Why Do Women Earn Less Than Men?

 February 10, 2019

Whenever you analyze the economics of a controversial social issue, it nearly always pays to do the research for yourself, review the studies, and look at the known data.

Controversy is usually a sign of politicization - and that is a death blow to the accuracy and reliability of almost every mainstream source.

For a perfect example, let's look at the alleged gender wage gap.

The media reports the story extremely differently than what the data shows.

The Gender-Income Gap - and Myth

Women generally don’t earn as much money as men. In fact, NBC News recently reported that female employees earn almost 20% less than males in total income.

Check out the news article and you’ll see breathless reporting about this crisis of discrimination.

But contrary to what the media might imply, this income gap is NOT caused by discrimination against women. If anything, a closer look at the data shows some startling conclusions.

Several new studies and surveys show that the biggest underlying cause of the pay gap is the fact that women now have more options, not fewer.

The Harvard Study

Valetin Bolotnyy and Natalia Emanuel from Harvard University recently conducted their own investigation to see why women make less. What they observed is startlingly good news for anyone who is against discrimination.

The researchers effectively discovered that women often earn less overall than men when they choose to do so because of other priorities they might have.

For example, when given the option to take days off, women would often choose to take pay cuts and work fewer hours so they could spend more time with their family.

Basically, women aren’t just working less because they’re being kicked out of the system or banned from earning as much as men. That’s nonsense. They’re - often - working less because it’s their decision to make - and they’re focusing on other priorities.

If a woman decides to not put in as much overtime because time spent with her child is more important to her, it’s no business of ours to somehow condemn her or the system for respecting her wishes. That’s the beauty of the market: actual equality.

Bolotnyy and Emanuel eventually summarized their study by saying:

“[The gender pay gap] can be explained entirely by the fact that, while having the same choice sets in the workplace, women and men make different choices.”

Women choose to make different decisions than men -- and that’s OK!

Women Aren’t Some Monolithic Group

This doesn’t apply to all women, of course. Some women would rather take overtime, would rather take fewer days off, and would rather focus on their career. Those women definitely see a huge income boost - in the same way that men do.

That said, this economic fact should not be confused with the notion that women somehow don’t experience sexism or that sexism isn’t a very real social problem that plagues countless women.

Of course sexism is a massive problem and of course there are countless victims.

When the system works incorrectly, we should note that. And when the system works correctly - like with average gendered pay - we should note that as well.

Accuracy is the goal, not manipulative political myths.

There’s no telling how many women have been told that they won’t earn as much as the average man and, because of this myth, were less ambitious or accepted less pay. The truth matters. So do lies.

One of the biggest temptations with economics and politics is to see people as some kind of identical units reflecting the aggregate whole. That’s wrong.

People are unique individuals and make different decisions.

A proper system respects that - without crying foul when those decisions lead to understandable results, like equal financial treatment.

This is something that you are very unlikely to hear explained by politicians or very many college professors. After all, facts are dangerous to some political beliefs and it’s far more politically useful to fear-monger and blame things like sexism instead of admit the truth.

Women Are Actually Outperforming Men - And That’s OK

Once again, not all women choose other values over maximizing their income.

Some women, especially single women, actually outearn men. Women graduate college overall at a higher rate than men. And women are less likely, overall, to feel stressed by economic downturns because of their - perhaps healthier - focus on non-financial goals.

You can see the data for yourself:

In the end, the data actually paints an optimistic picture of women in America. They’re not focused on profit-at-any expense, there is diversity within their decisions, and the equality is actually much more apparent when you look at the data.

Always look at the data for yourself. That’s the beauty of learning basic economics. You don’t have to rely on politicians or media talking heads to figure out what you must believe.

About Shaun Connell

Shaun Connell is the CEO of both Capitalism Institute and Connell Media. Shaun has spent years studying economics and finance. He has also built and sold numerous 7-figure businesses. He currently lives in Dallas, Texas.

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