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Do Women Earn Less Than Men?

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Another contemporary economic myth is that women make 75 cents for every dollar men make, because they're discriminated against in the labour markets. Like other myths this does have a kernel of truth to it, so for example: If you add up all the incomes of women and divide by the number of women in the labour force and then do the same thing for men, what you'll find is that on average women do make about 75 percent of what men do. What's happening here is not discrimination in the labour market, but differences in the choices that men and women make about investing in their knowledge, their education, their skills, their job experience, that lead to them getting paid different salaries. Economists talk about people's human capital. And by human capital we mean: the knowledge, the skills, the education and the job experience that people have. And economists argues that people get paid wages according to that human capital. It turns out that men and women invest very differently in their human capital. We can see that in four different ways: First of all, educational choices. Men for example tend to go into fields like engineering. Women tend to go into social sciences, into psychology, into nursing and so where men are making higher salaries as engineers or perhaps in the business world, women tend to end up in jobs in which their salaries are somewhat lower. So even though they may have the same years of schooling the different choices they have made about their majors lead to them working in different areas and getting paid differently. Secondly men and women have different expectations about work. For example: if women expect down the road to take time off to raise children they'll make different choices today about what kinds of skills they will aquire and if they imagine they will be working full time for the rest of their lifes. And we know historicly that many women in the 1960's and 70's didn't imagine that they would be working full time at age 40 and ended up making choices that led them to have jobs when they were working at age 40 that didn't pay as well as they might have otherwise. Younger women today, of course, are more likely to imagine themselves working at age 40 and therefore make different investments today. Another difference between men and women is full- versus part-time work. Women are much more likely then men to work part time. Men are like to work full time. And part time work, even for the same kinds of jobs tends to pay less then full time work. And women tend to prefer part time work more than men, because women still tend to take on the majority of the responsibility for children and the home. Finally men and women differ in terms of their tenure on the job or the way in which their careers get interrupted. If it's the case, that women take time off from the workforce to raise children, that will have an impact on their salaries down the road. So if we put these four things together what we get is that the difference between men and women's pay is not a result of labour market discrimination but of the choices that men and women make before they enter the labour market or even when they're in the labour market. about the kinds of job they want to have and the way they want to balance a family and work. Studies that have tried to control for all these factors have shown that if you take a man and a woman (same experience, same education, same job) and compare their salaries what you find is that women make about 98% what men do. So that gendre wage gap pretty much disappears. And in some jobs women actually make more. Now it might well be thhe case that women are being descriminated against or that sexism is a problem in the choices that women make. For example: girls are guided away from math classes and guided into other kinds of classes. It's also certainly the case that our expectation about women's roles versus caring for children and a household and men's roles about caring for children and a household are very different. And if we think those are poor choices, if we want to see women's pay more equal to man what we need to do is convince more women to go into areas such as the sciences, mathematics and engineering and we need to convince men to take more responsibility for children and a house. When those begin to even out we'll see wages begin to even out as well. But in the meantime whatever choices men and women make the wages they're paid in the market will reflect the productivity associated with those choices and not the result of discrimination.

Video Details

Duration: 3 minutes and 59 seconds
Country: United States
Language: English
Views: 81
Posted by: smtex on Sep 10, 2011

Are women discriminated against in the workplace? Looking at the data, women on average earn an annual wage that is approximately 75% that of men, which many people believe is the result of discrimination. However, when Prof. Steve Horwitz analyzes the data more closely, he finds that women make certain choices, such as career selection and raising children, which tend to result in lower wages than men. These choices could be the result of personal preferences or sexist cultural expectations for women's work, though the relative influence of these two factors remains unclear.

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