Gender and Pay Inequality: Apples and Oranges Rule the Debate

As people debate into Lean In: Women, Work, and the Will to Lead by Sheryl Sandberg, the topic of pay inequality often arises. President Obama has also made the issue of "fair" compensation a political issue. But, is there really a problem with inequality within the same job, or is there something else at work?

Based on research, it seems that if you want to study comparisons of apples to oranges, examine the "income inequality" debate. The differences in pay are more the result of career choices than differences within identical job positions.
Why Women Earn Less
According to a new report (PDF) by the American Association of University Women, the man would be earning a salary of $51,300. The woman's pay would be $39,600—about 77 percent of what her male counterpart earns.

The AAUW report compared the earnings of men and women just one year out of college across various sectors of the economy. The report controlled for different factors that tend to impact pay, including hours, job type, employment sector, and college major. The report—which uses the class of 2009 as its sample cohort—found that on average, women working full time earned 82 percent of what their male peers earned. The average for all women, at all experience levels, is 77 percent, a number that has barely budged in a decade.
At first glance, the preceding statistics imply women earn significantly less than men for equivalent work. In fact, the phrase "The report controlled for different factors…" implies researchers compared equals. But that is not the case, as the next paragraph reveals.
A good portion of the pay differential one year out of school can be explained by choice of major. Eighty-one percent of education majors are female, as are 88 percent of health-care majors. In computer science, information technology, and engineering, more than 80 percent of majors are male. Teachers and physical therapists, on average, tend to earn less than engineers. Women also choose to work in sectors of the economy where there are fewer opportunities to advance into higher-paying jobs. (A teacher might get tenure or become a school principal after working for 20 years. An engineer will move up the pay scale more quickly, and the raises will be bigger over time.)
The above reveals that though the "educational attainment" was equalized, the actual career paths were not. You cannot, and should not, compare degrees earned in different disciplines. Degrees are not equal even if they have similar designations. A bachelor of arts in liberal studies, a common education degree, is nowhere near as demanding as a bachelor of science in software engineering. Sorry, but all degrees are not equally demanding — or we'd see far more engineering graduates, since the fields do pay more than disciplines. Half of second year engineering students do not complete engineering degrees. Math and science seem to be more challenging content than most students are prepared to tackle.

The article from Businessweek, drawing on the AAUW report, makes another attempt to suggest equals are being compared, but again I will demonstrate it is a misleading comparison.
But as the scenario above shows, even when women and men are in practically identical situations, their earnings start to diverge just one year out of school. That's true across most sectors of the economy. One year out of college, female teachers earn 89 percent of what male teachers earn. In sales jobs, women earn 77 percent of what male peers earn. Women who major in business earn, on average, just over $38,000 the first year after graduation, while men earn just over $45,000.
Yes, female teachers earn, on average, less than male teachers. There are differences within teaching, however, and these are revealing. More male teachers teach middle school and high school. More male teachers are also employed in math, science, and technical fields. More women teach elementary school and within the humanities at higher grades. We pay high school science teachers more than first grade teachers. Hence, the male teachers earn, on average, more than female teachers.

The only true apple-to-apples comparison would be to compare two high school math teacher or two second grade teachers. Because most school districts are unionized with step-and-ladder promotion models, there can be only minimal differences between teachers with the same educational attainment, years of experience, and equivalent appointments. That is, in fact, one of the arguments for unionization within teaching: it prevents biased-driven pay differentials.

Covering the same AAUW report, CNN states:
Men, Women and the Pay Gap
http://money.cnn.com/2012/10/23/pf/college/women-men-pay-gap/index.html
Men typically choose majors that result in more lucrative careers post-graduation, like engineering. Even if men and women major in the same subject, men tend to end up in higher-paying jobs. **Men also work more hours, according to AAUW.**

But even when controlling for these factors — by looking at men and women with the same majors, jobs and hours — women were still paid 7% less than men.
Read the preceding a few times. Men work more hours. Over years within a career, the hours equalize some research has suggested, but if you spend more hours working earlier in your career, you do develop more skills. The early investment in a career compounds over time. This is a logical outcome. If I have two programmers, one working 60 hours and one working 45, the 60-hour coder is likely to master the platform, as well as the development process. The 45-hour coder? He or she falls behind. One is promoted and the other is not. Over time, the pay differential resulting from this early effort increases.

Why are people stunned that more effort results in more opportunity?

Reading the AAUW report directly, instead of secondhand reports on its content, it is clear how choices made during undergraduate studies affect future earnings. The AAUW report states:
Among 2007–08 college graduates, young men and women typically chose different college majors. Women made up the large majority of graduates in health care fields (88 percent) and education (81 percent). At the same time, women were a distinct minority in engineering and engineering technology (18 percent) and computer and information sciences (19 percent). Other majors, like business, are more gender balanced, but most major categories tilt either male or female. Looked at another way, about 11 percent of women majored in education compared with only 4 percent of men. Women were also more likely than men to major in the social sciences and health care fields.
— Graduating to a Pay Gap; p. 12
The STEM (science, technology, engineering, and math) fields pay better. Period. Women, for a variety of reasons, seem to choose other fields. Some people will argue the value of fields is more equal, but when pressed most of us do value some people more than others. Not every job we value highly requires a college degree, either. I value my mechanic, my electrician, and other trades highly. When your car is dead, you value the skilled technician. Women also lack representation in these trades, so college is not the only reason women trail men in overall earnings.

