The gender wage gap and hours worked

By Eric Crampton 19/12/2014

From my piece with Bryce Wilkinson in last week’s National Business Review:

Suppose a management consultant pulled you aside and said, “Hey, have I got a deal for you. With this one simple trick, I can lower your labour costs by 14% and it won’t cost you a dime in productivity. Trust me, I know what I’m doing.” You’d probably be a little sceptical about the claim, or at least I would.

Statistics released in the last week by the State Services Commission reportedly found that the pay gap between men and women in public sector management roles averaged 14%.

Sadly, there are few one-simple-trick paths to success. More rigorous analysis of gender pay gaps that accounts for differences in work experience, training, time outside of the workforce, choice of industry, and hours worked generally wipes out the bulk of the headline pay differences.

The recently released New Zealand Income Survey data also makes things very clear. Hourly earnings for full time male employees, at $23.97/hour, is only about 6% higher than women’s $22.54; women in part-time work, averaging $17.26/hour, beat men’s $16/hour. Much of the headline pay gap comes from that more men are in full-time work rather than part-time work.

Treasury released analysis a fortnight ago showing that Working for Families (WFF) has reduced the number of hours worked by married women. Prior to WFF, among married men in employment, about 10% worked part-time, 59% worked a 40-hour week, and 32% worked a 50-hour week. For women, 55% were in part-time work, 30% worked a 40-hour week, and 15% worked a 50-hour week. None of those figures changed greatly with WFF, but women in part-time work shifted to working fewer hours, and about 9000 married women dropped out of the workforce entirely.

In a lot of professions, wages start climbing substantially for employees willing to put in the longer work-weeks, as economist Claudia Goldin pointed out in her 2014 Presidential Address to the American Economic Association. Much of the measured pay gap comes down not to discrimination, but to choices.

A few relevant links: