While I agree the “gender pay gap” is misrepresented by averaging across the entire workforce, I think your argument is specious because a substantial fraction of people are not operating in a “household” for a substantial fraction of their lives (and quite frankly it shouldn't matter, nobody is making salary decisions based on whether or not they're in a "household").
Typical (first) marriage age is about 30.
Something like 20% of households are not couples.
Something like 50% of marriages end in divorce.
And while averaging across the whole workforce does make the gender pay gap looks worse than it actually is, it also raises the question of why are low-paying jobs dominated by women, and why even in those industries, are the vast majority of higher-paying roles held by men.
For a personal anecdote, a while back ago my wife received a significant (over $25k) pay rise as a result of a salary review, to bring her salary in-line with the other - all male - members of her team (all of whom received very small, barely-inflation bumps), along with a once-off bonus intended to be back-pay for previous years. She is an Electrical Engineer in her 40s. The (department wide) salary review was instituted by the new, female, department head.
This was certainly not the first time in her ~20 year career a non-trivial pay discrepancy had existed between her and her male peers, but it _was_ the first time it was pro-actively addressed.
I do think that much of the real “gender pay gap” (ie: controlling for similar jobs) would be fixed by legislating wage transparency (ie: force employers to publish job titles and salary ranges, along with anonymised data of what they’re actually paying). The relative unwillingness of women to negotiate salary is well documented.
Mar 12, 2023·edited Mar 12, 2023Liked by Cameron Murray
The "gender pay gap" is one of those fuzzy political slogans that just keeps getting repeated, irrespective of the facts that you have summarised Cameron, or questions like, "Why would an employer in our mostly competitive private industries, pay men more than women for the same job?" I have yet to hear an answer to that.
However, the low levels of superannuation for older women who have worked at home is an absolute standout welfare issue that needs reforming. People, usually women, who give up work or work part time to stay at home with their kids perform a vital function in our society. However, in doing so they are giving up not only the accumulation of superannuation, but also skills and career progression that would otherwise serve them when they go back to work.
I think a combination of policy responses is important such as facilitating part time work across all occupations, to ensure skills retention and allow some career progression, suitable retraining job seeking assistance and in the instance of divorce, settlements that recognise the contribution that people who raise their kids at home experience and the financial cost to them that this entails.
> "Why would an employer in our mostly competitive private industries, pay men more than women for the same job?" I have yet to hear an answer to that.
They think men will do a better job, because they're men.
I would hazard a guess that in workplaces where women make the salary decisions, there's a much smaller (perhaps even reversed!) discrepancy. I would be very interested to see real data on this if anyone has any.
People frequently do not act rationally. If you are starting from the assumption they always do, then you're probably wrong. "Employers" (as in the detached entity that is a business) do not set individual salaries, that is done by hiring managers.
As stated these are competitive industries. If they hire a man on a higher salary because they think he will do a better job then he doesn't, their business will be uncompetitive and make financial losses, then the manager will either get fired or the business will go broke.
As it turns out we are both wrong, this is from the Commonwealth Government.
"Gender pay gaps are not a comparison of like roles. Instead, they show the difference between the average pay of women and men across organisations, industries and the workforce as a whole."
I had not previously understood that they were talking about total average income, rather than rates of income for the same work. Where a gender pay gap can be demonstrated to result from discrimination I certainly think action should be taken and as above I think that the person (usually the woman) who spends time raising children, shouldn't be penalised for it in terms of superannuation when they divorce.
My major concern is that this doesn't result in social engineering that discourages people from living in more traditional relationships, with the man earning the money and the woman looking after the kids, if that is what they desire. I don't see that pushing families to organise their lives in an approved manner, is any business of government or society.
I can't decipher what you're trying to say in your last paragraph, but it's riddled with red flags like "traditional relationships" and "social engineering".
I thought the last paragraph was pretty self explanatory, but for your benefit I will simplify it. If a heterosexual couple agree that they want the man to be the primary income earner and the woman to be a stay at home mother, then they should be able to do so without discouragement or discrimination in the name of closing the gender pay gap.