Female-dominated fields pay less, but it requires ignoring a great deal to argue these differences reflect gender bias alone. Fields that are higher risk, from higher physical risk to higher liability risk, pay more. Working in a mine? High physical risk. Surgeon? High legal risk. There is a risk-reward balance that goes well beyond gender, even within broad fields, as I will illustrate later.

Women in the high-paying fields do much better than women in the lower-paying fields. Of course, the AAUW and other media insist on describing these as "female-dominated" or "male-dominated" careers, instead of describing the fields based on skills required or risk-reward models. Still, at least the AAUW reports that women choosing technical career paths do earn more.
Graduates who earned degrees in female-dominated majors tend to get jobs that pay less than the jobs held by graduates who earned degrees in male-dominated majors. For example, one year after graduation, the average full-time-employed female social science major earned just 66 percent of what the average full-time-employed female engineering or engineering technology major earned ($31,924 compared with $48,493).
— Graduating to a Pay Gap; p. 13
As I stated above, even within larger disciplines, such as law, medicine, or engineering, the specialties of men and women differ significantly and this does affect earnings. These differences can be explained by the skills required and the risk-reward ratios of various careers. The path you choose within a field matters, not merely the larger field.
Among social science graduates, for example, men were more likely to work in business or management occupations (26 percent of men compared with 11 percent of women), while women were more likely to work as social services professionals (16 percent of women but only 6 percent of men), in health care occupations (7 percent of women compared with 1 percent of men), and as PK–12 educators (7 percent of women compared with 2 percent of men). Among engineering and engineering technology majors, 57 percent of men were working as engineers compared with 39 percent of women.
If within technology majors we have a 57 percent to 39 percent balance of working engineers, that reflects choices made — choices we should study, certainly. Still, we should compare working engineers to working engineers, not tech grads to tech grads. What you do after graduating with a technical degree matters. Clearly, the women are not choosing to be engineers.

Within science and business graduates, the career paths also diverge among women and men, something reflected by the salaries earned.
Other research has found that female science and business majors are twice as likely as their male counterparts to enter clerical work. Men in these majors are more likely to go into management jobs (Joy, 2000, 2006).
— Graduating to a Pay Gap; p. 16
Managers are better paid than others. The question, again, is why women do not enter management. Beyond that, we should only compare managers to managers and lab techs to lab techs, regardless of educational attainment.

Within medicine, researchers have found the same issues I discussed earlier: hours worked and specialities chosen diverge along gender lines. Men work more hours and choose "riskier" specialties (with more legal liability, according to research data).
Many women physicians are more likely to work fewer hours than their male counterparts, choosing part-time schedules to balance work and family/lifestyle needs, says Singleton. Also, there are fewer women in some of the higher-paying specialties.
— Medscape.com, 2011 Compensation Study
The higher-paying medical specialities spend the most time with patients, which seems logical.
Anesthesiologists, cardiologists, gastroenterologists, surgeons, and urologists spend an average of 46-50 hours per week seeing patients. By contrast, primary care physicians spend a median of 30-40 hours per week in direct patient care, owing to intense paperwork and administrative demands.
— Medscape.com, 2011 Compensation Study
I can imagine only one career path in which equal ranks are truly equal: the military. If you are lieutenant, that's all that matters. The military has long been a great equalizer across race, religion, and now gender. Sure enough, the AAUW found that the military is the most egalitarian of employers.
Earnings were highest for women in the military, where only 1 percent of women worked. Men's earnings were high in the military as well. As a result, there was no pay gap in the military (average earnings were $44,325).
— Graduating to a Pay Gap; p. 16
Again, women do not enter military careers. But, if they did, the military is quite egalitarian. Again, women and men make different career choices. That is the larger "cause" of pay differences. Why these choices are made, and what if anything should be done about these choices, is something that should be studied separately.

What happens when you do compare like-to-like? The closest data we have, which is still imprecise for reasons mentioned earlier, indicates women earn between 93 and 97 percent of what men earn in equal positions, of equal title, with equal educational attainment. There are, however, differences in the hours worked, that seem to persist.
[For] most careers the company studied, PayScale found that the pay gap is largely the result of outside factors. Within a specific job, before controlling for outside factors the typical female worker earns pay that is only 90 percent of the typical male worker’s pay; after controlling for these variables, she earns 94 percent of the typical male worker’s pay. For jobs paying below $100,000, the gap narrows further.
— PayScale.com, from Gender Pay Gap Persists 
The next time someone cites data that women earn 77 cents for each dollar earned by a man, remember the data are comparing apples-to-oranges.

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