women entered the work force, the fear was that they would undercut male workers and thereby force down the “family wage” that allowed fathers to keep their wives and children clothed, housed, and fed.

To have spoken of a “gender gap” in this area — a gap between female and male wages — wouldn’t have made much sense, not least because the use of the term “gender” to refer to sex was not yet de rigueur. The Progressives who championed restrictive labor-market regulations were well aware of a substantial gap between the compensation offered to women and that offered to men. The goal was, if anything, to widen that gap in men’s favor. Much has changed since then. The most important change, perhaps, has been that the family-wage ideal no longer fits the realities of the American family.

As of last year, women represent 47 percent of the work force, and the share of married mothers with children who work has increased from 37 percent in 1968 to 65 percent in 2011, according to a recent report from the Pew Research Center. There are many reasons for this transformation. One familiar narrative is that married mothers with children have been pushed into the work force as men’s wages have suffered. Another narrative, however, is that women, including married mothers with children, have been pulled into the work force as household work has grown less culturally prestigious and less physically and intellectually challenging, and as women’s rising educational attainment and changing cultural attitudes have opened up more attractive employment opportunities. These push and pull factors interact. For example, as women have entered the work force for a variety of reasons, including a desire to find meaningful work and to provide for themselves, they may well have put downward pressure on men’s earnings.

Then there is the fact that married mothers with children, the group that the family-wage ideal indirectly sought to protect, represent a shrinking share of women as a whole, as Americans defer marriage and delay childbearing. With no male breadwinner to provide for unmarried women, or for mothers raising children on their own, the family-wage ideal has been eclipsed.

As Pew reports, single-mother families with children have risen from 7.3 percent of all families with children in 1960 to 25.3 percent in 2011, while families with children in which a married woman is the primary breadwinner have risen from 3.5 to 15 percent. That is, women are the sole or the primary breadwinners in 40 percent of households with children. This rise of “breadwinner moms” has made the gender gap more politically salient than ever. Unmarried women and single mothers are an overwhelmingly left-of-center political constituency, and one assumes that Democratic calls for paycheck fairness, or gender parity, have been part of the party’s enduring appeal to female voters. Though women have made dramatic gains in earnings in recent decades, a gap remains, albeit a shrinking gap, between the wages earned by women and those earned by men, though not in all categories. Among part-time workers, for example, female earnings surpass male earnings. And among people in younger cohorts, the gender gap between full-time year-round workers falls almost to zero. But overall, a gender gap persists.

Whereas Progressives of the 20th century favored a gender gap large enough to deter women from entering the work force at all, progressives of the 21st century aim to close a gender gap that, in their view, reflects a legacy of discrimination. In both cases, the impulse is to use the power of government to achieve the desired outcome. The trouble is that the sources of the pay gap are complex, appearing to be rooted less in simple discrimination than in real differences discerned by employers. Heavy-handed government intervention that ignores these differences risks doing more harm than good.

Enter Harvard economist Claudia Goldin, widely regarded as America’s leading economic historian and co-author of The Race between Education and Technology, a comprehensive look at how the relationship between human-capital development and labor-market outcomes has unfolded in U.S. history. Goldin’s research has delved into the evolution of women’s roles in the work force — a thorny subject, and one that she tackled in a recent address to the American Economic Association.

Goldin notes that the gender gap in wages is closing. The gap reflects differences in human capital, including educational attainment, work experience, and other factors that we can easily identify and explain, as well as some residual that could reflect discrimination, or other differences that are harder to identify and explain. There are many theories as to the role of discrimination; the harder-to-explain factors may include women’s (supposed) greater unwillingness to negotiate aggressively, or the reluctance of employers to promote women because they are more likely to leave the workplace to devote time to their families.

Goldin observes that, gradually, the human-capital component of the wage gap has all but vanished, as women have come to “look” more like men in terms of skills. What is left of the gap, according to Goldin, largely reflects how firms reward workers for their willingness to give up some measure of workplace flexibility, particularly in high-end occupations. Among college-educated professionals, the wage gap between women and men starts out small (with women earning in the 90 percent range of men in their 20s) before widening as women age, falling in some cases to the 70 percent level. The gap starts to decrease again as women enter their 40s.

While some occupations see pay increase with work hours in a straight line, others see nonlinear increases — that is, working twice as many hours yields more than twice as much pay. The gender gap is low in occupations in which there is a one-to-one relationship between wages and hours worked. In nonlinear occupations, however, the gender gap is higher. Linear occupations will be those in which it is relatively easy and cheap to plug in one employee for another. Nonlinear occupations are those in which switching from employee to employee is difficult and expensive. For example, a team of lawyers working on a case might find that it is much easier to get its work done if everyone works the same long hours, as filling in a team member who is there only half of the time takes time and energy that might otherwise be spent more profitably. Nonlinear occupations tend to be the most lucrative, and so gender gaps in these lofty worlds (like the corporate, finance, and legal sectors, which Goldin studies most closely) have big consequences.

For the gender gap to be eliminated entirely, Goldin argues, firms need to lower the cost of the flexibility that female workers, and particularly mothers, prize. This could involve granting workers more autonomy, so that one team member doesn’t depend so much on others, or else making it easier to substitute one worker for another, perhaps by standardizing the nature of tasks.

The firms that succeed in developing new business models that capitalize on the talent of working women have an enormous and lucrative opportunity ahead of them. It’s just not obvious how government can help this process along.

Where government can make a difference is in tackling the gender gap at the low end of the U.S. labor force. In “Wayward Sons,” a report for the center-left think tank Third Way, economists David Autor and Melanie Wasserman of MIT describe the “tectonic shift” whereby younger cohorts of men, particularly less-educated younger men, are falling behind women in educational and employment outcomes. Just as the gender gap at the high end is closing in women’s favor, the gap at the low end appears to be widening to the disadvantage of men. Having ceded their role as breadwinners, less-educated, and even moderately educated, American men are struggling to make their way in a new economy. It seems far more likely that female corporate executives, financiers, and lawyers will close the gap with their male counterparts than that working-class men will soon be in a position to offer working-class women the economic support they need.

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