Flexible work hours may be the key to solving wage gaps

A paper from the American Economic Review thinks it has some more insight into the cause of the gender wage gap. It’s not sexism, employer discrimination, or really even children. It’s the flexibility (or lack there of) of work hours.

The converging roles of men and women are among the grandest advances in society and the economy in the last century. These aspects of the grand gender convergence are figurative chapters in a history of gender roles. But what must the “last” chapter contain for there to be equality in the labor market? The answer may come as a surprise. The solution does not (necessarily) have to involve government intervention and it need not make men more responsible in the home (although that wouldn’t hurt). But it must involve changes in the labor market, especially how jobs are structured and remunerated to enhance temporal flexibility. The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours. Such change has taken off in various sectors, such as technology, science, and health, but is less apparent in the corporate, financial, and legal worlds. [Emphasis mine.]

The data from this paper is fascinating, and challenges quite a few pre-conceived notions we have about women in the work place. For example, we often think of jobs in the sciences, medicine and maths as being most off-limits to women, but in fact, women make up roughly half of today’s medical graduate enrolments, and actually women lead men in study areas including biological sciences, optometry, and pharmacy.

What’s even more interesting is that the gender pay gap is at its lowest in the tech and science industries. The gap begins to widen when you look at the health industry, and it spikes when you look at the business industry.

The paper, “A Grand Gender Convergence: Its Last Chapter” argues that this is because the tech and science industries are more suited to flexible work hours, presumably because the quality of one's work output is based on results; whereas the business industry demands the constant slog of long work hours and 'face-time' - things which their clients have come to expect, and things that can be much harder for women to do if they are trying to manage both a family and a job at the same time. Claudia Goldin, author of the report, notes "a flexible schedule often comes at a high price, particularly in the corporate, financial, and legal worlds...there will always be 24/7 positions with on-call, all-the-time employees and managers, including many CEOs, trial lawyers, merger-and-acquisition bankers, surgeons, and the US Secretary of State. But, that said, the list of positions that can be changed is considerable."

Workplace culture has been changing for years– jeans, pets, and company-sponsored Red Bull fridges are becoming widely established. A move towards flexible hours is becoming more relevant too, especially in some of the most innovative industries. Perhaps our best bet to solving wage gap issues is to encourage employers to adopt more flexibility (for both men and women) in the many industries that could suit, and even benefit, from it.

Economic Nonsense: 20. Only government intervention can address the gender pay gap

There was a gender pay gap when the work required physical strength. This is because men are, on average, physically stronger than women. They are more capable of hauling a plough or heaving a sack of coal. When work meant physical labour for the most part, men were economically worth more. They were not intrinsically worth more, it was just that, on average, their labour could add more value than that of a woman. They were paid higher wages because of this. As physical labour has been made easier by machines, and desk jobs and service industries have become more significant employers than heavy industry, the labour of women has been more equal to that of men, and their pay has risen accordingly. In Britain today there is no significant gender pay gap. Women in their 20s earn a little more than their male counterparts.

There is a pay gap as they grow older, but this is a maternity pay gap, not a gender pay gap. Women who take time out of their careers to have and raise children earn less over the years than those who do not. This is for most of them an option they have chosen to exercise. Most do it because they want to, trading the higher salary that might otherwise result for the greater satisfaction and happiness engendered by starting a family. As they take time out of work, they mount the promotion ladder more slowly than their counterparts who make uninterrupted progress.

It is very important when looking at the statistics on this to compare like with like, that is to compare full-time employment with full-time employment. Some women prefer part time jobs because they offer better opportunities to achieve the balance between work and family that they seek. Part time jobs tend to pay less than full time employment, creating the erroneous impression that women are being paid less for the same type of work and the same amount of it. They have chosen a lifestyle that pays less because they prefer to have children be a part of it.

So who did cook Adam Smith's dinner then?

