An Economist's Formula for Shrinking the Gender Pay Gap

By Amy-Willard Cross

The workplace just isn’t a very equal place. Women still don’t earn as much as men, even when they possess the same degrees.  Women's progress has actually stalled since the 1990’s as Harvard economist Claudia Goldin points out.

But Goldin has some solutions for shrinking the wage gap. Her recent research suggests that flexibility and altering the way jobs are structured and paid could bring about equality.  Leaning in to ask for a raise, or starting government programs or even getting men to do more housework may not be the fix.

Goldin just presented a paper, The Grand Gender Convergence: The Last Chapter at a meeting of the American Economist Association, of which she is president. Long interested in the subject,  she is also the author of Understanding the Gender Gap: An Economic History of American Women.  It turns out flexibility might help erase the pay gap; that disparity might vanish entirely she writes, “if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours.”  The fields of technology, health and science have seen change, but not the stodgier worlds of finance, law or corporate America.  In those fields, big bucks go to those who are on call, face time or client-dealing. It doesn't have to be that way. 

As we know, wages start out pretty equal, but the pay gap comes with age—and women without children earn salaries nearly equal to men. And of course, it differs according to occupations—jobs with big time pressure and much interaction have a larger wage gap.

Professor Goldin studied how things work in law, finance and pharmacy. The first two aren’t great places for women; surprisingly, pharmacy is actually one of the most egalitarian professions today. 

Goldin’s research also shows that certain professions penalize time off more than others. Some call it the motherhood penalty.  For women who had been out of school 15 years, an 18 month break results in a decrease in pay of: 41 percent for MBAs; 29 percent  for JDs and PhDs; and 15 percent  for MDs

Interestingly, MDS and PhDs take the shortest non-work break—mainly because their professions allow greater flexibility after a birth, so they don't have to go cold turkey.

Goldin also dug deeply into MBAs and JDs work patterns. 

MBA Bingo

Looking at the graduates of University of Chicago’s Booth School of Business from 1990s-2006, Goldin found that pay for women and men was nearly identical in the beginning and was still small five years into their careers.  But 10-16 years after graduating, the pay gap ballooned to 55%.  And after children, women MBA’s work life changed significantly. She also found that:

Only 51 percent of women with children worked full time.

Women with children 24 percent  fewer hours.

Those with higher earning husbands had lower work participation rates.

One year after a birth, women’s hours decreased by 17 percent whereas 3-4 years after birth, that decreased to 24 percent.

Fifty percent of part time workers were self-employed.

Legalese

Among graduates of the University of Michigan, a similar pattern emerged.  The pay gap was negligible after graduation and five years hence.  However, 15 years later, things changed:

Those who worked more hours charged higher fees.

Twenty  percent women JDs with children were no longer in the work force.

Those with higher earning husband were less likely to stay in the work force.

Women without children had no difference in wages.

Pharmacist heal thyself

Drugs do pay. The druggist is now the third highest paying occupation for women (eighth for men) and has the lowest gender wage gap of all the higher paying occupations.

Goldin points out it legislation, anti-discrimination policies or regulations did not create equality. It was pharmacists are very substitutable, and they tend to work for large corporations or hospitals—as opposed to old fashioned small drugstore.

Forty percent of female pharmacists work part time between the ages of 30-50.  And unlike in other professions, they don’t suffer financially for it.

“Flexibility at work has become a code word to mean shorter hours…Flexibility is of little value, however, if it comes as a high price”, writes Goldin.  In her conclusions, Goldin calls for a change in how worker’s time is allocated, used and remunerated; she makes a case for giving people more independence and autonomy and points to the benefits when workers can substitute seamlessly for one another.  Creating strong teams is another way to promote this change.

“What the last chapter must contain for gender equality is not a zero sum game in which women gain and men lose. Many workers will benefit from greater flexibility...” And then everybody wins. 

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