William & Mary

W&M professor shares his research on the wage gap

According to the U.S. president’s Council of Economic Advisers, women make up about 47 percent of the labor force. Women also hold 49.3 percent of jobs, therefore making them equal or primary breadwinners in the American household. Yet for every dollar earned by men in the labor market, women received 77 cents.

That difference – often referred to as the gender wage gap – is a controversial topic in America and brings about strong arguments about its potential causes.

Assistant Professor of Economics Peter McHenry recently sat down with William & Mary News to share his research on the subject.

When asked about wage gaps, McHenry noted that there are many gaps between groups but their causes vary widely.

{{youtube:medium|9bEzQl0VUM8, In this video McHenry discusses the variety of wage gaps}}

“There are wage gaps all over the labor market,” he said. “There's a wage gap based on sex. There are wage gaps based on ethnicity and race, as well; there are wage gaps based on education.”

Some wage gaps are more controversial than others. College graduates earning more than high school graduates typically isn’t controversial, McHenry said. But wage gaps based on race, ethnicity and gender are controversial, because for example, “a man and a woman doing the same work and being equally productive ought to earn the same amount of money.”

{{youtube:medium|DyD0mdAOMs0, In this video McHenry explains what influences the size of the gender gap}}

“It’s very intriguing to look at wage gaps to find out why they exist,” he said. “Some of it can be explained by different choices that men and women make about how many hours to work, about how much experience to accumulate” and other decisions. But after controlling for observable differences between men’s and women’s labor market experiences, there’s still a wage gap.

“We do see these gaps. ... But an economist would say, ‘You don’t really have evidence of discrimination when you’re just comparing these two averages, because there could be a lot of non-discriminatory reasons for these gaps to exist.’ And we would want to rule these out before we accused anyone of illegal discrimination,” McHenry said.

Some researchers have concluded, however, that part of the remaining wage gap is likely due to discrimination.

“The clever studies do tend to find evidence of discrimination based on gender, based on race, based on ethnicity, and based on a lot of other characteristics, too,” McHenry said.

{{youtube:medium|tn-ucE5VMIw, In this video, McHenry speaks about the relationship between the wage gap and discrimination}}

“Some economists have studied graduates of top professional schools ... and they find that right out of graduate school, men and women are earning almost identical compensation," he said. "But if you look at them 10-15 years later, men on average are earning a lot more than women.”

One of the important differences is that women were more likely to take time out of the formal labor market in their 20s or 30s, likely to have and care for children, McHenry noted.

A likely reason that large wage gaps arise is that professions reward their personnel for working very long hours and for working steadily every year without gaps, he added. Men and women may earn closer to equal pay if professions did more to encourage more flexible work. Professions may be able to organize their production processes to help workers take time off or not work as many weekly hours while still being as productive per hour, said McHenry, adding that pharmacy is a profession that appears to do this well.

{{youtube:medium|4cIYGz2z0-8, In this video McHenry talks about the differences in compensation between men and women in the professions}}

McHenry’s areas of specialization are labor economics and economic geography. His interests include the economics of local labor markets, residential location choices and educational institutions. He received his bachelor’s degree from Vanderbilt University and his graduate training in economics at Yale University.