The portrait of Adam Smith’s mother above has been published here with the kind permission of her owner Rory Cunningham

Much excitement over in Grauniadland as a new book comes out talking about why that economically rational man so beloved of us neoliberals could not ever be the economically rational woman. Because, you know, women do all that caring and cleaning and stuff for love, not for reasons of calculated rational self-interest:

But a polemical and entertaining new book by journalist Katrine Marçal suggests that Economic Man has another major shortcoming: he’s not, and never could be, a woman.

Hmm. The book's blurb says:

It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest When Adam Smith wrote that all our actions stem from self-interest and the world turns because of financial gain he brought to life 'economic man'. Selfish and cynical, economic man has dominated our thinking ever since and his influence has spread from the market to how we shop, work and date. But every night Adam Smith's mother served him his dinner, not out of self-interest but out of love. Today, our economics focuses on self-interest and excludes all other motivations. It disregards the unpaid work of mothering, caring, cleaning and cooking. It insists that if women are paid less, then that's because their labour is worth less - how could it be otherwise? Economics has told us a story about how the world works and we have swallowed it, hook, line and sinker. Now it's time to change the story. In this courageous look at the mess we're in, Katrine Marcal tackles the biggest myth of our time and invites us to kick out economic man once and for all.

The contention is entirely poppycock of course. For we can only make sense of gender roles and how they have changed within that very concept of economic rationality. The work of Gary Becker explores this world, where the decision to form a family for example, is explained in those rational economic terms. In a world reliant upon human muscle power to feed itself (ie, all of history until the tractor) there was obviously going to be a gender divide in who did what. And as the biologists tell us it really does take two to raise a family (historically one agricultural labourer could produce enough in a year to feed 1.7 to 2.3 people in total). So many other things about men and women only make sense if there is a division of labour (as Smith repeatedly pointed out, this is the basis of wealth creation) and trade in the subsequent produce. "Hunter Gatherer" as a decription of pre-agriculture societies is in itself a gender distinction of roles on the grounds of comparative advantage (which is all about David Ricardo).

We might also look at the work of Amartya Sen and Joe Stiglitz on the Sarkozy Commission. One of the questions they considered is what is the economic value of that unpaid household production that women tend to do? Given that it is undifferentiated labour (while there is that gender divide the specialisation and division rarely extends beyond two people) then it should be valued at the undifferentiated labour rate: minimum wage.

So two of the founding figures of economics address exactly this point, Smith and Ricardo, three Nobel Laureates point out the implications and then some journalist comes along to shout that of course economic rationality doesn't apply to women?

Yes, we'll probably file that under poppycock.

Quite apart from anything else it's impossible to explain the changes in society in the past century without using that structure of economic rationality. Why have fertility levels fallen so much? Because children now generally survive into adulthood, the name of the game is to have grandchildren, thus one needs fewer children to have them. Why have male happiness rates stayed largely static while female ones have fallen as they gain ever more choice over their lives? Because having more choices means that the opportunity cost of making any single one of them rises. Why have female paid working hours risen? Because automation has meant that the gender division of labour based upon muscle power is no longer useful.

You simply cannot explain this modern world without that assumption that we're all, men and women together, acting as economically rational beings to at least some extent. For, as Marx pointed out, the level of technology determines social relations: the inventions of the reasonable cooker, the microwave, the vacuum cleaner, the washing machine, the steam iron and so on quite killed off the servant class just as one example.

Sorry, but the concept that there's a male world which is economically rational and a female one that isn't is simply poppycock. Otherwise we wouldn't be in a world where one female journalist writes about a book by another one instead of them both being tied to the domestic treadmill in that game of producing grandchildren.

Non-discrimination laws matter least in helping women advance

On January 12^th, the International Labour Organization – a specialized agency of the United Nations – published its global report “Gaining Momentum: Women in Business and Management.” The report -

looks at the most recent statistics and information at a global level, and provides a unique insight into the experiences, realities and views of companies in developing countries.

