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Reflections on the gender pay gap: What Claudia Goldin’s Nobel Prize has taught us

Emily Borghaus explores what Claudia Goldin research teaches us about the gender pay gap.

“Five beautiful women? All doing economics? No wayyyy!”

This was remarked by two male PhD students at the UCL faculty welcome drinks after they had inserted themselves into a conversation between me and a group of fellow master’s students. As their comment so gracelessly points out, economics is a male-dominated profession – more so, in fact, than most STEM fields. Women make up roughly a third of economics undergraduate students, and this ratio drops to 15% for tenured professors. Women are also underrepresented in the Treasury, the Bank of England, and policy think tanks. Given that economics is a social science, which analyses how human behaviour affects economic outcomes, it is particularly concerning that its practitioners are so unrepresentative of society. 

In this context, the 2023 Economics Nobel Prize is a triumph for the field. Its recipient, the economic historian and labour economist, Claudia Goldin, is only the third woman to be awarded the Nobel Prize in Economic Sciences, and the first to be honoured solo instead of sharing the prize with male colleagues. Goldin was awarded the prize “for having advanced our understanding of women’s labour market outcomes”. Since she became the first woman to be offered tenure in the Harvard Economics Department, Goldin has contributed extensively to, and often pioneered in, this research frontier. 

Her analysis covered over two centuries’ worth of data from the US economy in a project to chart the progress of women in the labour market. The findings dispelled myths around female workers: Instead of being “traditionally” constrained to housekeeping and child-rearing, married women were responsible for a significant portion of production within agrarian societies of the 19th century. Goldin was also the first to examine the effects of the contraceptive pill on economic growth. Labour-enhancing innovations are a source of great interest to economics research – but while her male peers narrowly focused on technology and machinery, Goldin showed that the lower risk of unplanned pregnancies sparked an economic revolution as sexually active women became free to invest in time-consuming degrees; the resulting surge in doctors, lawyers, and other essential professions is what policymakers dream about.
 
Goldin’s investigation of the gender pay gap has been most instructive regarding the current barriers faced by women in the labour market. Although norms around full-time careers for women changed after the Second Wave feminism of the 70s, women were still on average earning 50 cents to a man’s dollar. This was, in part, indicative of what was at the time a ‘productivity gap’ between male and female workers in the same profession: Due to massive social obstacles in their pursuit of higher education and work experience, women were seen as less qualified in the eyes of employers. Once women were free to pursue an education and a career, the differences in years of education, content and quality of education, and accumulated work experience between the genders rapidly converged. In fact, women today outperform men in educational attainment: The number of women at university began to exceed that of men 16 years ago, they outnumber them at every Russell Group university, they are more likely to get a 2:1 or a First, and they are less likely to drop out.

It therefore seems that judged by productivity standards that once “explained” the gender pay gap, today’s women are racing ahead. Yet, the gap persists. When Claudia Goldin was writing her seminal paper, ‘A Grand Gender Convergence: Its Last Chapter’, in 2010, the ratio of mean annual earnings between male and female full-time earnings in the US was 0.72 – a number that had barely budged since 2000 and has barely budged after, measuring 0.77 to 0.80 in 2023 according to most estimates. At this rate, it would take 40 more years for women to be fairly compensated (and that is ignoring the fact that a more highly educated female workforce should, on average, be earning more than their male counterparts).

In the article, Goldin sets out to statistically determine the culprit behind the persisting inequality – what we economists call the “unexplained” or “residual” portion after productivity differences have been eradicated. She immediately dispels the popular misconception that the earnings gap stems from the fact that women “choose” to work in lower-earning professions (nurses vs doctors, etc) – not only are such choices, if women do make them, governed by factors like sexist work cultures in male-dominated professions; they are also statistically insignificant compared to the earning differentials that exists between men and women in the same occupation. Goldin demonstrates this by estimating what would happen to the gender gap if one were to even out the proportions of male and female workers in each occupation (i.e. assume 50% of doctors and nurses are female) versus what would happen if one equalised average earnings by gender within each profession (i.e. male doctors are on average paid the same as female doctors). In the former case, estimates still show a large gap, in the latter, the gap is almost eradicated. This means that changing the gendered mix of occupations will not solve the problem of the wage gap.  

