Friday, April 22, 2011

The Female Premium

Mark Perry has an excellent take on a NYT editorial advocating regulation to close the pay gap between men and women. Because women get 88 cents for every dollar men get, clearly there is an unjustice to correct. Or so the story goes (Perry's alterations are in bold)...
Women Men now make up almost more than half of the American work force, but, according to data compiled by the Census Bureau, James Chung of Reach Advisors, who has spent more than a year analyzing data from the Census Bureau's American Community Survey, single, unmarried, childless full-time female employees still make, on average, only 77 cents $1.08 for every $1 earned by men in America's largest cities.
A large part of the pay gap originates from biology and social norms concerning children. When a female employee becomes pregnant, the company she works must find and train a replacement. When such employees have children, they are more likely to be spending time away from work caring for them in case of illness or unexpected conflicts (e.g. the nanny is ill). When there is no child and when the possibility of pregnancy is small (the female employee is single), that pay gap turns into a pay premium.

Chung's work is just one study, of course, but it's not the only one which comes to this conclusion. Thomas Sowell's Economic Facts and Fallacies reports a similar result from a different study, also finding a wage premium. The one cited in Sowell (I don't have the book handy at the moment) controlled for the nature of the job as women also tend to go to low paying occupations (e.g. administrative assistants). I assume Chung's research did this as well. Those concerned about the supposed pay gap rarely acknowledge this other important fact.