Truth Bomb Tuesday: The gender pay gap persists, but not for the reasons we commonly think.
The Nobel Prizes were awarded last week, and I thought the economics one was a bit interesting.
The award went to Harvard Economist Claudia Goldin, making her only the third female economist to win the award, and the first to win it solo.
Go girl.
And Goldin won it for her pioneering work understanding the gender pay gap.
This is where it was interesting to me.
Basically, there’s two places pay inequality can come from. It can come from across professions – women tend to work in fields that pay less than male-dominated fields, or it can come ‘within profession’ – where women doing the same job earn less than men with exactly the same title.
Goldin is a historian, and she anaylsed hundreds of years of data.
What she found is that before WWII, the gender pay gap was mostly due to the ‘across profession’ effect, as society had more rigid ideas of what accounted for ‘women’s work’, and paid accordingly.
But that started to change after World War II.
These days, the differential is largely (though not entirely) accounted for by the ‘within profession’ effect.
And this in turn largely comes to down to child-rearing responsibilities.
Out of universities, men and women in the same careers tend to earn the same amount of money, and that’s broadly true for the first ten years of working life.
However, after people pair up and start having families, and women become more responsible for their children, a pay gap starts to open up.
And that’s not necessarily because companies look down on women who have had kids.
Rather, its because home responsibilities tend to mean women opt out of what Goldin calls ‘greedy jobs’.
Greedy jobs are high paying jobs, but they also demand more commitment. There’s an expectation you’re going to be available for long hour, and every working day of the week.
They’re not jobs where you can say, “Sorry, cant get down to Sydney to close that deal, my 3y.o is sick and I need to stay home and look after them.”
And what happens is that even if couples have ideals around sharing the childcare burden equally, they effectively get ‘bribed’ out of doing it.
There’s a financial incentive there to let men do the greedy work and earn the big bucks.
And so she reckons we’re never going to fully close the pay gap unless we either get rid of greedy jobs, or make it more normal for women to work the greedy jobs, and for men to be more available for home-duties.
Neither of those are happening any time real soon.
But to me, it’s interesting in the sense that the gender pay-gap doesn’t come down entirely to biased attitudes still running rampant in society.
Rather, it’s a rational response to the economic incentives households, as a collective, face.
And it also says to me that if you want to really even things out, the best way to do that is not through a high-paying job. It’s through true financial independence.
It’s through a household partnership focused on wealth, not on income.
And that’s what I teach my students.
And I can tell you, a husband and wife team focused on building life-changing wealth?
Nothing can stop that.
DB.