Members of the Republican Policy Committee Working Group on Women in the 21st Century Workforce. Thank you for inviting me to testify today.

As women have become an increasingly powerful economic and political force, lawmakers and researchers have dedicated much time to comparing women’s economic opportunities with those of men. The primary concern is whether women, who have historically suffered from discriminatory practices, continue to suffer similar injustices today. Are women being discriminated against in the U.S. modern workforce?

There are some key differences in men and women’s life experiences that are captured by a range of data differentials. Men and women are different in many ways and only some of these differentials can give researchers any indication of residual discrimination. The gender wage gap has garnered particular attention in this context. Some differences include:

Longer Lives. Women tend to live longer than men. Average life expectancy at birth for women exceeds that of men by nearly five years. Women live on average for 81.2 years, compared to men’s 76.4 years.[1] Average life expectancy at age 65 for women exceeds that of men by 2.5 years. Women at age 65 live, on average, for 20.3 more years, to age 85.3, compared to men’s 17.8 years, to age 82.[2]

Fewer Earning Years and Hours Worked. Women are more likely to take time out of the workforce to provide care for children and other family members, resulting in more zero-earnings years during their lifetimes. However, this gap is narrowing. Whereas women born between 1926 and 1945 averaged 18.7 zero-earnings years over their working lifetimes compared to men’s 7.1 years, women born between 1946 and 1960 averaged a mere 3.7 years with zero earnings compared to men’s 2.8 years.[3] Beyond exiting the labor force to care for children or parents, women are more likely to reduce their hours at work to care for family members. Among full-time workers, men worked 8.4 hours per day, compared to women’s 7.8 hours. Moreover, women are nearly twice as likely to work part-time as men: 26.6 percent of women worked part time in 2010, compared to just 13.4 percent of men.[4 ]

Lower Earnings. Median earnings of full-time, year-round workers differed substantially by gender. Women earned $39,621 in median income in 2014, while men earned $50,383 that year. This amounts to a female-to-male earnings ratio of 79 percent.[5] In 2015, full-time working men earned a median wage of $51,212, and women earned $40,742, for an earnings ratio of 80 percent.[6] Several factors explain these income and earnings gaps, which I’ll explore further in this testimony.

Higher Poverty Rates. In 2015, 12.2 percent of males were in poverty, down from 13.4 percent in 2014. In contrast, about 14.8 percent of females were in poverty in 2015, down from 16.1 percent in 2014.[7] Poverty rates among the population 65 years of age and older are generally below those of the overall population. However, poverty rates in old age are also higher among women than men. Whereas the poverty rate among men at age 65 and older was 7.4 percent, among women the rate was 12.1 percent.[8] Poverty rates are by far the highest among female heads of household with no husband present—at 28.2 percent.[9 ]

The Gender Wage Gap: A Misleading Statistic

Public discourse has focused the most on the gender earnings gap in recent years. This gender wage gap discussion is one of the most misleading policy issues today. According to various groups, women are paid 77 cents on the dollar for every dollar a man earns. According to this year’s annual Census Bureau report, this figure would be 80 percent today.[10] Both figures are highly misleading, especially when used as supposed evidence that women are discriminated against in the workforce. Bad statistics are dangerous when used to justify legal action that does more harm than good.

In this testimony I will attempt to discern myth from fact. Before Congress takes potentially harmful action to right an alleged wrong, Members of Congress should first take a close look at whether what they are trying to fix is indeed broken. And, even if something is broken, that does not necessarily mean that Congress can fix it. Congress should apply a Hippocratic Oath policy of “first, do no harm.” As it turns out, when it comes to certain antidiscrimination policies, the track record is clear: Lawmakers have made conditions worse for the very individuals and groups that lawmakers have been trying to protect.

The Wage Gap

President Obama’s White House and countless organizations have repeatedly claimed that women face widespread discrimination in the U.S. on the basis of their gender. The consequences of this alleged discrimination are said to appear in terms of pay and job opportunities, which are then captured in a gender wage gap. Taking a closer look at how the gender wage gap is calculated reveals that it is a meaningless statistic that does not tell us much of anything about whether gender discrimination exists in the workplace.

