Stephen Kinsella: What explains the gender pay gap?

There are around 4.76 million people in the Republic of Ireland. More of them are women than men. In fact, around 53,000 more. On average, it is true, women live longer and, when they enter the labour market, earn less.

There is a gender pay gap. It is the difference between the gross hourly earnings of all working men and those of all working women.

Across the EU and across all sectors, women earn on average 16 per cent less than men. Put another way: across the EU, women work around two months a year for free. The gap gets worse with age. It is pretty small when men and women are in their twenties, around 6 per cent. It widens to around 20 per cent as the two groups move into their thirties.

The chart shows how Ireland compares to our European counterparts. It shows the difference between the average hourly earnings of male and female employees as a percentage of male earnings. This should be down at plus or minus 2 or 3 per cent. Instead, for some countries like Estonia, it is 27 per cent.

In Ireland, the gender pay gap is around 14 per cent. Here, women do more unpaid work, while men do more paid work. Women take state-supported career breaks in their late twenties and early thirties. They also take breaks to care for older relatives. These breaks have consequences.

Blau and Kahn’s research shows that career breaks impact on women’s earnings for the rest of their lives. They earn less than men now, and later. Their pensions, if they have them, are lower again. Gender matters come bonus time. A 2016 McKinsey report surveyed 5,000 people and found the average male bonus was €6,000. The average female bonus? €3,000.

Austerity hit women harder than it hit men. Women were on part-time contracts, and more dependent on state transfers like child benefit. The figure shows the changes in gender difference in the “at risk of poverty” rate for 2008−2011. Women were much more likely to fall into poverty than men.

When it comes to bargaining for higher salaries, men beat women hands down. Card, Cardoso and Kline looked at Portuguese data on incomes, job types and bonuses. They found women were less likely to work at firms that paid higher premiums to either gender. They got only 90 per cent of the firm-specific pay premiums earned by men. This affected low- and middle-skilled workers. That is, women didn’t apply for the higher-up jobs to be eligible for the larger salaries.

Why is there a gender pay gap?

There are three main arguments explaining why this gap exists. One is that women are different to men. They are less ambitious in education and in the workplace. They want to spend their time making homes, having children and tending to society. That’s why we see a larger proportion of women doing part-time jobs, and so getting paid less.

This argument no longer holds any water. First, women actually earn less per hour than their part-time male equivalents. If the ‘difference’ argument were true, you’d expect the opposite. Second, women are now over-represented, not under-represented, in education across Europe. About 60 per cent of those with third level degrees across Europe are women. Third, if women were different to men, we would not see the decadal decline in the gap between women and men. Over time, the gender pay gap has fallen. In the 1940s, it was around 40 per cent. By the 1980s, 30 per cent. By the 2000s, 24 per cent. It is now around 14 per cent.

The deficit model

The second argument is that women are ‘men minus’. Women have child-bearing and caring duties, and lack political resources or power. This produces a ‘deficit model’ in labour market policy. The state produces policies like child benefit payments, maternity leave and free childcare. These policies help close the gap.

The private sector implores women to ‘lean in’. It provides mentoring and courses in things like ‘gravitas’ (no, really). The idea is to help women act more like men by compensating for those features which aren’t man-like.

The deficit model argues the gender pay gap needs to be ‘controlled’. You ‘control’ the gender pay gap by affecting things like education, job type, number of children, and so forth. You do can this using a statistical technique if you have survey data on wages by sex. When you do, the wage gap narrows, and you see which elements contribute to the wage gap the most. You can then aim policies at them.

An example: let’s say you see educational attainment as the key factor holding women’s pay down. (It isn’t any more, but stay with me.) You will then direct resources to encourage more women into education. Problem solved, deficit eliminated.

Another problem arises, though. No matter how many variables you used to ‘control’ for the gender pay gap, you still see an ‘unexplained’ element. More on that in a bit.

This second ‘deficit model’ argument holds sway across most policy makers in Europe. The solution to the gender pay gap is more taxpayers’ money. The solution is more information, more women as role models, more networks.

This argument doesn’t hold either. Weischselbaumer and Winter-Ebmer did a huge survey of 263 gender gap papers. The papers they studied were from the 1960s to the present day. They found gender wage gaps falling over time. They wrote: “This decline is almost entirely due to an equalisation of productive characteristics: females have become better educated and trained.”

Education has helped to solve the gender gap problem. But it is still there, and it is still significant. The fall was but the ‘unexplained’ part of each attempt to ‘control’ for the gender pay gap stayed the same size. What does that mean?