On a similar topic, I’d like to see some research done on how much of the retail market is geared towards women’s spending which could shed some light on the informal economy / discretionary spending you are talking about.
Anecdotally, when I walk around a Westfield, it seems like maybe 8/10 shops are expressly intended for women.
I personally spend almost nothing in my household except for food, public transport and the occasional bottle of whisky. My wife however has every dollar I’ll ever earn for the rest of my life already allocated 🤣
“ My wife however has every dollar I’ll ever earn for the rest of my life already allocated”
I hear you!
I do wonder about when there are more households with women earning the most and pooling that income with husbands whether we might start to hear more about intra-household transfers.
The internal dynamics of how household share resources are interesting, although I think that difference in incomes at an individual level still matters. First, and probably most importantly, pooling of resources is very limited in single parent households, with women much more likely to end up as single parents and be exposed to poverty. Although this has made me think that we shouldn't be so concerned about gender-pay gaps but the lack of transfer payments to single parents. Second, the intra-household transfers are not unconditional but are subject to the micro-political environment that determines how resources are pooled within each household.
Along the same theme, I find it odd that we’re bombarded with the difference between the average male’s superannuation balance versus the average female’s balance.
Surely the focus should be on the combined/household balance?
Furthermore, if/when couples break up isn’t the aim that the total of the assets (proprty, cash, shares, superannuation, &c.) is split equally?
I see what you’re saying, but while you can value non-market household transactions, isn’t the issue that the provision of household services is (despite their importance) low status work?
Even in these enlightened times, it’s women that tend to be ‘relegated’ to the role of deliverer of household services when children arrive, while the man is free to pursue his work. There are many reasons for this (including preferences, I think). Ultimately though a culture in which women are expected to forego paid work to fulfil these tasks while the man continues should be questioned.
An anecdote: my partner was on and off work for 5 years while she was pregnant with, and looking after, our three girls. When she went back to work, her outwardly highly progressive employer essentially turned a blind eye while a (male) colleague systematically played the system to ensure he ended up with the senior role she’d left. She came back to a highly unfulfilling and physically demanding role teaching mostly beginners (she was an instrumental teacher at a large private school).
A classic case of a business talking the woke talk, but failing miserably to walk the walk.
On the status issue, plenty of men work in low status jobs. You are opening up the issue of work as a place if self fulfilment or a place of drudgery that you only do for money. A man is “free to pursue his work” makes it sounds like a hobby.
On expectations of women forgoing paid work, that is the flip side of the expectation of men being breadwinners. It’s the same expectation expressed differently. Which is fine. But as you point out does not necessarily need to be an assumption in 2023.
That second point is interesting.. I suppose there would be a welfare loss linked to men (or women) being compelled to work more hours than they’d ideally like. Should this concern us?
Looking at earnings and noticing a gender difference is about as useful as looking at clothing and noticing a gender difference - an interesting reflection of biology and culture, but not of great significance in itself.
If we are going to talk about equality we need to talk about power. Power derives from spending, not earning. I'd love to see a good analysis of spending by age and gender. My best guess is that it would favour females (because I'm yet to meet a real-estate agent who thinks they are selling to men). And it would almost certainly show a shocking skew in favour of the old over the young - contrary to the stereotype of young people spending their disposable income. But while we obsess about earnings, we'll never know.
Thanks for bringing this issue to our attention Cameron. Unfortunately, these days the gender pay gap is most commonly expressed purely in terms of gender, not equal pay for equal work which is the appropriate basis for comparison. The role of the family in redistributing income and resources, while not applicable to all of us for all of our lives, is an important factor to be aware of, even including transfers after death, which would also tend to go more to women than men.
Also, you have to understand this whole thing reads as "ladies, don't stress about being paid less, you'll make it back with interest when you settle down with a man and have some kids", surely ?
I noted that younger women already earn more than men and that the equalisation of pay for the same jobs has been a huge success. I'm not here judging what is good or bad. Only describing the world and how we seem to ignore a huge part of it.
You could equally understand the whole thing as
"men, don't celebrate being paid more, you'll lose it with interest when you settle down with a woman and have some kids"
I'm not sure how you would judge that. A problem to be fixed? It is exactly what you said, but from the perspective of men.
