Myths About my Views on the Myth of the Gender Wage Gap

Steven Horwitz
Thanks to being linked on reddit a few months ago, my LearnLiberty video on the gender wage gap is now close to 300,000 views on YouTube. The video was one of four designed to rebut commonly held economic myths. In this case, the myth is that women earn 75% of what men do because of labor market discrimination. What’s been interesting about the reaction to the argument there is that both “left libertarians” and “right libertarians” have criticized it. That reaction tends to be a sign that I probably got it pretty much correct! However, I do want to clarify a few points I was trying to make there, and have probably made better in longer presentations of the argument at IHS seminars and other venues over the years, so that my basic points are clear. In other words, let’s tackle three myths about my argument that the claim that women earn 75% of what men do is a myth.
1. Myth: Horwitz was arguing that labor market discrimination plays no role at all in the gender wage gap.
The point of the video was not to argue that labor market discrimination has nothing to do with wage differentials, but rather to point out that there are a lot reasons and pretty good evidence to suggest that when we control for human capital, compensating differentials and the like, most of the gender wage gap disappears. The most reliable studies I know put the “unexplained residual” at 5% or less. No study I’m aware of, other than ones of very specific markets, concludes that human capital and compensating differentials and other economic factors explain the entire gap. Folks are welcome to see my Economics of Gender syllabus where we tackle human capital, compensating differentials, and discrimination models in one chapter each.
Yes, other disciplines might provide arguments and evidence for a larger role for discrimination. Great, let’s have at it. Economists need to take them seriously and they need to look at the economic evidence. Let’s see where it goes. So for my left-leaning critics:
Reality: Horwitz was arguing that only a small part of the gender wage gap remains unexplained by the factors discussed in the video, and that remainder may well be due to discrimination.
 
2. Myth: Horwitz thinks sexism is not causally related to the gender wage gap.
It seems like some people didn’t watch the last minute of the video as they think I was denying the existence of sexism or that sexism plays any role in economic outcomes. If you watch all the way through, I point out at the end that sexism in how children are socialized into gender roles can indeed affect economic outcomes. If it’s true that girls really are discouraged from math, for example, or if they grow up believing that certain jobs are “women’s jobs,” then they will acquire their human capital accordingly, and may well earn less than the very men they went through school with whose human capital looks different.
It also matters that men don’t do as much as women do with respect to household production. Equalize the second shift more and you’ll likely make wages more equal in the process. Why men don’t contribute more is a matter of serious contention, but it’s certainly possible that misogyny is part of the story. So yes, sexism matters.
However, that is not the same thing as saying that the gender wage gap comes from labor market discrimination. It is not labor markets that are the problem here, but the socialization of children that comes before they enter the labor market. Change the socialization and labor markets outcomes will pattern differently by gender. So yes, some portion of the gender wage gap might be due to sexism, but not necessarily or only in the labor market but elsewhere in society and the culture. If we think that sexism is bad, or if we want to see more equality in wages, then attack the sexism in the places it has the most influence, but don’t imagine that labor market interventions such as anti-discrimination laws or worse, comparable worth, are going to solve the problem. So for my left-leaning friends again:  
Reality: Horwitz thinks sexism is causally related, but mostly via the socialization processes that influence the choices people make as they acquire their human capital before they enter the labor market, with labor market discrimination playing a (much) smaller role.  
 
3. Myth: By accepting the argument that misogyny in the culture indirectly explains the gender wage gap, Horwitz is tacitly endorsing interventionist solutions, not to mention making nice to the evil feminists.
From the right side of the libertarian spectrum comes the charge that all this talk of socialization and discouraging girls from math and science is all a bunch of lefty PC talking points that aren’t really true. And from some quarters is the suggestion that if one believes that stuff, one is somehow tacitly endorsing government-enforced solutions to them. For what it’s worth, I’m persuaded by the evidence I know of outside of economics (gasp!) that those problems are real, at least to some degree. I would agree that they continue to lessen over the years, but they have not totally disappeared. And there’s no doubt about the evidence on men’s contributions to household production being low. Data from 2004 had women doing twice the hours as men. Granted that’s down from 8 times the hours 40 years earlier, but if economic theory is right in suggesting that hours spent on household production should be in inverse proportion to the relative wages of the couple (think opportunity costs), then unless the average woman is making half of the average man, men are under-contributing in the household. Again, there’s a number of possible reasons why, but the fact is there for all to see.
Accepting that sort of evidence hardly means one sees interventionist public policy as the way to deal with it, although changing some polices, such revamping the tax code to end the secondary earner bias by instituting a nice low, flat tax would sure help. Sexism is a cultural problem and there are plenty of ways to try to work on the cultural side of matters to address it. It may also cure itself as younger generations adopt different views from their parents, and the trends of the last 40 years indicate that this seems to be happening. One can be hard-headed about the market generally not being a source of discrimination, while being soft-hearted about changing the culture in ways that might lead to different, and more equal, market outcomes. Not every problem demands a political solution and persuading men that it’s a good thing to take more responsibility for raising their kids and washing the dishes is a non-policy way to address that sexism, as is more generally persuading recalcitrant men to look at women in the workplace as equals. So for my right-leaning friends:
Reality: The feminists are not only not evil, they are right about a number of the problems, but wrong about the role markets play in causing them and that the state plays in potentially remedying them. Acknowledging the existence of sexism doesn’t ipso facto commit you to any particular way of dealing with it.
Cross-posted at Bleeding Heart Libertarians.