The gender wage gap is based on the female-to-male earnings ratio, comparing the full-time, median earnings of women and men. In 2015, full-time working men earned a median wage of $51,212 and women earned $40,742, for an earnings ratio of 80 percent.[11] This statistic is the basis for the repeated claim by the White House and primarily left-leaning groups that women earn a fraction of men’s pay.

This statistic is sometimes referred to as a raw statistic because it does not account for the various relevant factors that explain differences in pay that are unrelated to employment-based discrimination. Once researchers account for factors that affect every worker’s pay level—such as education, experience, choice of industry and occupation, career interruptions, and hours worked—the so-called gap all but disappears.

Several factors affect how much individuals are paid, regardless of sex, but none of these is reflected in the gender wage gap. Economists attempt to account for these other factors to see how much of the gender wage gap can be explained by factors other than sex-based discrimination. Research has revealed that those relevant factors include[12]:

• Education and human capital. More-educated workers tend to have more skills and greater productivity than less-educated workers. Consequently, they usually command higher pay.
• Occupation and industry. Jobs in some occupations and industries (for example, construction and energy production) are more physically unpleasant or dangerous than others: 92 percent of workplace fatalities in the U.S. occur to males.[13] Such jobs pay a compensating wage differential that accounts for the danger or unpleasantness of the work. Other jobs require specialized skills or expertise, such as engineering (versus elementary school teaching, for instance).
• Work hours. Employees who work longer shifts—including overtime—usually produce and earn more than those who do not. Furthermore, there are other structural reasons for why some jobs are disproportionately rewarded for longer hours and certain times—such as executive positions—compared with other professions that offer more flexibility (pharmacy staff, for instance). This, too, affects women in the workplace.
• Experience. Employees become more productive as they gain experience. Pay tends to rise with experience.
• Career interruptions. Career interruptions affect pay negatively to the extent that they allow skills to erode and reduce workers’ experience.
• Benefits. Cash wages make up only two-thirds of workers’ total compensation. Non-cash benefits, such as health coverage and paid leave, make up the rest. Employers consider the total compensation they provide their employees, and are indifferent to whether that is cash wages or benefits.[14] Workers who prioritize benefits may accept jobs with lower wages, and vice versa.

When accounting for these relevant factors that affect pay—such as education, choice of industry and occupation, hours worked, experience, and career interruptions—the difference between average male and female wages shrinks to about 5 cents to 7 cents on the dollar. Put differently, the earnings ratio between women and men drops to between 93 percent or 95 percent after accounting for relevant factors. These results are based on a study commissioned by the U.S. Labor Department, published under President Obama’s Administration.[15 ]

Other researchers have found similar results. June O’Neill identified an unexplained gender wage gap of 3.3 percent after accounting for relevant factors such as schooling and cognitive skills, work experience, time out of the labor force and employer type, and career choice.[16] Furthermore, O’Neill discovered that when comparing single childless women to single childless men, ages 35 to 43, there is a wage premium. Women in this group earned wages that exceeded those of their male counterparts by 7.9 percent. [17 ]

There is little, if any, evidence of widespread discrimination in wages and employment based on gender in the U.S. To suggest that the remaining gap of 3 percent to 7 percent is indicative of discrimination would be reaching a premature conclusion. Even this remaining smaller gap is not necessarily an outcome of discrimination. If women disproportionately choose employers who provide more compensation in the form of benefits than wages, this affects the overall wage gap and is not measured by current data.

Moreover, there are limitations to currently available data, which prevent researchers from analyzing factors such as work experience and job tenure in conjunction with factors like occupation and industry. To the extent that experience and job tenure matter more in certain occupations and industries than in others, this could explain a portion of the male-female wage differential.

The Role of Preferences

Recent research suggests that differences in preferences among men and women play a strong role in explaining women’s choices and resulting wage differentials.