But they're not the same because the outcomes are different.
For men it's a win/break-even scenario, whereas for women it's a lose/break-even scenario.
Men generally do better financially after a divorce as well.
And fundamentally none of this is really relevant because pay levels aren't being set in the context of some giant society-wide "it all comes out in the wash" strategy.
Men are financially better off than women outside of a household because they earn more.
I am assuming both come out basically equal inside a household (which I think was the position you were taking in your post, though I’ll admit I haven’t gone back to re-read it and double check).
So for men the outcomes are win (staying single) / break even (in a household) / “lose less” (after breakup) but for women are lose (staying single) / break even (in a household) / lose (after breakup).
My TL;DR here is that there’s a lot of people who aren’t in households, and nobody is making decisions about how much to pay based on a whole-of-society strategy so while, yes, it makes sense to take “households” "into account" I would argue they’re not really relevant to the underlying pay gap issue.
As I said above, I suspect a lot of the “gender pay gap” would disappear fairly quickly if everyone knew what their labour was worth to their employer and could make salary demands based on that. Though, of course, if there’s a massive labour surplus then they’ve got SFA bargaining power regardless…
EDIT: Also, to be clear, no part of my day to day life or hobbies involve either this topic or economics; I'm commenting from a layman's interest perspective. So it's possible the stories above have either or wrong or misrepresented data. I'm taking them at face value. Happy to be corrected with reasonable rationale and evidence.
While I agree the “gender pay gap” is misrepresented by averaging across the entire workforce, I think your argument is specious because a substantial fraction of people are not operating in a “household” for a substantial fraction of their lives (and quite frankly it shouldn't matter, nobody is making salary decisions based on whether or not they're in a "household").
Typical (first) marriage age is about 30.
Something like 20% of households are not couples.
Something like 50% of marriages end in divorce.
And while averaging across the whole workforce does make the gender pay gap looks worse than it actually is, it also raises the question of why are low-paying jobs dominated by women, and why even in those industries, are the vast majority of higher-paying roles held by men.
For a personal anecdote, a while back ago my wife received a significant (over $25k) pay rise as a result of a salary review, to bring her salary in-line with the other - all male - members of her team (all of whom received very small, barely-inflation bumps), along with a once-off bonus intended to be back-pay for previous years. She is an Electrical Engineer in her 40s. The (department wide) salary review was instituted by the new, female, department head.
This was certainly not the first time in her ~20 year career a non-trivial pay discrepancy had existed between her and her male peers, but it _was_ the first time it was pro-actively addressed.
I do think that much of the real “gender pay gap” (ie: controlling for similar jobs) would be fixed by legislating wage transparency (ie: force employers to publish job titles and salary ranges, along with anonymised data of what they’re actually paying). The relative unwillingness of women to negotiate salary is well documented.
The "gender pay gap" is one of those fuzzy political slogans that just keeps getting repeated, irrespective of the facts that you have summarised Cameron, or questions like, "Why would an employer in our mostly competitive private industries, pay men more than women for the same job?" I have yet to hear an answer to that.
However, the low levels of superannuation for older women who have worked at home is an absolute standout welfare issue that needs reforming. People, usually women, who give up work or work part time to stay at home with their kids perform a vital function in our society. However, in doing so they are giving up not only the accumulation of superannuation, but also skills and career progression that would otherwise serve them when they go back to work.
I think a combination of policy responses is important such as facilitating part time work across all occupations, to ensure skills retention and allow some career progression, suitable retraining job seeking assistance and in the instance of divorce, settlements that recognise the contribution that people who raise their kids at home experience and the financial cost to them that this entails.
> "Why would an employer in our mostly competitive private industries, pay men more than women for the same job?" I have yet to hear an answer to that.
They think men will do a better job, because they're men.
I would hazard a guess that in workplaces where women make the salary decisions, there's a much smaller (perhaps even reversed!) discrepancy. I would be very interested to see real data on this if anyone has any.
