Women can’t seem to get a break. They not only have to pay more than men for things like life insurance and haircuts, they earn less, too.
It seems so unfair. But is it?
Women pay more for life insurance because of an actuarial fact: they live longer than men.
Is there perhaps an equally reasonable explanation for the fact that, compared to men, women make only 80 cents on the dollar?
Why, yes, there is. The 20-cent “wage gap” compares the earnings of all men who work at least 35 hours per week to those of all women working 35 hours or more.
It makes no allowances for differences in occupation, education or experience, job conditions and risks, or whether an individual works 35 or 55 hours per week.
Devoid of such real-life context, the “wage gap” statistic is grossly misleading. The apparent gap is not born of discrimination. Rather, it arises from a difference in life choices.
The “gender wage gap” reflects women’s freedom to pursue the education and occupation they desire, and their opportunity to choose a job environment and work schedule that fits their needs and desires. Viewed in this light, the gap is something to be celebrated, not bemoaned.
So let’s take a closer look at why those 20 cents are missing.
A 2019 National Bureau of Economic Research study concluded that “hours worked” alone accounted for at least half of the wage gap.
A 2018 PayScale study factoring in additional variables such as experience, industry and job level found that women receive 97.8 cents for every dollar earned by their male counterparts..
The minimal gap remaining may result from more difficult-to-measure factors such as flexible work hours and generous benefit packages that women tend to value more than do men.
Despite overwhelming evidence that the so-called wage gap is really a choice gap, some want the government to step in and “fix” the non-existent problem. And that’s a problem in itself, because their proposed solutions will wind up hurting workers — both women and men.
That’s what happened when Denmark tried to reduce its wage gap by requiring companies to report their salaries by gender and race.
In a sense, it somewhat worked: the wage gap at those companies fell by 2 percentage points.
But the gap narrowed because the companies lowered men’s wages rather than raising women’s. The workers were no better off, and the businesses’ productivity fell as well.
Today, virtually everyone — employers included — believes workers should get equal pay for equal work.
Indeed, it’s been the law of the land for more than half a century—since the Equal Pay Act of 1963 and the Civil Rights Act of 1964.
But that didn’t stop virtue-signaling members of the House of Representatives from approving yet another law — the Paycheck Fairness Act — last month.
The proposed law encourages companies to enact rigid pay scales and one-size-fits-all jobs that don’t meet many working women’s (and men’s) needs.
It didn’t work in Denmark, and it won’t work here. Instead of generating higher paychecks for women — something they are already enjoying by virtue of their productivity — the bill would almost certainly reduce wages for all workers.
Perversely, since the bill emboldens trial lawyers to gin up class action lawsuits, some companies would hesitate to hire women, as a way to preempt groundless yet costly lawsuits.
There’s a huge drawback to rigid pay scales, too. Numerous economic studies show performance-based pay produces a 6- to 10% increase in productivity compared to rigid pay scales.
Stagnant or lower wages, lost flexibility and reduced economic output — that’s a high price to pay for what would likely be only a marginal decline in the so-called wage gap.
I’m not saying gender- and race-based pay discrimination is nonexistent. But individuals who encounter discrimination have both the law and the free market — which penalizes employers who discriminate — on their side.
Rather than promote the dishonest narrative that women make less than men for doing the exact same job, let’s celebrate the gains women have made in education, income, and career choices over recent decades. And let’s promote policies that increase opportunities and incomes for all workers.
This piece originally appeared in the Orange County Register