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An economist explains why women get less pay

This is a fundamental principle of fairness: both men and women should be afforded equal economic opportunities. Despite all the progress made and laws passed, there’s still a gap in what women and men are paid.

On average , a woman earns 54 cents for every dollar earned by a man. According to the World Economic Forum, this gap will close based on the current rate of progress. It will take 202 years to close. This chart shows the discrepancy in major OECD countries.

What’s the secret behind these numbers? According to Laura Tyson, an American economist, there is both discrimination and a complex web that influences and restricts the choices available to women. The moment when the gap widens is when parenthood occurs, where mothers are subject to a wage penalty and fathers receive a premium.

Below is an edited transcript from a conversation with Laura Tyson (Distinguished Professor at Berkeley).

There are many reasons for the wage gap between men and women. Let me start by stating that there was a significant determinant of earnings, and that educational attainment was a key factor in the wage disparity between men and women. The world has made great strides in eliminating educational differences between men & women over the past 20 years. These differences are now much less important to gender earnings, especially among younger workers who have similar educational attainment.

Let’s now look at other factors that can affect gender pay gap.

Women choose other occupations than men. There are also large and persistent income differences between different occupations. Teachers are paid less than engineers around the globe. So gender differences in occupational choice affect gender differences in earnings. Why are men and women choosing different occupations? Do women have enough role models in higher-paying occupations? Do these occupations have barriers that prevent women from advancing? Both questions can be answered yes. Furthermore, even in high-paying occupations women are more likely to be employed at the lower levels of the occupational hierarchy. This is because there is a gender gap at the top ranks of leadership and management within occupations which contributes to the gender pay gaps.

Gender differences in earnings can be found by sector or industry. The world’s men are more likely than women to hold jobs at all skill levels in manufacturing, which pays high wages, and educational services, which pays significantly less, is a sector with higher earnings.

Gender differences in the employment of different occupations and industries are key determinants of earnings differences. To reduce the gender gap in earnings, it is important to understand and decrease the gender differences in employment according to occupation and sector.

Part-time is more common for women than men around the globe. Part-time work is less lucrative than full-time work in comparable occupations or sectors. It also has lower hourly wages and fewer benefits. The ILO estimates that women make up about 57% of all global part-time jobs. This means that the earnings gap between full-time and part time work is approximately 10%.

Evidence also suggests that the gender pay gap is caused by differences in gender care responsibilities and motherhood.

Evidence of a motherhood penalty is there: All things being equal, there’s a negative relationship between a woman’s income and how many children she has. The 7% motherhood penalty is calculated according to OECD data. Evidence also suggests a fatherhood premium. This is a positive relationship between the man’s income and the number of children that he has.

If you look at men and women who have similar educations and work full-time in the exact same occupation or sector, the gender gap in earnings is almost gone in many advanced industrial countries. Same education, same work, same wage.

The gender gap in earnings is often visible five to ten years later, sometimes after the birth of children. An inexistent wage gap can quickly become a significant and increasing wage gap.

Part-time work is often a choice for women who want to be able to spend more time with their children. They are often forced to accept lower wages if they return to full-time work than they would have earned if they had stayed at their original job.

It is not easy to run a household or raise children. It is possible to do that work. This work is done disproportionately by women, not only in advanced industrial nations but all over the globe. It’s also not paid.

A more equitable division of parental responsibilities between women and men is an important step in closing the gender pay gap. Paid parental leave policies which provide paternity and maternity leave can help to achieve this goal. They increase fathers’ participation in child care, and reduce gender stereotyping and other household responsibilities. Paternity care that is not transferable makes it more attractive for men, which reduces gender gaps in the labour force participation rates of children. Paternity leave is often cited as an important policy to reduce, or eliminate, the gender pay gap resulting from the motherhood penalty or the fatherhood premium.

Stereotyping, discrimination and implicit biases continue to play a role. This is because even if you remove the occupation effect and the sector effect as well as the motherhood and fatherhood effect, there remains a gender gap between earnings. This gap is a result of gender discrimination, stereotyping, and implicit biases in earnings. These sources of gender pay gaps can be addressed by government policies, legal protections and changes in business practices.


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