For Equal Pay Day – There Is No Gender Pay Gap

We have Equal Pay Day – the day upon which women don’t earn any more money for the year given the gender pay gap – and the basic truth we’ve got to point out to the shrieking harridans is that there is no gender pay gap. There are differences – on average of course, across the population – in how men and women choose to live their lives. This means that some gain more, some less, along certain axes, it also means that some gain more, some less, along different axes by which we might judge income, wealth, life and utility.

But, you know, harridans complaining:

Equal pay day – why women aren’t being paid for the rest of the year due to the gender pay gap
The gender pay gap means that from tomorrow women effectively stop earning compared to men, here’s how to fight back

That’s nonsense:

Women earn 13.7 per cent less than men on average so they effectively start working for free on November 10.

And that’s the wrong statistic. That is to compare male and female wages, including both part and full timers. We’ve been told, by the Statistics Ombudsman no less, not to use this number. The part time workforce is predominantly female. Part time workers get paid less per hour than full time workers, for good reason and nothing to do with gender. This is therefore a misleading number. A more accurate one is 9.5% or so, the difference in median wages between all men and all women in full time employment. Something which is, we should note, one of the lowest in the world.

It promises to be the hottest party in town; a huge Trafalgar Square bash to celebrate the end of the gender pay gap.

But there is just one catch. Guests have been asked to save the date – in 2235, the year that the World Economic Forum has said the gap will be closed, given the current rate of change.

Labour MP Stella Creasy said the party, which she has organised and which will be hosted by the mayor of London Sadiq Khan, carries a serious message.

A jolly wheeze, no doubt, but not true in the slightest. For there isn’t, upon closer examination, a gender pay gap at all. Instead, we have a difference in what people decide to do with their lives.

Saturday 10 November marks Equal Pay Day in the UK.

After this date women are effectively working for free until the end of the year because of the gender pay gap.

No. This simply isn’t how it works. This is however:

We cheer because the basic point is being made, that gender pay gap is today largely if not entirely reliant upon the different choices that men and women tend to make about the care arrangements for their mutually begotten children. Where we differ is that, well, if the choices are available and adults make them then, well, what is it to anyone else what the outcome is?

Aren’t we all supposed to be liberals on such matters?

No, really, it’s all about children:

The arrival of children creates a gender gap in earnings of around 20% in the long run, driven in roughly equal proportions by labor force participation, hours of work, and wage rates. Underlying these “child penalties”, we find clear dynamic impacts on occupation, promotion to manager, sector, and the family friendliness of the firm for women relative to men. Based on a dynamic decomposition framework, we show that the fraction of gender inequality caused by child penalties has increased dramatically over time, from about 40% in 1980 to about 80% in 2013.

We find that when there’s no possibility at all of gender discrimination we still have that difference in pay:

Which is where our Uber data comes in.

The platform does not distinguish between male or female drivers. Pay rates differ by not one whit. It would be one heck of a stretch to try and insist that customers were preferentially picking male drivers, leaving women with less work to do.

Yet we do still see a difference in average earnings. Some 7 percent in fact – very close to the more general gender gap once we’ve accounted for the usual things like levels of education and so on in the wider economy (that popular 77 cents number is before making all those sorts of corrections).

That is, in the absolute and complete absence of any discrimination, we still see a gender earnings gap. Thus we cannot assume, and shouldn’t, that any gap we can see is the result of discrimination.

No, really, I’m sorry about this, it’s just not a gender pay gap:

Our modern world doesn’t have a gender pay gap, it has a parent pay gap. On average and across the population fathers make more than non-fathers, mothers make less than non-mothers. This is after we adjust for education, age and all the observable characteristics other than fertility. It is purely familial responsibility that explains this: house husbands suffer the same pay penalty as mothers. In more precise detail, primary child carers make less than the parents who are not such.

This has been pointed out in a number of different venues:

As you can see, it is marriage and more especially the having of children that leads to what everyone refers to as the gender pay gap and what should therefore more properly be referred to as the mothers’ pay gap. Now that we’ve correctly identified the reason for differential pay on average, we can decide what, if anything, we’d like to do about it. For if it is indeed motherhood that is causing the gap then all of the current recommendations in the equalities bill are really a little odd. Equal pay audits at companies aren’t going to do much about the way that parturition affects income now, are they?

We can even go further anf try to count correctly, when we might well find that the gender compensation gap is in favour of women:

Women get paid less than men. In general that is, across the economy as a whole. This is what is known as the raw, unadjusted or gross gap. But we’re in a market economy. People who work different jobs, work different hours or stick with the same career path for longer are naturally going to be paid different amounts. That there is some variation is to be expected.

In fact, once we correct for all of these factors we find that, for people doing the same job in the same organisation, the gender pay gap falls to about 0.8 per cent, the sort of figure we might ascribe more to a rounding error rather than anything more sinister.

But add in non-wage rewards and:

The key thing to note is that women, even given equal retirement ages, tend to receive their pensions for about three years longer than men. Where there is still a gap in retirement ages based on gender this gap expands even wider. But also women are also disproportionately represented in the public sector, the one remaining place where the very much more valuable defined benefit pension still exists. There are reasonable estimates that such pensions add as much as 30 per cent to public sector pay. Or, using our above definitions, to public sector compensation.

If we add all of these parts of compensation together then the gender gap might start to look rather different. It is possible that we find women are getting a different compensation mix, on average, to men: greater job security, greater flexibility, possibly better pensions, all at the cost of some cash in their monthly pay packets.

It really is true that we’ve not got a gender pay gap. Once we account for hours worked, direct job to job comparisons, levels of education, years in workforce and all that the gap is under 1%. And then when we add back in those things which female employees gain a little more than male, like those pensions, it might well favour women.

But very much more importantly than this we’ve not got employers discriminating for or against any gender at all. We’ve got individuals trying to live their lives making different choices. Those choices differing a little dependent upon gender. More so with the arrival of children. A sexually dimorphic species makes different choices about raising children? Getaway, hunh?

So, what’s Stella Creasy going on about then? Well, we did come in with a comment about shrieking harridans, didn’t we?