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Do women choose lower pay?

The gender wage gap explained

Do women choose lower pay?

(Photo: John Lamb/Getty)

A few years ago, I attended a graduation ceremony in which the award for academic achievement in every department in the faculty of science was awarded to a woman. At the time, I wondered: if the roles were reversed, would we not be wondering why one group was so over-represented at the top of the class?

The reality is such that, if you are under the age of 45, you have grown up in a time in which women have graduated from university at higher rates than men. In Canada today, for every 100 men under the age of 45 with a university degree, there are 127 university-educated women.

The principal reason for this educational divide: female students academically outperform male students at every level—high school and university.

So why is it, then, that women in this under-45 age group still earn, on average, only 78% of what men earn?

A new study by the American Association of University Women sheds some light on the gender wage gap by examining the earnings of men and women one year post-graduation. They found that even at the beginning of their careers women earn less than men—about 82¢ on the dollar, in fact.

Some of that pay gap can be explained by differences in college major, occupation and employment sector—but not all.

Within similar occupations, women earned consistently less than men. For example, in teaching, women earned 89%, business and management 86%, and in sales 77% of the salaries of men in the same occupation.

Compared to men working the same number of weekly hours, women earn less; 16% less when they worked 40 hours a week, and 18% less for those who worked 45 hours a week.

Even controlling for grade-point average, men earned more than women who graduated with identical levels of academic achievement.

This research indicates that the difference in earnings between a woman and man who both graduated from the same university and who, one year after graduation, both work the same field and have identical jobs (in terms of occupation, sector and hours) is about 7%.

There is a great deal of (justified) focus on that “unexplained” portion of the wage gap; the portion that results from, say, workplace discrimination or other factors that cannot be reliably measured in data. But in my mind, what this research tells us is that attention needs to be paid to the explained wage gap: the fact that women are frequently—and voluntarily—choosing jobs that pay less.

This means that if there is any hope of closing the gender wage gap, women must fundamentally change the way they plan their financial futures.

Female high-school students, for example, need to be encouraged to consider their future earning potential when choosing their university programs. Female university students need to be further encouraged to think the same way when pursuing their chosen occupation after they graduate.

The best thing for the Canadian economy is to have workers allocated to jobs where they are the most productive. If female workers are self-selecting themselves into careers in which they are underachieving on the wage scale, they cannot possibly be using their productivity to its full potential. On the other hand, if firms are not employing the most productive workers, they cannot possibly be maximizing their output.

A few years ago, a male graduate student told me that he would go work in the middle of a mosquito-infested swamp if that was the job that would guarantee him the best opportunity for a lucrative career down the road. Just this week, a female graduate student told me that post-graduation her only ambition for a job was one that gave her a feeling of personal satisfaction.

My point in sharing this story is this: very few people want to work in a mosquito-infested swamp, but it is unclear as to why pursuing lucrative occupations cannot also be personally satisfying—for both men and women alike.

Marina Adshade is a professor in the University of British Columbia’s department of economics