People frequently do not act rationally. If you are starting from the assumption they always do, then you're probably wrong. "Employers" (as in the detached entity that is a business) do not set individual salaries, that is done by hiring managers.
As stated these are competitive industries. If they hire a man on a higher salary because they think he will do a better job then he doesn't, their business will be uncompetitive and make financial losses, then the manager will either get fired or the business will go broke.
Repeating something doesn't make it true.
As it turns out we are both wrong, this is from the Commonwealth Government.
"Gender pay gaps are not a comparison of like roles. Instead, they show the difference between the average pay of women and men across organisations, industries and the workforce as a whole."
https://www.wgea.gov.au/the-gender-pay-gap
I had not previously understood that they were talking about total average income, rather than rates of income for the same work. Where a gender pay gap can be demonstrated to result from discrimination I certainly think action should be taken and as above I think that the person (usually the woman) who spends time raising children, shouldn't be penalised for it in terms of superannuation when they divorce.
My major concern is that this doesn't result in social engineering that discourages people from living in more traditional relationships, with the man earning the money and the woman looking after the kids, if that is what they desire. I don't see that pushing families to organise their lives in an approved manner, is any business of government or society.
No, that was the definition I understood (see my post https://www.fresheconomicthinking.com/p/since-families-share-economic-resources/comment/13534548).
I can't decipher what you're trying to say in your last paragraph, but it's riddled with red flags like "traditional relationships" and "social engineering".
I thought the last paragraph was pretty self explanatory, but for your benefit I will simplify it. If a heterosexual couple agree that they want the man to be the primary income earner and the woman to be a stay at home mother, then they should be able to do so without discouragement or discrimination in the name of closing the gender pay gap.
On a similar topic, I’d like to see some research done on how much of the retail market is geared towards women’s spending which could shed some light on the informal economy / discretionary spending you are talking about.
Anecdotally, when I walk around a Westfield, it seems like maybe 8/10 shops are expressly intended for women.
I personally spend almost nothing in my household except for food, public transport and the occasional bottle of whisky. My wife however has every dollar I’ll ever earn for the rest of my life already allocated 🤣
Interesting angle there.
“ My wife however has every dollar I’ll ever earn for the rest of my life already allocated”
I hear you!
I do wonder about when there are more households with women earning the most and pooling that income with husbands whether we might start to hear more about intra-household transfers.
Yes then and only then will the infographics flow!
The internal dynamics of how household share resources are interesting, although I think that difference in incomes at an individual level still matters. First, and probably most importantly, pooling of resources is very limited in single parent households, with women much more likely to end up as single parents and be exposed to poverty. Although this has made me think that we shouldn't be so concerned about gender-pay gaps but the lack of transfer payments to single parents. Second, the intra-household transfers are not unconditional but are subject to the micro-political environment that determines how resources are pooled within each household.
Along the same theme, I find it odd that we’re bombarded with the difference between the average male’s superannuation balance versus the average female’s balance.
Surely the focus should be on the combined/household balance?
Furthermore, if/when couples break up isn’t the aim that the total of the assets (proprty, cash, shares, superannuation, &c.) is split equally?
I see what you’re saying, but while you can value non-market household transactions, isn’t the issue that the provision of household services is (despite their importance) low status work?
Even in these enlightened times, it’s women that tend to be ‘relegated’ to the role of deliverer of household services when children arrive, while the man is free to pursue his work. There are many reasons for this (including preferences, I think). Ultimately though a culture in which women are expected to forego paid work to fulfil these tasks while the man continues should be questioned.
An anecdote: my partner was on and off work for 5 years while she was pregnant with, and looking after, our three girls. When she went back to work, her outwardly highly progressive employer essentially turned a blind eye while a (male) colleague systematically played the system to ensure he ended up with the senior role she’d left. She came back to a highly unfulfilling and physically demanding role teaching mostly beginners (she was an instrumental teacher at a large private school).
A classic case of a business talking the woke talk, but failing miserably to walk the walk.
Fair points.
On the status issue, plenty of men work in low status jobs. You are opening up the issue of work as a place if self fulfilment or a place of drudgery that you only do for money. A man is “free to pursue his work” makes it sounds like a hobby.