A 2009 study for the Federal Reserve Bank of New York examined how male and female students choose their majors.[18] Choice of major affects how much individuals earn. Gender differences in choice of major have recently been at the center of discussion on the reasons behind women’s underrepresentation in science and engineering. There are at least two plausible explanations for these differences.

First, it is possible that men are more innately predisposed to excel at math and science. However, studies of mathematically gifted individuals reveal differences in choices across gender, even for very talented individuals. For example, the “Study of Mathematically Precocious Youth After 35 Years” shows that mathematically talented women preferred careers in law, medicine, and biology over careers in physical sciences and engineering.[19]

Studies like the aforementioned, suggest gender differences in preferences as a second possible explanation for the gender gap in the choice of major. According to the Federal Reserve Bank’s research, factors that are most relevant to individuals when choosing majors are: enjoying the coursework, gaining the approval of parents, and enjoying the work they would likely be doing after graduation.

While men and women reported similar preferences with respect to the college experience they were seeking, there were significant differences between the genders in preferences regarding workplace conditions. Non-pecuniary determinants explained about half of the choices that males made, but they explained more than three-fourths of the choice made by females. Females reported caring most about non-pecuniary outcomes, such as gaining approval of their parents and enjoying the work they would likely be doing post-graduation, while males reported valuing pecuniary outcomes more, such as social status of their likely professions, likelihood of finding a job, and earnings potential at those jobs. Assuming that men and women seek professional opportunities in accordance with these stated preferences, a wage gap would ensue naturally.

Motherhood Penalties and Fatherhood Bonuses

Over the past decades, a narrowing has occurred between men and women in labor force participation, paid hours of work, hours of work at home, and life-time labor force experience. Since the end of World War II, women’s labor force participation has increased drastically. Whereas only about one-third of women, ages 20 and older, participated in the labor force in 1950, more than 60 percent of women were working by 1997. Though labor force participation by women has declined slightly since then, it still exceeds 58 percent. Among men, 20 years of age and older, labor force participation has declined from nearly 90 percent after the end of World War II, to 72 percent. Some of the decline in labor force participation can be explained by an aging society. Another portion of the decline can be explained by the fact that more people are going to college, affecting labor force participation, especially among those under 25 years of age. Yet, even looking at male labor force participation during prime working years (25 to 54), there is a decline.[20 ]

Women have not only caught up to men in many professional endeavors; single, young women are outperforming their male counterparts in urban areas.[21] Women already earn more bachelors, masters, and doctoral degrees than men do.[22 ]

Men and women begin their employment with similar earnings, and something happens that decreases women’s earnings relative to those of men as they age. Often referred to as the motherhood penalty and the fatherhood bonus, the earnings of female and male parents diverge.

Recent polling by the Pew Research Center reveals that mothers and fathers have different preferences when it comes to their ideal work environment. Particularly telling about these results is the emphasis that women place on a flexible work schedule. According to Pew, 70 percent of working mothers value a flexible schedule, with 48 percent of men saying the same. Meanwhile, working fathers were 10 percentage points more likely to value a high-paying job than working mothers were. If working fathers choose more high-paying jobs than working mothers, and working mothers choose jobs that allow them more flexibility, we should expect a divergence in earnings.[23]

Rather than being a result of discrimination against women based on their gender, research reveals that the gender wage gap is largely the result of the different preferences and behaviors exhibited by men and women when it comes to decisions about education, careers, and family. According to June O’Neill and Dave O’Neill:

There is no gender gap in wages among men and women with similar family roles. … What the average woman sacrifices in earnings from choosing jobs that allow for part-time work and flexible work conditions is presumably offset by a gain in the utility of time spent with children and family.[24 ]

As difficult as it may be for some to wrap their heads around this simple fact: Women have different priorities than trying to match men’s earnings.

Policies to Address Wage Differentials and Discrimination

There is little, if any, evidence of widespread discrimination in wages and employment based on gender in the U.S. In those rare cases where employers do discriminate based on gender, the Equal Pay Act of 1963 and the Civil Rights Act provide legal protections for individuals who are discriminated against based on gender (among other protected factors).