If you put in place policies to completely solve the gaps in education, child-rearing, job type and so on, there will still be a gap in earnings. What explains this gap? It’s not inherently ‘female’ characteristics. It’s not discrete elements of the system we can improve like education levels or ‘leaning in’.

It’s the structure of the system itself. To end the gender pay gap, you have to change the system. Following a deficit model implies that you will never, ever get the gap to plus or minus 2 or 3 per cent. These expensive policies will fail. Women will be poorer now, and poorer tomorrow.

It’s the structure, stupid

The third argument explains the wage gap by examining the structure of the system itself.

An example from higher education. In 2016 I was acting chair of the Higher Education Authority and had the privilege of seeing the National Review of Gender Equality in Irish Higher Education Institutions come together.

The problem is this: 51 per cent of all lecturers (the introductory job level in academia) are women. Only 21 per cent rise to full professor, the highest level. The pattern also holds for Institutes of Technology and Colleges. This is a puzzle. Education levels are the same. There is a defined career structure. There is a regulated HR system.

The ‘rules’ of the academic game are clear. You must publish papers in peer-reviewed, high-quality journals. You must teach well. You must win research funding. You must supervise Master’s and PhD students. You must help administer the university. You would imagine, given all this, that gender parity would be the norm. In fact a massive discrepancy exists.

It turns out the higher education system militates against female academics. How? Sometimes, it is unconscious.

An example. Researchers did an experiment where only the name on the CV was changed. The qualifications and so on, were identical. Result? Participants in the experiments rated male applicants higher than identical female applicants. They were also offered a higher starting salary and more mentoring.

Sometimes, the system works against women. Remember the ‘simple rules’ of academia? Who do you think invented them? Blokes. Old blokes, at that.

Most academics work between 50 and 60 hours per week (I know, you think we’re all on holidays since May - we aren’t. Honest.) Travel is an essential part of the job. The hours are long, and the work is often solitary. If one has to research, teach, write grant applications and be a carer, this can be difficult. Male colleagues experience this too, of course, but the burden of unpaid work tends to fall on women.

We have to change the idea of the ideal academic as someone prepared to give up every aspect of a normal life to be successful. It’s easier to give up “every aspect of a normal life” and live in a lab if someone else is minding the kids and keeping the house from falling down.

Sometimes, the changes required to affect the system are small. Moving meeting times to allow school drops offs allows more women to take part in management roles.

The HEA’s review convinced me of a few things. As a straight, white, able-bodied bloke, I have been playing the academic game on the ‘easy’ setting. It doesn’t mean I haven’t worked hard, it doesn’t mean my accomplishments don’t matter. In fact, it’s not about me at all. People like me designed the system to help people like me succeed. Everyone else who is not like me has been playing the same game, but on a harder setting. It is not that the goals are the same and I’m better and thus I get promoted. It’s that people like me decided what the goals should be in the first place.

The outcome is ‘gendered’ before the game starts. The goal has to be to change the goals. This is why you see so much pushback online from ‘broflakes’ carping that their ‘rights’ are being stolen. Of course it feels like theft if the difficulty setting on the game you have been playing and winning at goes up.

Of course it feels like theft if the barriers to women doing as well as men get removed. Competition has increased. Broflakes argue that less qualified women will get promoted out of ‘political correctness’ if we change the system. But by definition, this won’t happen if the goals of the system get changed.

And they won’t change unless those in power will it. The new Minister of State with responsibility for higher education, Mary Mitchell O’Connor, has announced a taskforce on gender equality. There is no need for this taskforce. Read the HEA review. Put in place its recommendations.

Higher education was one example. Generally, the outcomes of the system are skewed towards men. Transparency when it comes to pay by gender is the first step. Ireland has very poor gender statistics, and it should be the private sector that leads. Research shows the gender pay gap is an outcome of the structure of the system. It can’t be a HR issue: it has to be an issue that the leadership of every organisation takes on.

The IMF’s Sheila Quinn looked at the impact of national budgets by gender. Guess what? Budgets have different impacts on you depending on your gender. The world leader here is Austria. Every law and every policy now has a gender impact assessment. Sometimes this produces odd outcomes, because gender doesn’t mean ‘women’. Some policies have impacts that favour women over men, and so get tossed. Gender-proofing Budget 2019 is a realistic goal.

Gender quotas make sense when you think of them as pushing against the system. New research by Timothy Besley and colleagues showed that gender quotas improved the quality of Swedish male politicians, because rubbish ones just didn’t get elected. That’s a structural change we’d all like to see.

The economic importance of the structural argument centres around excellence. We assume people get rewarded for their productivity. If we don’t change the system, excellent women will not see their excellence rewarded. The economy will not reach its potential. That is unacceptable.