On expectations of women forgoing paid work, that is the flip side of the expectation of men being breadwinners. It’s the same expectation expressed differently. Which is fine. But as you point out does not necessarily need to be an assumption in 2023.
That second point is interesting.. I suppose there would be a welfare loss linked to men (or women) being compelled to work more hours than they’d ideally like. Should this concern us?
Looking at earnings and noticing a gender difference is about as useful as looking at clothing and noticing a gender difference - an interesting reflection of biology and culture, but not of great significance in itself.
If we are going to talk about equality we need to talk about power. Power derives from spending, not earning. I'd love to see a good analysis of spending by age and gender. My best guess is that it would favour females (because I'm yet to meet a real-estate agent who thinks they are selling to men). And it would almost certainly show a shocking skew in favour of the old over the young - contrary to the stereotype of young people spending their disposable income. But while we obsess about earnings, we'll never know.
Thanks Cameron. An excellent analysis with a different slant, focusing on the pooling of household resources and the spending pay gap.
Thanks for bringing this issue to our attention Cameron. Unfortunately, these days the gender pay gap is most commonly expressed purely in terms of gender, not equal pay for equal work which is the appropriate basis for comparison. The role of the family in redistributing income and resources, while not applicable to all of us for all of our lives, is an important factor to be aware of, even including transfers after death, which would also tend to go more to women than men.
My father used to say things like that. 50 years ago.
Also, you have to understand this whole thing reads as "ladies, don't stress about being paid less, you'll make it back with interest when you settle down with a man and have some kids", surely ?
I cannot control how you interpret words.
I noted that younger women already earn more than men and that the equalisation of pay for the same jobs has been a huge success. I'm not here judging what is good or bad. Only describing the world and how we seem to ignore a huge part of it.
You could equally understand the whole thing as
"men, don't celebrate being paid more, you'll lose it with interest when you settle down with a woman and have some kids"
I'm not sure how you would judge that. A problem to be fixed? It is exactly what you said, but from the perspective of men.
But they're not the same because the outcomes are different.
For men it's a win/break-even scenario, whereas for women it's a lose/break-even scenario.
Men generally do better financially after a divorce as well.
And fundamentally none of this is really relevant because pay levels aren't being set in the context of some giant society-wide "it all comes out in the wash" strategy.
Do you have evidence that men to better financially after a divorce, relative to their incomes during marriage?
I also don't understand what you mean by "For men it's a win/break-even scenario, whereas for women it's a lose/break-even scenario."
https://www.forbes.com/sites/forbesfinancecouncil/2022/10/20/the-financial-impact-of-divorce/?sh=1a23932419e5
https://www.theatlantic.com/business/archive/2016/04/the-divorce-gap/480333/
https://www.theguardian.com/lifeandstyle/2009/jan/25/divorce-women-research
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5992251/
Men are financially better off than women outside of a household because they earn more.
I am assuming both come out basically equal inside a household (which I think was the position you were taking in your post, though I’ll admit I haven’t gone back to re-read it and double check).
So for men the outcomes are win (staying single) / break even (in a household) / “lose less” (after breakup) but for women are lose (staying single) / break even (in a household) / lose (after breakup).
My TL;DR here is that there’s a lot of people who aren’t in households, and nobody is making decisions about how much to pay based on a whole-of-society strategy so while, yes, it makes sense to take “households” "into account" I would argue they’re not really relevant to the underlying pay gap issue.
As I said above, I suspect a lot of the “gender pay gap” would disappear fairly quickly if everyone knew what their labour was worth to their employer and could make salary demands based on that. Though, of course, if there’s a massive labour surplus then they’ve got SFA bargaining power regardless…
EDIT: Also, to be clear, no part of my day to day life or hobbies involve either this topic or economics; I'm commenting from a layman's interest perspective. So it's possible the stories above have either or wrong or misrepresented data. I'm taking them at face value. Happy to be corrected with reasonable rationale and evidence.
Remarkable that you do not consider domestic violence at all. A very incomplete piece of analysis.
I didn’t consider many things. Only the topic that I was writing about.