Some, including President Obama’s Administration, argue that the Equal Pay Act needs strengthening by amending it with provisions in the proposed Paycheck Fairness Act. The details of the Paycheck Fairness Act suggest, however, that it was written for the benefit of trial lawyers and those who seek government control over employer compensation decision, not for the benefit of women.

Beyond asking employers to prove that wage and employment differentials are due to “factors other than sex,” under the new act employers would need to prove that differentials are a “business necessity” for which there is no alternative employment practice. It would be up to the courts to define what constitutes such a business necessity.[25 ]

Moreover, the act would lift the cap on compensatory and punitive damages, thereby greatly increasing employers’ potential liability. My Heritage colleague James Sherk has called this “jackpot justice,” explaining that employers’ higher insurance costs to ward off greater legal liability would be paid for by reducing employee’s wages and by hiring fewer workers.[26 ]

Another risk is that the Paycheck Fairness Act would move the U.S. economy closer to a “comparative worth” pay regime, with nudges by government. No single body, let alone one that is responsive to political pressures, is capable of effectively determining fair pay structures in industries or in individual job positions.

Reporting requirements proposed in the Paycheck Fairness Act regarding pay by gender, and subsequent Labor Department pay guidelines, would likely motivate employers to adopt more rigid pay structures and, thus, less-flexible work arrangements, taking away a highly valuable benefit from women. Employers may also avoid performance-based pay, such as bonuses that encourage and reward excellence, to protect themselves from legal claims. Such a one-size fits all approach promises to reduce productivity and limit employee’s choices.

Other policies proposed to assist women, such as mandatory paid leave, also do more harm than good. Such policies are often proposed with the stated intent of helping women who act as caretakers for children or elderly parents to meet those responsibilities without losing valuable pay. As an unintended side effect, such policies lead to statistical discrimination, as employers begin viewing women of childbearing ages as more likely to use such benefits. A Cornell study from 2015 finds that women hired after the 1993 Family Medical Leave Act were 8 percent less likely to get promoted.[27] Instead of doubling down on such harmful policies, Congress should review existing policies that hinder women’s economic opportunity and remove them. Furthermore, Congress should:

• Reduce costly employment mandates. Policies that raise the cost of hiring workers hurt the workers whom they are supposed to help. The minimum wage is cited as another measure to help women earn more. However, minimum wages also reduce employment opportunities for individuals as companies shift to automate tasks or to locate production abroad. Additionally, many policymakers seek to mandate paid sick and family leave with the well-intended goal of making it easier for women to take time out of the workforce after childbirth or to assist with family care. Yet, such mandates backfire on the population they are supposed to help. Similarly, additional litigation risks that arise from misguided policies like the Paycheck Fairness Act will reduce employers’ willingness to provide the very workplace flexibility women so desperately want in order to balance work and family. Congress and state governments should reduce existing employment mandates and reject adding more.
• Enable an opportunity society. The most important component of strengthening women’s economic security is to enable a strong and growing economy that provides opportunity for women to attain higher earnings. The federal government should pursue fiscal and economic policies that allow investors and entrepreneurs the confidence to expand operations and clear barriers to economic growth and innovation. Congress should consider tax and regulatory reforms that allow the economy to grow, including simplifying the tax system and lowering rates and rolling back regulations like Dodd-Frank[28] and countless others that hurt the economy.[29] State and local governments should reduce extensive occupational licensure and restrictive zoning and permitting laws that prevent individuals from using their aptitudes and talents to earn a living.[30] Removing costly regulatory mandates that increase the cost of childcare would be particularly helpful to mothers trying to return to the workforce.

A strong economy that enables individuals to use their skills and aptitudes to earn a living, and that allows entrepreneurs and investors to create jobs and enhance productivity through innovation, is an economy that works for all Americans, including women. Congress should be focused on establishing the legal conditions that allow free markets to flourish and enabling greater economic growth by reducing regulatory barriers, lowering taxes, and eliminating barriers to entry that undermine competition. Researchers in think tanks and in academia should continue to study which groups in society experience discrimination, the sources of this discrimination, and ways to enhance equality in the U.S. and around the globe. The Independent Women’s Forum, my former employer, has produced a number of compelling recommendations in a recent report, “Working for Women,” that lawmakers could consider.[31] Public policies targeting women, such as mandatory benefits, that have been found to have the opposite outcome of what they intended, limiting rather than expanding women’s economic opportunities, should be eliminated. Congress should undo harm already done, and do no additional harm.

