What’s the ‘pay gap’ and is it real?

All over the world, men are on average paid more than women, so it’s hard to deny that the gender pay gap exists. But there is a big debate over what actually causes the gender pay gap. Is it outright discrimination by employers? Or is it about different educational achievements, choices of occupation or the imbalance of caring responsibilities between men and women?

Suppose the gender pay gap was caused by outright discriminatory practices by employers. This would mean that similar workers, with the same education, experience, labor force participation rates over their lifetime etc, are paid less simply because they are women. Economists have tried to test this, doing studies which have looked at workers with very similar qualifications, jobs, experience, education etc, to look to see if gender makes a difference. What they find is that actually men aren’t paid much more than women for doing the same type of work (ie the gender pay gap is much smaller).¹ This seems to suggest that outright discrimination by employers isn’t the main cause of the gender pay gap, although it does still exist and changes a lot depending on which country is being measured. 

So what is causing the gender pay gap if it’s not outright discrimination? It looks like the main reason is the difference in caring responsibilities between men and women. Women are much more likely to take time out of work to look after children or care for parents, which means they tend to demand part-time flexible work. This has a negative effect on how much they are paid, as flexible, part-time work tends to be less well paid and reduces the likelihood for promotions and pay rises - if you take the difference between men and women with similar caring responsibilities, the gender pay gap narrows to under 5%.²

Women also tend to work in sectors which pay on average less than men, in what’s known as occupational segregation. A classic example is the fact that women are more likely to become nurses and men more likely to become doctors, who have higher status and are better paid. According to Harvard economist, in the US, about 25% of the gender pay gap can be explained by this phenomenon – which means that if you got rid of all occupational segregation then the gender pay gap would go down by a quarter.³ 

The gender pay gap is more complicated than women being paid less than men for the same job. So while it isn’t caused by outright discrimination, it persists because of one important structural inequality - the fact that women do more unpaid domestic labor than men.