OPINION: Gender pay gap debate: It's not just about the money

by Christian Moser | Columbia Business School
Wednesday, 25 August 2021 16:32 GMT

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Our research finds women are more willing than men to give up pay in favor of other amenities, such as flexible hours, parental leave, and employment security

By Christian Moser, assistant professor of economics at Columbia Business School 

Earlier this summer, U.S Senate Republicans filibustered a bill that aimed to address wage discrimination on the basis of sex. The Paycheck Fairness Act had finally cleared the House in April 2021, after being introduced by Democrat Representative Rosa DeLauro in every Congressional session since 1997.

During the floor debate in the House, DeLauro said the situation was “simple,” stating that “men and women in the same job deserve the same pay.” Republicans didn’t argue against that point but insisted the bill would primarily create more work for lawyers, while unfairly burdening employers.

There are three main ways in which women end up with lower pay than men. The first is that some women are compensated less than men for doing the same jobs. If equally qualified and performing the same amount and type of work, the situation is a clear case of gender discrimination. DeLauro’s bill attempts to address this by limiting an employer’s defense against wage discrimination claims to factors such as education, training and experience - all of which, unfortunately, are imperfect predictors of job performance. The bill would also prohibit employers from asking prospective employees about their salary histories and from retaliating against employees who compare salaries.

Secondly, women may not be hired for the same jobs as men. Even employers with dedicated human-resource departments sometimes fail to attract gender-diverse workforces. This may be intentional or the result of ineffective recruitment practices. Regardless, an equal-pay mandate could exacerbate wage disparity in some of these situations by making it even more costly to recruit women. In theory, Congress could impose an equal-pay mandate paired with an equal-hiring mandate to target both the number of women hired and their relative pay. But enforcement would likely be nightmarish and excessively costly.

The final way in which women can end up with lower pay - as noted by Republicans - is that some women prioritize non-pay job attributes above salary, often to care for families. That women are responsible for the majority of child and elder care may be inequitable in the first place, but this reality suggests that an equal-pay mandate could be barking up the wrong tree. Even if women and men were equally compensated for their work, a gender pay gap would still exist due to women and men valuing non-monetary job attributes differently.

So how do we sort this out? For many years, economists didn’t have a method for quantifying how much of the wage gap resulted from these different preferences. However, through collaboration with my colleague Iacopo Morchio at the University of Bristol, we formulated a way to measure the relative value of non-pay job attributes separately for men and women.

We applied a modified version of Google’s PageRank algorithm to employment data collected by the Brazilian government and created employer rankings for tens of millions of workers across hundreds of thousands of firms based on worker flows between firms, much like Google ranks websites based on user flows between websites.

We combined the rankings with detailed information on wages to quantify the relative importance of pay versus non-pay job attributes.

In Brazil, where there’s an almost 10% gender pay gap, we concluded that approximately one-fifth of the gap is due to women’s preferences for non-pay job benefits. Specifically, women are more willing than men to give up pay in favor of other amenities, such as flexible hours, sick and parental leave, and employment security. This portion of the pay gap is roughly equivalent to a week’s worth of pay each year. The remaining four-fifths of Brazil’s gender pay gap results from the other two influences mentioned above.

Summing up, gender pay gaps are a problem for labor markets as a whole, not just for individual workers.

The gaps indicate output losses from women working in jobs that don’t match their productivity potential. This means that improving gender equity can also boost economic efficiency - a lesson that’s applicable in any labor market. However, a word of caution is in order: achieving equity isn’t as simple as we’d like it to be.

Policy makers can try to level the playing field for men and women in the labor market, but in an economy where not all happiness derives from money, striving only for equal pay is missing the point. We need to find smarter ways to help women get into the right jobs, where they find their preferred mix of pay and amenities.

Christian Moser is a faculty leader within the Sanford C. Bernstein & Co. Center for Leadership and Ethics.