 

Endnotes

[1] Jiaquan Xu et al., “Deaths: Final Data for 2013,” National Vital Statistics Report, Vol. 64, No. 2, February 16, 2016, http://www.cdc.gov/nchs/data/nvsr/nvsr64/nvsr64_02.pdf (accessed September 21, 2016).

[2] Elizabeth Arias, “United States Life Tables, 2011,” National Vital Statistics Reports, Vol. 64, No. 11, September 22, 2015, http://www.cdc.gov/nchs/data/nvsr/nvsr64/nvsr64_11.pdf (accessed June 1, 2016).

[3] Chad Newcome, “Distribution of Zero-Earning Years by Gender, Birth Cohort, and Level of Lifetime Earnings,” U.S Social Security Administration, Research and Statistics Note No. 2000-02, November 2002, https://www.ssa.gov/policy/docs/rsnotes/rsn2000-02.html (accessed September 21, 2016).

[4] United States Department of Labor, Office of the Secretary, Women’s Employment During the Recovery, May 3, 2011, https://www.dol.gov/_sec/media/reports/femalelaborforce/ (accessed September 21, 2016).

[5] U.S. Census Bureau, “Income and Earnings Summary Measures by Selected Characteristics: 2013 and 2014,” Table 1. Income and Poverty in the United States: 2014, https://www.census.gov/hhes/www/income/data/incpovhlth/2014/table1.pdf.

[6] Bernadette D. Proctor, Jessica L. Semega, and Melissa A. Kollar, “Income and Poverty in the United States: 2015,” U.S. Census Bureau Current Population Report No. P60-256, September 2016, p. 10, https://www.census.gov/content/dam/Census/library/publications/2016/demo/p60-256.pdf(accessed September 21, 2016.

[7] Ibid.

[8] Carmen DeNavas-Walt and Bernadette Proctor, “Income and Poverty in the United States: 2014,” U.S. Census Bureau Current Population Survey No. P60-252, September 2015, http://www.census.gov/hhes/www/poverty/data/incpovhlth/2014/tables.html (accessed September 21, 2016).

[9] Proctor, Semega, and Kollar, “Income and Poverty in the United States: 2015.”

[10] Ibid.

[11] Proctor, Semega, and Kollar, “Income and Poverty in the United States: 2015,” p. 10.

[12] Rachel Greszler and James Sherk, “Paycheck Fairness Act Would Reduce Pay and Flexibility in the Workplace,” Heritage Foundation Issue Brief No. 4200, April 17, 2014, http://www.heritage.org/research/reports/2014/04/paycheck-fairness-act-would-reduce-pay-and-flexibility-in-the-workplace.

[13] Bureau of Labor Statistics, “Injuries, Illnesses, and Fatalities: Census of Fatal Occupational Injuries (CFOI),” 2014, http://www.bls.gov/iif/oshcfoi1.htm (accessed September 21, 2016).

[14] Employer costs for employee compensation averaged $34.05 per hour worked in June 2016. Wages and salaries averaged $23.35 per hour worked and accounted for 68.6 percent of these costs, while benefits averaged $10.70 and accounted for the remaining 31.4 percent. See news release “Employer Costs for Employee Compensation—June 2016,” Bureau of Labor Statistics, September 8, 2016, http://www.bls.gov/news.release/pdf/ecec.pdf (accessed September 21, 2016).

[15] CONSAD Research Corporation, “An Analysis of Reasons for the Disparity in Wages Between Men and Women,” prepared for U.S. Department of Labor, January 12, 2009, http://www.hawaii.edu/religion/courses/Gender_Wage_Gap_Report.pdf (accessed September 21, 2016).