It aims to create greater understanding of the barriers to women’s advancement in business and management. It points to possible ways of tackling the issue, highlighting good practices among private sector businesses and organizations that represent them.

Unlike a lot of reports that focus on the underrepresentation of women in the workforce, the ILO’s puts a refreshing emphasis on facts and figures, rather than resting on the assumption that all inequality comes down to inherent sexism on the part of male employers.

The data it compiles provides a huge range of insight into the state of female involvement in different areas of public life - exploring why less than 5 percent of CEOs are women while also explaining how a third of the world's enterprises have come to be run by women.

But the most telling table in the report looks at "company respondents to the ILO company survey conducted across developing regions" who "ranked what they considered the most significant barriers in order of priority" to women's leadership and promotion:

It will be surprising (dare I say frustrating) for many people to learn that the top two ranked barriers to women's leadership had everything to do with traditional views of women in society and the their role in the family unit, and nothing to do with employer discrimination (inherent gender bias ranks 12th on the list!).

It often seems in western society that radical gender equality advocates want the reason for gender inequalities - especially in the workforce - to be sexism. To be honest, I'm somewhat sympathetic to what, I assume, is their reasoning. If inequality in the workforce is mainly driven by something as awful as sexism, then we can shout about it, legislate against it, demand board quotas, demand companies publicise payroll figures according to gender. Combined, we can legislate and ban the discrimination away.

But this just isn't the case: all regions in the ILO's survey, "identified inadequate labour and non-discrimination laws as the least significant barrier" to women leadership and promotion. (Bolded is my emphasis.)

In places like the UK, gender inequality has very little to do with male bias - after all, women in full-time work aged between 22 - 39 are now, on average, are earning 1.1 percent more than their male counterparts. The reality is that women's life choices are determining how far they succeed in their career, including the kind of degree they pursue, when and how they go about having kids, and how long they spend out of the work force.

We shouldn't harp or judge women for the choices they decide to make - different people have different priorities, and that's okay - but if we want to attack the institutionalised sexism that still exists in our culture today, it would be far more productive to target the teaching, training, and conditioning of women to become 'mothers and wives' than to go after the employers who, based on all recent evidence, seem to be giving women an equal and fair shot at having a career.

That's a big ask, I know. Solving sexism by reforming ourselves and our traditions will be a big change from legislating things.

Ease up on Assisted Reproductive Technologies to close the gender wage gap

Of course, there is debate over whether the gender wage-gap exists or not. I, for one, believe it does exist but that the answer does not lie in legislating protection for maternal (or even paternal) leave. Charlotte Bowyer wrote about how firms such as Apple and Facebook have begun to offer female employees the opportunity to freeze their eggs (so that they can delay pregnancy until later in their career). One reason for the gender wage-gap is that women in modern society most often face the dilemma of having children earlier and potentially jeopardising career progress or having children much later and hopefully advancing their career. Each option has its pros and cons but neither is particularly appealing for many women. It’s a choice between probable fertility, children and significantly lower pay or probable infertility, childlessness and career success. Unsurprisingly, a sizeable proportion of women opt for the former and this means that the gender wage-gap persists (of course, econometricians can make it disappear using a bunch of control variables and certain methodologies).

Assisted Reproductive Technologies (ART) helps alleviate the situation for many women. Sure, they don’t provide what many might currentlyconsider a ‘natural’ conception, pregnancy or birth (as contemporary social perceptions depict them) but it does mean that there is an alternative to women being constrained one way or another.

Some Assisted Reproductive Technologies are completely unregulated, some are loosely regulated and some are definitely quite heavily regulated. For example, in certain jurisdictions where forms of ART is available, laws stipulate that only heterosexual couples (as opposed to say, a homosexual couple or a single person) can use these technologies. Such a restriction means that marriage is a pre-requisite for ART; again, however, this constrains her. We need to completely abolish restrictions like these (which exhibit a clear, conservative bias) in order for ART to be an effective means by which the biological causes of gender wage-gap persistence are overcome.

