Ethics at Work: Explaining the income gap between men and women

The average salary of a woman is about 63% of a man's and even in the higher-paying professions, the gap is more than NIS 3,000 per month.

asher meir 88 (photo credit:)
asher meir 88
(photo credit: )
Saturday is International Women's Day. This date has been observed for about a century, and is mainly devoted to evaluating and promoting the economic and political status of women. Many Israeli papers have used IWD as an opportunity to examine the current status of women in Israel, and "Ethics at Work" will do the same. Most of the reports I saw were devoted to examining the status of women in Israel's economy. There is no doubt that women on the whole have less income and less status than men; the question is how worrisome that is and, in particular, how much is due to unfair discrimination. One agreed-upon fact is that there is a large income gap between men and women. The average salary of a woman is about 63 percent of a man's. Even in the higher-paying professions, the salary gap between men and women is more than NIS 3,000 per month. Women make up only 29% of managers, but 46% of the workforce. Regarding the meaning of these figures, there is a bit of a "dialogue of the deaf." Women's activists point to the salary gap as evidence that women are unfairly disadvantaged in the job market. Many economists have tried to measure bias and found there is little evidence of overt discrimination; they explain away the discrepancy as being due to a variety of innocent causes, which activists view as not innocent at all. The main economic explanation for women's lower wages is that women are in the workforce for less of their life. The official figures say that 51% of women and 61% of men are in the workforce in a given month. However, the fraction who are usually in the workforce is both higher and more equal. The vast majority of both men and women are usually at work; the 51% for women reflects the larger number of women who are temporarily out of the workforce, mostly because they are at home raising children. By the same token, even when women are in the workforce, a much larger number of them are working part-time, for the exact same reason. This impacts the wage figures in a number of ways: It means that women are working fewer hours right now (so there is more equality in hourly wage than in monthly income); the women at any given stage of life have less seniority and experience than the men; it means that women show a strong preference for professions that are easy to return to after an absence of a few years, and these are generally lower-paying professions. What is left is little evidence that equally qualified men and women are getting different salaries. A few months ago we cited research from the US showing that men and women in identical jobs often have different salaries because the women simply are not as stubborn in negotiation. Again, the economist will say, there is no evidence that men and women with equivalent negotiating skills or goals are paid differently. That doesn't mean there are no cases of discrimination against women. Just this week, an Israeli court convicted a security company of discrimination against a woman applicant. It just means that these cases are not the main reason for the large discrepancies we observe. However, this explanation doesn't actually respond to the main argument of women's activists, which is cultural and ideological, not economic. The discrimination against women, in their view, expresses itself precisely in the figures we cited: Women have to curtail their workforce participation to take care of children, while men don't; women are discouraged from being demanding, and men aren't. Discrimination is ended not when each individual boss agrees to pay equal salary to equal candidates, but rather when male and female candidates participate in the workforce as equals - in hours worked, in continuity, in seniority, in assertiveness. Let us apply this insight to subsidized day care, a major policy goal of women's activists. No one denies that quite a few parents decide of their own free will that it is worthwhile for the mother to stay home (or arrive early) rather than either paying for day care or having the father stay home. The women's lobby is not asserting that women are fired from their jobs when they give birth (as in fact used to be common in many countries). Subsidized day care would change the incentives parents face in a way that would change that decision and favor having both parents work. A similar favored incentive is the Swedish policy of automatically giving both parents maternity/paternity leave; thus there is no need to choose which parent will stay home. Viewed this way, the struggle for women's advancement is in many ways an exercise in social engineering rather than a fight for civil rights, as these are traditionally understood. Racial civil rights activists wanted to ensure that a black lawyer and a white lawyer would compete for work on an equal basis. But I don't think it was their goal to ensure that the choice between professions would be the same among blacks and whites. I personally am not a big fan of social engineering. I generally feel that government programs are pretty ineffective at changing people's nature and preferences; these efforts are either futile (because society is not willing to accept the desired change) or superfluous (because society is already on its way to accepting it). In this case, I think there is a little of both: I don't think the average Israeli is convinced that gender roles should be completely equalized. At the same time, the norms of the younger generation are considerably more egalitarian than those of older Israelis, so over time the consciousness change that activists seek is occurring. To illustrate this, I measured the degree of income inequality among men and women in different decades of life. I discovered - not to my surprise - that the inequality among full-time workers was greater for men and women in their 30's than for those in their 20's, and greater for those in their 40's than for those in their 30's. The oldest workers had the greatest inequality of all. Now some of this is no doubt due to the accumulating effect of seniority, but the effect is very striking. While I do not doubt that many women face discrimination at work, I don't think overt discrimination is the main reason for the large income gaps between men and women. These gaps are mostly the result of freely chosen gender roles that give women a greater role and status in the household and men a greater role and status in the outside workplace. I don't see any role for government programs in trying to re-educate the Israeli citizenry toward a more equal division of labor between the sexes. However, I am convinced that even without any outside intervention, younger Israelis are accustomed to a more egalitarian workplace that will persist as these same workers age. ethics-at-work@besr.org Asher Meir is research director at the Business Ethics Center of Jerusalem (www.besr.org), an independent institute in the Jerusalem College of Technology.