Wednesday 17 December 2014

The gender wage gap and hours worked

From my piece with Bryce Wilkinson in last week's National Business Review:
Suppose a management consultant pulled you aside and said, “Hey, have I got a deal for you. With this one simple trick, I can lower your labour costs by 14% and it won’t cost you a dime in productivity. Trust me, I know what I’m doing.” You’d probably be a little sceptical about the claim, or at least I would.

Statistics released in the last week by the State Services Commission reportedly found that the pay gap between men and women in public sector management roles averaged 14%.

Sadly, there are few one-simple-trick paths to success. More rigorous analysis of gender pay gaps that accounts for differences in work experience, training, time outside of the workforce, choice of industry, and hours worked generally wipes out the bulk of the headline pay differences.

The recently released New Zealand Income Survey data also makes things very clear. Hourly earnings for full time male employees, at $23.97/hour, is only about 6% higher than women’s $22.54; women in part-time work, averaging $17.26/hour, beat men’s $16/hour. Much of the headline pay gap comes from that more men are in full-time work rather than part-time work.

Treasury released analysis a fortnight ago showing that Working for Families (WFF) has reduced the number of hours worked by married women. Prior to WFF, among married men in employment, about 10% worked part-time, 59% worked a 40-hour week, and 32% worked a 50-hour week. For women, 55% were in part-time work, 30% worked a 40-hour week, and 15% worked a 50-hour week. None of those figures changed greatly with WFF, but women in part-time work shifted to working fewer hours, and about 9000 married women dropped out of the workforce entirely.

In a lot of professions, wages start climbing substantially for employees willing to put in the longer work-weeks, as economist Claudia Goldin pointed out in her 2014 Presidential Address to the American Economic Association. Much of the measured pay gap comes down not to discrimination, but to choices.
Update: NBR subscribers can catch it here.

A few relevant links:

1 comment:

  1. What is underrated in all this is the extent to women started investing in the family friendly occupations well before the economists announce them as family friendly.

    From the mid-20th century, women were choosing careers that balanced family with mild rates of human capital depreciation while on career interruptions.

    In more recent decades, the last decade or two, more and more women are moving into the occupations that do not penalised an unwillingness to join the rat race and work incredible long and inflexible hours.

    Human capital isn't as much of a factor in explaining the gender wage gap as compared to say, 30+ years ago.

    How teenagers and uni students somehow work out where to make the correct choice to major and which occupation and industry to join once they graduate on the basis of minimal information is one of the marvels of the market process.