What then, explains the differences in compensation within occupations? Academics have supplied many explanations: good old-fashioned workplace discrimination, women are socialised to be less competitive and less willing to bargain for pay raises, women spend more of their time doing housework, women take more time out of the workforce to after becoming a parent, the prospect of paid maternity leave makes employers less willing to fill a vacancy with a female worker, and more. Intuitively, these all ring true, and statistically, they have been proven to matter.

Goldin, however, purports to have identified the one singular factor that accounts for the vast majority of unexplained pay differentials between men and women in the same profession. By controlling for differences among male and female workers with the same level of experience within a given profession, Goldin discovers a distinctive pattern in wage differentials: Women start off with similar earnings to men (in the 90% range) but the ratio declines with age and plummets to 60% on average when both cohorts are in their forties. These timings, of course, point to motherhood as the primary culprit. This may not come as a surprise, although the size of the disparity is shocking (Goldin’s findings indicate that women re-entering the workforce after motherhood suffer practically the same level of wage inequality as women 50 years ago). Feminists have spent decades rallying against the social norms that place the onus of childcare entirely with the mother while the father focuses on his career, free to gain experience and promotions that once again leave women far behind. 

However, Goldin is not yet satisfied with this explanation. Another distinctive pattern in the data is that the gender gap varies significantly with occupation, and not in the way one might expect. Tech and science fields – although the underrepresentation and low retention rates of female workers are issues in themselves – have surprisingly low gender pay gaps in every age group. Women in business or law, however, can expect to lose a large chunk of their income post-maternity: An 18-month career break was associated with a 41% decline in earnings for MBA grads, and 31% for law school graduates. This “motherhood penalty” is often viewed as a mere time issue as mothers with young children are forced to scale back their careers. It should, then, raise eyebrows that the MBA grads who see an average pay decline of 41% work only 24% fewer hours on average. 

It seems that women are disproportionately penalised for making career sacrifices for the sake of their children. In fact, Goldin discovered so-called non-linearities in the hourly wages within these industries – that is, compensation does not decline one-to-one with respect to hours worked. A woman who, because of childcare duties, works half the hours of her male colleagues receives, on average, less than half his pay. In the legal profession, where lawyers are billed by the hour, lawyers that work under 40 hours a week receive lower hourly rates. Flexible work, such as a worker leaving the office two hours early for school pick-up but making up for those two hours later in the evening, is also underpaid relative to the same hours in a 9-5 schedule.

The reality is that women want to combine children and career, but certain industries make this extremely difficult. Labour-force participation rates indicate this: Counterintuitively, women on average work three or four years less after childbirth than one year after childbirth, indicating that sustaining career commitments throughout is either impossible due to workplace inflexibility, or simply not worth the hassle given how grossly underpaid these efforts are. As Goldin puts it, children require some modicum of parental time, husbands provide little of it, and part-time work in these fields is insufficiently remunerative to justify the difficult task of juggling children and career.

This does not have to be the case. The reason tech and science fields have lower post-maternity pay gaps is that the nature of these jobs lends itself to greater flexibility. Tech work can be done from home, and physicians and pharmacists who use standardized procedures and computer systems to track their clients’ needs can take a year out without much consequence. The pandemic has shown that the vast majority of business and law jobs, too, can be done just as well online from home. It is therefore disappointing that many such firms are now insisting on a return to “office culture” – a concept still tied to the archaic notion of office workers as men who can spend fifty hour work weeks in the office while their wives look after their children – thereby undoing the benefits remote work has offered to working mothers. In the current system, once children have outgrown full-time care, women will return to their former profession and find that they have paid a pound of flesh, earnings wise, for the choice they have made. 

Claudia Goldin’s Nobel Prize is well-deserved. Her research proves that the gender pay gap is a three-tiered social problem. It exists at the level of the individual woman in a male-dominated field who is underestimated by her boss, patronised by her male coworkers, and as a result is either denied the pay, promotions, and recognitions she deserves, or is bullied out of the profession. It exists at the level of the industries that are 50 years behind the status quo, still so ill-adjusted to the idea that the modern worker (whether male or female) might want to combine the demands of family and career that those workers who do attempt this through part-time work, flexible work and career breaks must pay disproportionate penalties on their earnings and potential for upwards mobility in their profession. And ultimately, it exists at the level of the patriarchy that not only fails to recognize and address the parenthood penalty but still expects women to pay it in full without complaint while absolving men of basic childcare responsibilities. 

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