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Is Gender Pay Gap a Myth?

The “$.77 on the dollar” construct is thrown around a lot, and it’s usually meant for illustration rather than precision. I have surrounded myself with women who have graduated from various prestigious universities and are some of the brightest and most talented women in my friends and family. When we graduate from colleges like IITs, NITs, IIMs or international universities like HEC and Columbia, we expect really good post-college opportunities that will open doors for us to move up the career ladder. To my amazement, these women were so sure they were going to live unequal lives. A sexist future awaits them. They assume that women pay 22% tax at work.

But wait. I’m not blaming them. Look around us, we’re peddling news all day and all night. Just do a web search for the wage gap and you’ll be redirected to a plethora of websites backing up the concept with numbers. One of these pages is Reliable UN Web Links. According to United Nations statistics, women’s income accounts for only 10% of the world’s income, but they work two-thirds of the world’s working hours. If there’s any truth to it, it’s a shocking statistic. Sally Barden and Anne-Marie Goetz, gender and development experts at the University of Sussex, refuted this claim more than 15 years ago: “The figure was made up by someone who worked at the United Nations because, in her view, , which represented the scale of gender-based inequality at the time.” But there’s no evidence that it was ever accurate, and it certainly isn’t today. Now, if UN statistics are discredited, where do I go for some hard data?

A couple of other links shown are those of the US organization NOW (National Organization of Women). Above, we see that famous number in quotes again. “For a full-time, 24/7 worker, the average pay for women is only 77 percent of what men are paid. Women still don’t get equal pay for equal work, let alone equal pay.” Here’s the thing. This percentage is much more than we think. If you think this means that women with the same skills and experience are paid 80% of what men are paid for the same jobs, you’re wrong. This figure tells another thing. It is the ratio of men’s and women’s wages among full-time workers, covering a variety of jobs, without regard to workers’ skills and preferences. That 80% is an aggregate – it’s not a like-for-like comparison of men and women doing the same job. No wonder female college students believe the 77% pay gap myth.

To debunk this number further, I’ll provide some more statistics for you to decide. On average, men spend 14% more time at work. Men choose the highest-paying majors compared to women who primarily choose jobs at the other end and in the middle. The figure also does not take into account differences in occupation, position, education, job tenure or hours worked per week. When all these factors are taken into account, the wage gap narrows to the point of disappearing.

Now, I’m going to make some arguments here that women’s educational and career choices aren’t really free, they’re driven by powerful sexist stereotypes. Viewed in this light, women’s tendency to withdraw from the workplace to raise children or enter fields such as early childhood education and psychology rather than higher-paying careers such as petroleum engineering is evidence of persistent social coercion. The problem is: I can understand this being said against countries like India or other Asian countries. But Western women are some of the most informed and opinionated people in the world. To say they were manipulated into making life choices by forces beyond their control is unrealistic and demeaning.

So why does this idea still exist? One reason is the general opacity about how workers are paid, and the practice of most companies paying based on individuals rather than jobs. It remains difficult to determine whether women are actually earning less for doing the exact same job as men, under the exact same circumstances, because of the huge disparity between those holding the same job title. Well, I almost convinced you that gender pay is a farce. But wait, is there equality? Not quite.

There is something in our society called the gender pay gap and the pay gap has absolutely nothing to do with it. There is little evidence that men and women with the same background, education and qualifications are paid differently for the same jobs. Whether it’s Target Corporation, BASF, Facebook, Reliance, or McDonald’s, there’s little evidence that any of these organizations have two pay scales: one for men (higher pay) and one for women (lower pay). Of course, that’s illegal, and organizations face legal action if the practice exists. Facebook’s Sheryl Sandberg thinks the idea that we can close the gender pay gap by paying women more seems plausible [3] already hinted at. Sadly though this isn’t actually the correct answer. The gender pay gap doesn’t exist because men and women are paid less for the same jobs, it exists because men and women tend to do slightly different jobs. When equal jobs are achieved, we achieve gender pay equality. Because, as before, we’ve been paid the same for the same work.

A well-documented gender pay gap does exist when comparing unadjusted median earnings for men and women, without correcting for any of the dozens of relevant factors that explain natural differences in gender earnings. Take any large company for example. You will most likely find income disparities. I think this is the crux of the problem that despite equal pay for equal work, there are always more men than women in high-paying jobs and more women than men in lower-paying jobs. It is a shame that more deserving women are not filling these high paying positions. Let me give you a real example. My father works for a government oil company. I was there as an intern for a month, at an oil refinery. Except for one, I couldn’t find a single woman who worked in an office. The problem is, the vast majority of applicants for these positions are men. Female candidates compared to males in single digits. Women who did apply for internships transferred to companies in the service industry, even if it meant finding a lower-paying job.

The first step in solving any problem is recognizing that there is a problem. If implemented, Mrs Sandberg’s solution would fail miserably. Women need to be actively engaged and working in these sectors to close this real gap. This gap has actually widened over the years, because not many people pay attention to it. Finally, I want to borrow Mark Twain’s words, it’s not what you don’t know that gets you into trouble. This is something you know for sure, but it’s not.

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