An alternative approach to the gender pay gap

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Politics,White House,Barack Obama,Labor,Entitlements,PennAve,Joseph Lawler,Economy,Gender Issues,Income Inequality

President Obama has made it clear that the gender pay gap is at the top of his talking points heading into the months before the midterm elections, but his preferred solution isn't going anywhere, even as alternatives that might be viable go unexplored.

The White House has offered two actions aimed at shrinking the gender gap: Pushing for Congress to pass the Paycheck Fairness Act, and executive orders Obama signed that will prohibit federal contractors from retaliating against workers who discuss their salaries and force those contractors to report data on compensation paid to their employees by race and sex.

Through public statements and social media, the White House has promoted those measures as ways to ameliorate sex-based pay discrimination — which it says results in women being paid 77 cents for every dollar men make.

Experts have challenged that particular number, which is a simple comparison in the Census Bureau data between the median earnings of men and women who work full time, year round. It likely represents different career choices made by the sexes. Controlling for the differences between men and women in hours worked and occupation significantly narrows the gap.

The Obama administration attributes all of the gap to discrimination, when other factors are also in play. For instance, men are more likely to work dangerous jobs that come with risk compensation.

Obama’s approach is to make it easier for workers who are victims of sex discrimination to seek damages. The Paycheck Fairness Act would update the 1963 Equal Pay Act, which made explicit sex discrimination in compensation illegal, by broadening the scope of actionable offenses and increasing the penalties for employers who committed them.

The Paycheck Fairness Act isn’t likely to pass the Republican-led House anytime soon. That is a fact that Obama and the Democrats plan to exploit in the midterm elections, as they seek to press their electoral advantage among women.

But there are alternatives to updating discrimination law in addressing the remaining unexplained portion of the gender gap, which has already fallen steeply over recent decades.

One such alternative was laid out by Harvard labor professor Claudia Goldin in a speech given to the American Economics Association in early January.

in that address, Goldin said that “the gender gap in pay would be considerably reduced and might even vanish if firms did not have an incentive to disproportionately reward individuals who worked long hours and who worked particular hours.”

She concluded that, especially for women, who are more likely to take time off work to care for children, “a flexible schedule comes at a high price, particularly in the corporate, finance and legal worlds.”

Goldin’s proposal for closing the gender gap, accordingly, was to promote work flexibility among U.S. businesses, although she didn't specify how to do that.

That recommendation dovetails neatly with one made by Obama’s own Council of Economic Advisers in 2010.

in a study titled “Work-Life Balance and the Economics of Workplace Flexibility,” the council noted that “children are increasingly raised in households in which all parents work,” straining families' schedules. The report concluded that “the best available evidence suggests that encouraging more firms to consider adopting flexible practices can potentially boost productivity, improve morale, and benefit the U.S. economy.”

The CEA assembled evidence that employees of companies with work flexibility are “happier, healthier and more likely to remain” in the firm, and that that those companies often gain financially from introducing flexibility policies.

Since that report was issued, the main survey of businesses it drew from was updated, namely the National Study of Employers funded by the Alfred P. Sloan Foundation.

The 2012 version of the National Study of Employeres found that over the past seven years, work flexibility has improved in a number of ways: The share of employers that offer flex time (from 66 percent to 77 percent), flex place (from 34 percent to 63 percent), choices in managing time (from 78 percent to 93 percent), and daily time off when important needs arise (from 77 percent to 87 percent) have all risen.

The bad news is that the number of employers allowing workers to move to part-time status and then back to full-time and accommodating career breaks for family responsibilities has fallen.

But on the whole, the labor market is moving in the direction of flexibility that Goldin recommends as the antidote to disadvantages women face in pursuing careers.

Whether legislation can accelerate the process is another question. Last year, House Republicans passed a bill, the Working Families Flexibility Act of 2013, that they said would allow companies to offer all people who worked overtime to choose time off from work rather than added pay.

Liberals objected to the bill, however, however, and President Obama threatened a veto. The AFL-CIO labor federation described the measure as “just another attempt by Republicans to get rid of paid overtime.”

Increased work flexibility remains for now just a private-sector pursuit.

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Joseph Lawler

Economics Writer
The Washington Examiner