Less Recognized Reasons For the Gender Pay Gap

Sometimes economics can be “logical but totally insane.”

Former Treasury Secretary Lawrence Summers recognized the insane part when he apologized for suggesting that the developing world was the best place for polluters. Thinking economically, he knew the opportunity cost would be minimized if lives with less future earnings were sacrificed. However, as he quickly realized, his economic logic lacked wisdom.

Where are we going? To economic wisdom and the gender pay gap.

The Gender Pay Gap

Asked about the gender pay gap you could say 81 cents in 2016. But it is more complicated than a median (middle) number. We would also have to point out that as women age, the pay gap widens. And it gets even more complex when we look at different occupations. Jobs with long, inconsistent hours and unpredictable client and co-worker contact have the bigger gap. Add to that specific projects and strict deadlines and you get higher paying jobs to which men gravitate and women avoid. Others that have more flexibility tend to have less of a pay gap.

No matter what the job though, there is one common denominator. Marriage. Even when they do not have children, married women tend to have more responsibilities at home. Because of those obligations, women work fewer hours, take more time off, and need jobs with flexibility.

So, we have a pay gap just waiting to kick in. To be activated, it only needs a typical household and a typical workplace. The solution? As economist Claudia Goldin recently said, “Equality…requires a level playing field at home and in the market.”

Our Bottom Line: Differentiating Economic Logic and Economic Wisdom

Our little Lawrence Summers story really does relate to all of this. Looking at the gender pay gap, it is logical to base solutions on traditional workplace incentives and household social norms. But, if we want to narrow the gender pay gap, accepting the logic becomes “totally insane.”

Instead, we have to combine the logic of economics with a bit more wisdom (and cleverness).

My sources and more: Rarely and wonderfully, a group of disparate ideas and articles converge. That happened yesterday when all were pulled together by a new book and Roger Lowenstein review. For me, the goal was to harness thoughts about women’s empowerment to a bigger idea. I needed to relate women in India, the United States and the broader developing world. I needed to connect this NY Times Economic View and this academic paper. But then, it all came together through the need for more wisdom in economics.