Tuesday 23 August 2016 6:15 pm

Forget discrimination: The gender pay gap is driven by our (free) choices

The IFS is an excellent think tank but its latest paper adds nothing to the debate. It’s on the gender pay gap, which it slices in various ways, but none of these slices tells us anything new about discrimination in the workplace.

The gender pay gap is actually driven by choices men and women make, and although we cannot be exactly sure whether these choices are free, some evidence suggests they are.

According to the ONS, men working full-time earn about 9 per cent more per hour than women; among part-timers women earn about 6 per cent more. But these figures don’t control for occupation or rank: once those are taken into account, the gap is usually measured as zero. The question is whether women’s presence in lower-paying occupations is down to their choices or down to “structural discrimination”, nebulous but powerful social forces pushing women into different roles in society.

The IFS nicely re-states the known facts about lower pay for women. For example, it shows how, if you look at weekly pay, women’s earnings are 36 per cent lower on average, but the gap shrinks to 19 per cent for hourly wages, 16 per cent for hourly wages among those working 20+ hours a week, 10 per cent among the childless, and 6 per cent for young people.

The first adjustment is obvious. The second comes because part-time workers can handle fewer bulky continuous projects and are often thereby less valuable to firms. Workers with kids are often less attached to the firm and may take absences or flexible hours. The IFS goes on to control for birth cohort – because discrimination was more explicit in previous generations – and overall educational levels – although in recent years women have actually earned more qualifications than men.

These controls are useful, but they are far from the full story. Some jobs are seen as very satisfying, rewarding and safe (like education or medicine), whereas others are seen as unpleasant or risky (like oil-rigging, logging, fishing or banking).

For both genders, choosing more flexible or shorter hours, or a career path with more safety and less risk, is associated with lower pay. Women sort more into jobs and occupations that pay less – women who never exit the workforce seem to get more aggressively paid and promoted than men. This explains the gender pay gap.

But it’s possible that women don’t actually value shorter hours, flexibility, less risk or more pleasant jobs. It might be that they are subtly but inexorably pushed into these jobs, not just by socialisation – toys, books, and the association of women with certain professions – but also by social pressure. Maybe women face snide comments, isolation, and stigmatisation if they focus single-mindedly on the pursuit of larger bank balances and greater status.

I think this is very plausible. But some evidence – gathered by actually going to the source and asking women – suggests the choice is at least partly that: a choice.

One study took two cohorts in the top 1 per cent of mathematical ability, identified as teens, 1,600 in all. When asked in 2006, in their middle ages, what they wanted from their jobs, the top three answers for men were “high pay”, “risky work” and “merit pay”. The top three answers for women were “working no more than 60 hours a week”, “working no more than 50 hours a week” and “working no more than 40 hours a week”. The results were as you might have predicted, but when asked how happy or satisfied with their life and career they were, these talented men and women gave equally high answers.

Another way of working out the answer is to look at the difference between more and less sexually egalitarian countries. Gender equality is not perfect in Sweden, Denmark, Finland and Germany but it’s still rather different there to how it is in Russia, Japan, Indonesia or the UAE.

Perhaps surprisingly, research finds that differences between men and women are often bigger in more equal countries: the sexes choose more different degree courses; more different jobs; and measure as having more different personality traits.

Of course the debate over nature and nurture in sex differences is far from over, and there are alternative explanations for the findings I note. But what should be over is the question of whether firms discriminate in the marketplace. The answer is a resounding “no”: firms pay groups lower wages when – and only when – those groups are less productive due to features of their career trajectory.

Perhaps we should consider trying to change those different trajectories, for example by making childcare cheaper. But we cannot conclude anything new from the IFS’s numbers.