Pay Women More?

Last week during President Obama’s State of The Union address he made the claim that women workers make 77 cents for every dollar that men make. It was one of the President’s largest applause lines indicating most in the audience saw the wage discrepancy and as area for change. Politicians and media members tout this statistic over and over as evidence of discrimination against women. With all the progress this country has made in the last 50 years it’s hard to believe society would tolerate such unfairness. We’re living in the 21st century after all, get your stuff together U.S.!

Where did the President come up with his 77 cents figure? Basically from looking at U.S. Census data which says “the average man in the U.S makes X and the average woman makes Y.” But census data doesn’t control for differences in work experience or education. Probably most importantly it doesn’t control for the types of jobs that men and women work. One of the largest contributors to the difference in pay is that men and women make different decisions when it comes to the types of jobs they’re willing to work. Men are more willing to work on high voltage power lines than women are. Men are more willing to work on crab boats too. These jobs are dangerous and pay significantly more than would a job as a teacher or administrative assistant. I read a study recently that controlled for these various factors and found the wage difference to be between 9 and 5 cents per dollar and there were still variables not controlled for that may have been able to explain this small difference. In fact, when these other variables are accounted for women often make more than men. This makes sense to me intuitively. If I assume that business owners are rational and that profit maximization is top priority, what incentive would one have to hire men at all? If one could hire a woman to do the same job a man does for 25% less it would seem women would outnumber men in the workforce as this would create more producer surplus.

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