More importantly, we should ensure that the current freedom of access to ART is defended against misinformed, prejudiced zealots. This ensures not only that people have more freedom to choose but also partially addresses the social inequity and labour market outcome inequity arising from biological gender-inequality via the technological innovation that a relatively free market makes possible.

As we've been saying, there isn't really a gender pay gap

But there is a motherhood pay gap. Interesting research:

Studies from countries with laws against discrimination on the basis of sexual orientation suggest that gay and lesbian employees report more incidents of harassment and are more likely to report experiencing unfair treatment in the labor market than are heterosexual employees. Gay men are found to earn less than comparably skilled and experienced heterosexual men. For lesbians, the patterns are ambiguous: in some countries they have been found to earn less than their heterosexual counterparts, while in others they earn the same or more.

The results for the UK are that gay men earn less than hetero, lesbians more than hetero women. In fact, lesbians earn around what men do and gay men earn around what hetero women do.

We could, as this report does, speculate about societal standards, the idea that lesbian women have, in some manner, "male traits" which lead to that higher pay.

A much simpler observation of the evidence would be the influence of children. We know that fathers earn more than non-fathers among hetero men (yes, even after adjusting for age and education etc). Also that mothers earn less than non-mothers. Gay men tend not to be fathers (this is not being categorical of course, "tend") as lesbians tend not to be mothers.

If the so-called gender pay gap were simply the influence of children upon earning patterns, as we largely think it is, then we would expect to see what we do see when looking at the earnings of non-hetero society. This does not prove we are correct of course, but it is supportive of our view.

Can we stop talking about the alleged 'gender wage gap' now?

Many are boasting good news on the ‘gender wage gap’—I agree, it’s great news: the Office for National Statistics’ findings offer more proof that wage gaps have very little to do with gender, and much more to do with choices each gender is prone to make. From the BBC:

The average full-time pay gap between men and women is at its narrowest since comparative records began in 1997, official figures show.

The difference stood at 9.4% in April compared with 10% a year earlier, the Office for National Statistics (ONS) said, a gap of about £100 a week.

This as well:

Hourly earnings figures reveal that, in April 2014, women working for more than 30 hours a week were actually paid 1.1% more than men in the 22 to 29 age bracket and, for the first time were also paid more in the 30 to 39 age bracket…

…The government said that, from next year, it was extending the rights for shared parental leave. It had also invested in training and mentoring for women to move into higher skilled, higher paid jobs, and guidance to women looking to compare their salaries with male counterparts.

Women, from the start of their careers, are now earning a higher salary than men; and, if they choose to make the decision to stay in the work force, they are more likely to be promoted than their male counterparts as well.The real gap, it seems, is not between women and men, but between mothers and child-less women. Leaving a job early on in one's career or for an extended period of time to have children will impact a women’s salary when she returns to the work force.

As this is the case, I think the government is probably right to extend rights for shared parental leave (though the money put into training will surely be a waste; women who are ambitious and attracted to careers in science, business, and formerly male-dominated sectors aren’t having much trouble pursuing them). But anything legislated from the top-down can only go so far to change cultural opinions that have been in place for centuries about the role of women and the household.

In reality, women’s choice in their private and home lives will be the greatest determinate as to what further changes we see in wage gaps. It seems there's evidence that good economic climates actually lead more women to stay at home with their kids rather to go out and get jobs - at the same time, we are witnessing an increase in stay-at-home-dads, which, most likely, has multiple reasoning to it: more women are demanding to work, and more men feel comfortable making the choice to stay home.

Either way, it seems there is no obvious discrimination between men and women when they enter the work place; as far the element of motherhood is concerned, we should be less focused on the numbers and far more focused on ensuring that women are not being socially pressured, either way, to make any decision that is not completely their own.

The problem with low pay

The Resolution Foundation tells us that there's some great big problem with low pay in the UK. Looking at their actual statistics though it's difficult to see what the problem is. Of course, everyone would like more money for whatever it is that they do. But what keeps people in those low pay jobs seems to be that people opt to stay in those low pay jobs. Only one in four low earners has managed to permanently escape the prison of low pay in the past decade, according to a major study published today.

