The lesbian pay gap

Says BoingBoing:

Lesbians make more money than straight women (And nobody really knows why)

Really? Nobody? I can think of a couple of explanations, pretty easily testable. But we'll get to that in a minute. BoingBoing points to Big Think:

The wage premium paid to lesbian workers is a bit of a mystery. Sure, lesbian women are better-educated on average, are more likely to be white, live predominantly in cities, have fewer children, and are significantly more likely to be a professional. But even when you control for these differences, the wage premium is still on the order of 6%.

It is fascinating when the data starts looking like the majority is being discriminated against. Is it wage discrimination, though, or is there an economic argument for why lesbians are getting paid more?

Well, a possible explanation has to do with the division of labor in a heterosexual union.

...

This theory is cleverly tested in a paper which calculates the wage premium paid to lesbians in two distinct groups—those who were once in a heterosexual marriage and those have never been married.* The assumption made is reasonable; lesbian women who were once married to men (about 44% of the lesbians in the sample) presumably have in the past had the expectation that they would have a marriage partner with a higher income. The never-married women might also have had this expectation, but it is much more likely that, on average, women in that group expected to be in a relationship with another woman with a comparable income.

Does the evidence support the theory that the wage premium can be explained by greater investment in more market-oriented skills by lesbian women? Well the premium does not disappear completely for the subset of previously married women but is reduced by about 17%, providing some support for the idea. At 5.2% though, the once-married lesbian premium is still high enough that I don’t think we can consider the case closed.

Here's my candidate explanations.

First, and most importantly, maternity risk. If an employer expects a lesbian employee to be less likely to take maternity leave, and if maternity leave imposes costs on an employer, then the employer will be more likely to hire and to promote the lesbian over the straight woman. What evidence do we have? Petit's field experiment showing that maternity risk is responsible for a fair bit of women's lower average salaries.

How could this be tested in the data presumably available in the original study? Test whether the wage gap between lesbian and straight women is larger for younger women than for post-menopausal women. That will confound with age cohort effects, but there may be a way around it: use state insurance mandates on assisted reproduction, or state policies with respect to same-sex adoption. If some states require that insurers cover fertility treatments as part of an employer's insurance package and others don't, or if some states make it easier for lesbians to adopt kids, then we'd expect the wage gap between lesbians and straights to be smallest in those states that make it easiest for lesbians to have kids.

Second, testosterone and negotiation strategies. Women, on average, are less aggressive in wage negotiations. If testosterone correlates with aggressiveness in salary negotiations, and some evidence suggests higher than average testosterone levels among lesbians as compared to heterosexual women (though that evidence is contested), then we've another candidate explanation.

I'd put money on the maternity risk variable. I'd only put money on the negotiations one at decent odds.

But really, if correcting for the observables reduces the wage gap between lesbians and heterosexual women from around 40% [the paper cites average hourly wages of $18.70 for lesbians and $13.34 for cohabiting non-lesbian females] to around 5%, odds are pretty high that there are a bunch of unobservables also correlated with job performance that aren't captured in the wage regression.

More broadly: if you think it's implausible that employers love lesbians so much that they pay them extra for no good reason, then shouldn't you expect the same when looking at the male-female pay gap?