[16] June E. O’Neill “The Disappearing Gender Wage Gap,” National Center for Policy Analysis Brief Analysis No. 766, June 22, 2012, http://www.ncpa.org/pub/ba766 (accessed September 21, 2016).

[17] Ibid.

[18] Basit Zafar, “College Major Choice and the Gender Gap,” Federal Reserve Bank of New York Staff Report No. 364, February 2009, https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr364.pdf (accessed September 21, 2016).

[19] David Lubinski and Camilla Persson Benhow, “Study of Mathematically Precocious Youth After 35 Years,” Perspectives on Psychological Science, Vol. 1, No. 4 (2006), https://my.vanderbilt.edu/smpy/files/2013/02/DoingPsychScience2006.pdf (accessed September 21, 2016).

[20] Bureau of Labor Statistics, “Labor Force Statistics from the Current Population Survey,” May 26, 2016, http://data.bls.gov/pdq/SurveyOutputServlet (accessed May 26, 2016).

[21] Belinda Luscombe, “Workplace Salaries: At Last, Women on Top,” Time, September 1, 2010, http://content.time.com/time/business/article/0,8599,2015274,00.html (accessed September 21, 2016).

[22] Mark J. Perry, “Stunning College Degree Gap: Women Have Earned Almost 10 Million More College Degrees than Men since 1982,” AEIdeas, May 13, 2013, http://www.aei.org/publication/stunning-college-degree-gap-women-have-earned-almost-10-million-more-college-degrees-than-men-since-1982/(accessed September 21, 2016).

[23] Pew Research Center, “Modern Parenthood Roles of Moms and Dads Converge as They Balance Work and Family,” March 14, 2013, http://www.pewsocialtrends.org/files/2013/03/FINAL_modern_parenthood_03-2013.pdf (accessed September 21, 2016).

[24] June E. O’Neill and Dave M. O’Neill, “What Do Wage Differentials Tell Us About Labor Market Discrimination?” NBER Working Paper No.11240, March 2005, http://www.nber.org/papers/w11240.pdf(accessed September 21, 2016).

[25] Romina Boccia “The Unintended Consequences of the Paycheck Fairness Act,” Independent Women’s Forum Position Paper No. 33, November 2010, http://www.iwf.org/files/f769b4c8154411ad2b5c46951ae0abdf.pdf (accessed September 21, 2016).

[26] James Sherk, “Paycheck Fairness Act Unfairly Burdens Employees and Employers,” Heritage Foundation Issue Brief No. 3623, June 5, 2012, http://www.heritage.org/research/reports/2012/06/paycheck-fairness-act-unfairly-burdens-employees-and-employers.

[27] Mallika Thomas, “The Impact of Mandated Maternity Benefits on the Gender Differential in Promotions: Examining the Role of Adverse Selection,” unpublished manuscript, University of Chicago, January 22 2015. http://www.economics.cornell.edu/sites/default/files/files/events/Thomas%20paper.pdf (accessed September 21, 2016).

[28] Norbert J. Michel, ed. The Case Against Dodd–Frank: How the “Consumer Protection” Law Endangers Americans, (Washington, DC: The Heritage Foundation, 2016), http://www.heritage.org/research/reports/2016/04/the-case-against-dodd-frank.

[29] James L. Gattuso and Diane Katz, “Red Tape Rising 2016: Obama Regs Top $100 Billion Annually,” Heritage Foundation Backgrounder No. 3127, May 23, 2016, http://www.heritage.org/research/reports/2016/05/red-tape-rising-2016-obama-regs-top-100-billion-annually.

[30] Salim Furth, “Costly Mistakes: How Bad Policies Raise the Cost of Living,” Heritage Foundation Backgrounder No. 3081, November 23, 2015, http://www.heritage.org/research/reports/2015/11/costly-mistakes-how-bad-policies-raise-the-cost-of-living.

[31] Independent Women’s Forum, “Working for Women: A Modern Agenda for Improving Women’s Lives,” April 2016, http://workingforwomenreport.com/ (accessed September 21, 2016).