The Resolution Foundation think tank uncovered the most graphic evidence to date of the scourge of in-work poverty, in which millions working part-time, in sales jobs and the hospitality industry, cannot move up the income ladder. Fewer than one in five people working in restaurants, pubs, takeaways and catering left low pay for good in the past 10 years.

A scourge, eh? Well, that's what the Independent says. The report itself is a bit more measured.

And what they mention, but don't emphasise, is the interesting stuff. For example, many on low pay actively decline to take promotions that will earn them more:

Part of the reason that many of these people who are usually in employment do not progress may be to do with the limited appeal of moving into positions of greater responsibility. The limited pay increases received for moving from an entry-level position to a supervisory role were often as little as 30p or 40p extra an hour. When weighed against the additional stress which comes with the role and the hassle of rearranging their work-life balance, for many people progression may not appeal.

They also find that those who stay in low pay over the long term tend to be single mothers and a number of people who are only in the workforce intermittently. And, of course, given that part time pay is generally lower than full time pay per hour the low paid (defined as those on less than two thirds of median hourly wage) are predominantly those working part time.

When we add all of that together, what do we see? The intermittency will at least in part be women leaving the workforce to have children. Single mothers are obviously balancing that work life balance, and the most common, we would think, reason for not taking a promotion that disrupts that work life balance would be the need to take care of children. And, of course, there's many more women working part time than there are men for exactly the same reason.

It's entirely true that it's not in fact necessary for women to do the bulk of the childcare but that is the way our society generally works. So, we find women with children concentrated in those part time areas, not taking promotions, dropping in and out of the workforce as further children arrive. And thus earning low pay as these are the very things that seem to identify those who stay on low pay.

In other words the Resolution folks have simply found the flip side of the gender pay gap in the UK. That there isn't one but there is a motherhood pay gap. Women with children generally earn less than men or women without children. It's not a great stretch to move from that to the idea that women with children will be predominant among the low paid. And while they don't emphasise this this is the rough outline of their finding.

And the point is that, despite everyone wanting more money for their labours, this is a result of the choices of those individuals. There's a series of trade offs there, responsibility for higher pay, more rigid hours for higher pay, longer hours for higher pay and so on. And people are deciding which they prefer. Which ain't the higher pay.

And, given that it's all a result of individual choices there's really nothing that we should be trying to do about it.

There is no such thing as a gender pay gap

Actually, there is a gender pay gap, but the entirety of it is determined by 'legitimate' factors—things which make men's and women's labour different. As well as women having jobs they rate as more pleasant, and jobs that are objectively less risky, as well as doing more part-time work, women leave the labour market during crucial years, setting them substantially back in labour market terms. That is, the gap comes down to women's choices.

This is not necessarily a bad thing, since childcare seems to contribute to mothers' well-being and happiness, and looking after children is certainly not an unimportant task. But it implies that, whether or not society as a whole, through schools, culture, upbringing and so on, is the reason women do most of the labour in the home and in child rearing, firms are not discriminating against women.

Two new papers add to the formidable base of evidence for this conclusion. In "The Gender Pay Gap Across Countries: A Human Capital Approach", authors Solomon W. Polachek and Jun Xiang take a lifetime labour supply approach. They find that the wage gap increases with women's fertility, the size of the average age gap between men and women at marriage, and the top marginal tax rate, all things which affect women's total labour supply over their lives and at crucial points. (It decreases with the prevalence of collective bargaining).

