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Gender pay gap is primarily a result of personal choices — so, what can employers do?

By: Cara Crotty

May 12, 2017

A number of studies are showing that most, if not all, of the gender pay gap is explained by personal choices made by women and men. But how can employers protect themselves from claims of discrimination?

The U.S. Bureau of Labor Statistics reports that, in 2015, women working full-time had median earnings that were 81 percent of the median earnings of their male counterparts. That is up from 79 percent in 2014.

In the same 2014 study linked above, the U.S. Department of Labor acknowledged that a variety of factors have contributed to the differences in earnings between men and women:

  • Women historically had lower levels of college education
  • Fewer women historically participated in the labor force
  • Women are more likely to work in lower-paying jobs
  • Women are more likely to shoulder caregiving responsibilities, diminishing their time spent working.

The Wall Street Journal recently ran an article discussing “Why We Don’t Value Flextime Enough” (paid subscription required to access). Raymond Fisman and Michael Luca reported on a study that our blog proprietor, Robin Shea, also wrote about in the fall of 2016:

The study involved a simple experiment in which the company varied the job options communicated to more than 3,000 applicants.  Prospective employees were given two possible work schedules:   a standard 9-to-5 day and a second option with either more or less flexibility.  The less flexible option gave the company the power to assign last-minute shifts (including nights and weekends).  The flextime options offered more freedom in the days, times or number of hours the employee would work per week.  But these options came with a catch:  Applicants had to take a pay cut in exchange for increased flexibility.

The average applicant, it turned out, was willing to take a sizable pay cut – about 20% — to avoid having hours scheduled at the whim of the company.  Who, after all, wants to work weekends or nights on short notice?

But flextime didn’t fare so well. About 60% of would-be employees weren’t willing to take any wage cut, even a tiny one, in exchange for flexibility in the number or scheduling of hours. About a quarter of applicants were willing to take a cut of about 10% in exchange for schedule flexibility, and about a quarter were willing to take a 6% cut for flexibility in the number of hours. Perhaps unsurprisingly, the applicants that valued flexibility were disproportionately women with young children.

(Emphasis mine.)

Then there’s the report from Glassdoor Economic Research revealing that 9 of the 10 highest-paying college majors are dominated by men, while women predominate in 6 of the 10 lowest-paying majors. The Glassdoor study concludes as follows:

Because men and women systematically sort into different college majors, they experience different early career paths, which pay differently. These pay differences in turn reveal themselves as a major contributor to the well-documented gap between male and female pay in the labor market. Because the choice of college major affects job prospects and pay later on, choosing a field of study goes far beyond an expression of personal preference; it is also a decision that affects America’s persistent gender pay gap.

These patterns of “self-selection” are important. When women are paid less than men overall or are over-represented in lower-paying jobs, it is easy to jump to the conclusion that an employer is discriminating against women. (The government is certainly likely to do so). As this research shows, however, it is often individuals’ choices that result in compensation differences – not decisions by an employer.

What steps can employers take to protect themselves?  Here are some recommendations:

  • Require applicants to identify the specific position in which they are interested, and consider them only for that position. If an employer’s policy requires applicants to self-select the job they want (and if it applies that policy consistently), it cannot be accused of “steering” women to lower-paying jobs.
  • Allow employees to bid on open positions, and document the selection process. Employers cannot be accused of discriminatory cherry-picking if all employees are offered to the opportunity to apply, and the process is open and documented.
  • If flextime or reduced-hour schedules are available and that affects compensation or benefits, document that the alternatives are provided only upon employee request.

If women make life choices that affect their compensation (and I’m certainly not judging them for doing so!), employers should not be penalized for those decisions. However, if a company cannot show that it was the individual’s decision — and not company practice — that caused a discrepancy, it may end up paying.

By: Cara Crotty

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