Gender Inequality in the Labor Market: Don't Call It a Wage Gap

When President Obama announced the Paycheck Fairness Act on Equal Pay Day this week, we applauded his efforts to address the so-called "gender wage gap" but, from a data point of view, mourn the fact that he, like many others before him, is building his case around a flawed number. The oft-quoted statistic that women only earn 77 cents for each dollar earned by a man, is not actually very accurate and distracts legislators and the public at large from coming up with solutions to the real problem -- the gender jobs gap.

The 77 cents on the dollar number is calculated from Census data and simply compares the average earnings of men and women overall. In other words, it doesn't take into account job choice, industry, experience, education or any other factor that contributes to one's pay. PayScale has examined the gender wage gap numerous times and has determined that if you compare apples to apples -- men and women with the same background (education, years of experience, etc.), doing the same job for the same type of employer, the wage gap all but disappears for most positions. This outcome isn't popular as it goes against the typical gender wage gap mantra. However, clinging to this argument just because it makes a catchy headline isn't going to help us solve the deeper problems.

The subsets of jobs where a wage gap does persist, even when we control for all measurable factors, typically fall into two main categories: high level executives and director positions. This is a topic that does need exploration. We need to be asking why there are so few female executives and why men are earning more than women doing those same senior-level jobs. If things like the pressure of raising a family are making it harder for women to rise to the same level of career success as men, as this Pew study suggests, we need to focus our efforts around making it easier for men and women to share the responsibility of raising families.

Ironically, Obama's own staffing practices have been called out as an example of unfair pay based on the Census data's method, and they've fought back using a methodology more akin to the one we use at PayScale. A New York Times article reports that a January study showed that females in Obama's own staff only earn 88 cents for each dollar male staff members earned. A rebutting staff member said that these numbers were incorrect because the study compared all males to all females, "including the lowest levels, where women outnumber men." The Obama staff insists that men and women are paid equally for doing the same jobs. If they are going to use an apples-to-apples comparison for their own staff, why not use it when investigating gender pay differences for the whole country?

Job choice plays a huge role in potential earnings. Common jobs for men tend to be in relatively high-paying fields like IT and engineering, while women dominate relatively low-paying fields like education and human resources.

PayScale has performed a rigorous examination of 125 common jobs ranging from Line Cook to Anesthesiologist, and found that once we controlled for measurable compensable factors, almost two thirds of the jobs on the list showed men and women earning the same pay within statistical errors. Of the remaining one third, the controlled difference was always under 20 percent (still below the Census figure).

The good news is that President Obama's mandate to track pay data and to make salaries more transparent can help close the real gap, provided the results are analyzed correctly -- job to job, not in the aggregate.

By focusing on the average earnings of all men and all women, who frequently pursue different careers, legislation is missing out on the opportunity to understand why men and women make these different career choices.

We should also be encouraging young women to enter male-dominated STEM (science, technology, engineering and math) fields, which are not only in-demand, but high-paying. And, we should focus efforts on creating workplace environments where women feel supported to negotiate their salaries and rise to executive positions without fear of discrimination or a lack of support.