An even more interesting approach came in "Fertility Effects on Female Labor Supply: IV Evidence from IVF Treatments" by Petter Lundborg, Erik Plug and Astrid Würtz Rasmussen. To abstract from the possibility that women who decide to have kids have systematically different characteristics affecting what kind of career they'd have, they look at those who try to have children via In-Vitro Fertilisation (IVF):

This paper introduces a new IV strategy based on IVF induced fertility variation in childless  families to estimate the causal effect of having children on female labor supply using IVF  treated women in Denmark. Because observed chances of IVF success do not depend on labor market histories, IVF treatment success provides a plausible instrument for childbearing. Our IV estimates indicate that fertility effects are: (a) negative, large and long lasting; (b) much stronger at the extensive margin than at the intensive margin; and (c) similar for mothers, not treated with IVF, which suggests that IVF findings have a wider generalizability.

The results are pretty clear. Women are on a steady upward trajectory, likely in line with comparable men (as seen in previous studies). They then decide to take time out to have and raise children, and never make it back to their previous trend-line, perhaps moving to more flexible work or less demanding jobs. Even those who go back to similar careers are far behind in experience and have to catch up with movements they have missed.

So, while there might be such thing as a gender wage gap, the alternative is completely changing how children are raised in society, and while this would certainly have the potential to raise measured output, it may not necessarily raise total social welfare.

David Cameron vs feminism

Today there was a minor kerfuffle about the Prime Minister’s refusal to wear a t-shirt that says “This is what a feminist looks like” after Elle, a women’s magazine, asked him to do so for a marketing campaign. Elle had a go at Cameron, saying that “It should be simple. Do you believe that men and women are equal? Do you believe men and women should have the same rights? The same opportunities? Yes? Then you are a feminist.”

Well, that sounds pretty reasonable! I don’t see how anyone could object to that. But the plot thickens later on. All these unobjectionable, bland claims apparently relate to quite specific public policy issues, like unequal pay and political representation for women. According to Elle, we need feminism because "for every £1 a man earns in the UK, a woman earns 80p. Women make up only 35% of senior managers in the UK and an estimated 30,000 women a year lose their jobs as a result of pregnancy-related discrimination. In politics, fewer than one in four MPs is a woman, and there are only five women in the cabinet out of 22 ministers".

In other words, we need feminism so we can do something about very specific issues (presumably in specific ways, since the Fawcett Society is involved which has specific policies to address all these things).

This sounds to me like a ‘motte and bailey’ argument. Scott Alexander explains in more detail in part two of this excellent essay here (if you have the time, read that, not this). The name come from medieval times, when a ‘motte’ was a defensible castle surrounded by a profitable village called the ‘bailey’. Everyone would work out in the bailey until they got attacked and had to retreat to the safety of the motte.

A motte and bailey argument starts off by defining itself in very defensible way. “Feminism means thinking that men and women should be treated equally.” That’s the safe, defensible motte.

It then extends that reasonable-seeming claim to all sorts of controversial claims – unequal political representation demands all-women shortlists; unequal pay demands more invasive laws to equalise pay between men and women. That’s the bailey where the actual (political or cultural) advancements can be made.

Let’s say you attack the bailey by saying that you're not a feminist because you think the policies advocated by feminists are bad, or the problems they identify are not even problems at all. Maybe you find, as Ben recently has, that “if you control for background (i.e. skills and talent) and exit (i.e. women staying in the workforce) women earn more than men and get more aggressively promoted than men”, which implies that the claims made by feminists about unequal pay needing new laws are simply incorrect.

Feminism may also be wrong about many other things, such as claims about men and women’s brains being biologically the same or the pervasiveness of a ‘rape culture’. These are substantive elements of what feminists define as feminism, and they may be right or wrong. It’s legitimate (albeit quite possibly mistaken) to think these claims are wrong, and hence to decline to wear a 'This is what a feminist looks like' t-shirt.

But do that and many feminists will retreat into the defensible motte, as Elle have today. David Cameron doesn’t think men and women should be equal! David Cameron doesn’t think men and women should have the same rights! Feminism is very simple!

This is dishonest and manipulative. And an open society requires honesty in political discourse. David Cameron is often accused of pandering to fashion. He deserves credit for refusing to do so this time.