Obama is Right About His Wage Gap Statistics

By Heidi Hartmann

Despite recent criticism from “The Fact Checker” blog on The Washington Post, there is nothing at all misleading or biased about President Obama’s use of the 77 percent figure as a measure of wage inequality between women and men in the United States. Women’s median earnings for year round, full-time work in 2010 of $36,931 amounted to 77.4 percent of what men’s median earnings for year-round, full-time work were in the same year ($47,715). These numbers come from the Current Population Survey’s Annual Social and Economic Supplement (ASEC) and include the non-institutionalized civilian population who are either self-employed or work for wages or salary and are 15 years of age or older. These data are reported on an annual basis each year in August or September by the Census Bureau based on a household survey they conduct. This particular earnings series—annual median earnings for full-time, year-round workers—has the longest history, most likely explaining why it is the most frequently cited data series. It is the series on which NOW’s famous pin saying simply 59¢ was based, as that represented the wage ratio back in the late 1960s when NOW was founded. Because this data series has the longest history, its wage ratio serves as a well-known index to measure trends over time.

A Variety of Wage Gap Numbers

There are a range of numbers given for the wage ratio or gender wage gap (generally the gap is 100 percent minus the ratio, so with a ratio of 77 percent the gap is 23 percent), stemming from different data sets or different ways of analyzing the data. Each can be correct, depending on what the analyst wants to study. Each data set and methodology yields estimated pay gaps. Each is based on a survey, generally of a sample of all households, though wage data can also be gathered from samples of employers or of administrative records such as unemployment insurance or Social Security earnings records. Generally no data set is complete; all are subject to both sampling and non-sampling errors. Furthermore, different researchers may choose to extract different elements of data. For example, some researchers may restrict the age range of workers to prime age adults, those aged 25 to 54, in order to compare those for whom education is generally complete but who have not yet reached retirement age. To illustrate the burden of inequality faced by women of color, some researchers might compare the earnings of minority women to white men; others restrict the comparison of the earnings of minority women to those of minority men. Both ways can be correct depending on what one wants to illustrate.

In the United States, researchers generally restrict the comparisons to those who work full-time, whether on a weekly basis or an annual basis, but in other countries, for example Canada, total earnings of all workers (both those who work full time year-round and those who work part time or part year) might be compared in a gender wage ratio. If we do that in the United States we get a wage ratio of 72.4 percent and a larger gap of 27.6 percent. Although the Post‘s fact checker claimed that President Obama picked the wage ratio that made gender inequality look the worst, he clearly did not—he could have picked this one.

Another even smaller wage ratio (and larger wage gap) was generated by IWPR in our report entitled Still a Man’s Labor Market (February 2004), where based on a different data set, the Panel Study of Income Dynamics, on a survey of households conducted by the University of Michigan, we calculated that across 15 years, prime age women earned just 38 percent of what prime age men earned, for a staggering gender gap of 62 percent. This ratio is just as valid and just as accurate as others. It is telling us that across a 15-year period the typical woman in the United States earns only 38 percent of what the typical man earns. As the study points out, the reason women earn so much less across 15 years is that they spend more time out of the labor market; women typically work both fewer years and fewer hours per year than do men. No one would take this measure as a measure of discrimination by employers, but as a measure of women’s economic independence or lack of it or of what women contribute to family income across 15 years, this is an excellent measure. This type of life-time measure was used by the United Kingdom under the Labor government.

A larger wage ratio and smaller wage gap is generated by the Bureau of Labor Statistics from the Current Population Survey by looking at median weekly earnings for full-time workers each week of the calendar year and then combining those medians to get an annual median weekly earnings figure. Currently this ratio is a bit higher than the annual ratio released by the Census Bureau, standing at 82.2 percent for 2011. As an IWPR fact sheet shows, in some years, these two ratios are virtually identical, yet the Post fact checker made a big deal of how President Obama chose the lower ratio. Not so, President Obama just chose the most commonly used wage ratio. And, contrary to the fact checker’s claim, there is nothing superior about the weekly measure. It is not, for example, more inclusive: on the one hand it includes some workers who work full-time but not all year, but on the other hand it excludes the self-employed. It also underestimates earnings from annual bonuses—a substantial part of income in some high paying professional jobs and a source of income where a number of law cases show that women lose out.

In many countries an hourly wage ratio is used to avoid the measurement problem of full-time male workers working slightly more time than full-time female workers. Since, in the United States, some workers are paid on an hourly basis and others on a weekly basis, using either measure requires calculating a consistent wage measure, and the BLS does not routinely generate an hourly wage rate for all workers.

Response to Criticisms of the Wage Gap Measure

The most frequent criticism I hear of the wage gap is that it is comparing apples and oranges—it’s not comparing women and men in the same jobs or women and men who have the same education or same college major or whatever, and therefore the whole gap cannot be considered the result of pay discrimination. Interestingly, I don’t know of any individual or group who claims the whole pay gap is due to discrimination, so I don’t know why so much hot air is spent saying that it isn’t all due to discrimination. Many economists, sociologists, and other researchers have spent years trying to identify how much of the gap can be explained by factors that might reasonably affect wages, such as work experience, education, and so on. Generally in these analyses what cannot be explained by reasonable factors is considered possibly or likely the result of discrimination. Several comprehensive literature reviews that have been published in peer reviewed scholarly journals conclude that about 25 to 40 percent of the wage gap remains unexplained. But most of these studies do not assess whether some of the differences observed between women and men that might help explain the gender wage gap, like college major, are themselves the result of discrimination or of limited choice sets faced by women and men. In a world where most social workers are women and most engineers are men, few women and men may consider training for occupations that are nontraditional for their gender.

Much is also made of women’s choice to bear children and to spend some time out of the labor market as a result. But is that just a woman’s choice, or is it also a societal necessity? Years after that labor market absence should women still be suffering a wage penalty for that societal necessity? Or should society try to equalize the playing field by providing paid parental leave, encouraging fathers to share equally in child rearing, and providing subsidized, high quality child care to facilitate both parents’ return to the labor market?

The Case for Government Action

As Rachel Maddow recently pointed out on her news show, the existence of the wage gap should not be in dispute—the gap is there as measured in all the data sets released by federal government agencies. What is being argued about is whether that gap is meaningful; whether, if we can explain it by several reasonable factors, we don’t have to worry about it; whether we can pretend it isn’t really there. Conservatives, as she pointed out, tend to argue there is no gap, at least no gap that can be attributed to employer discrimination and therefore no gap that government policy needs to address. Liberals, in contrast, tend to argue there still is employer discrimination (with several horrendous cases of it coming to light each year as women bring legal actions against a wide variety of employers, despite the difficulty of doing so), and that, furthermore, a case can also be made for minimizing the negative economic effects of child bearing, particularly on women.

If we generally believe that women and men are equally talented and work equally hard on the job, that they tend to value the same things about work (such as making money and having some flexibility on the job), then they ought to be able to find opportunities in the labor market that pay them about the same. Yet while the evidence suggests that women and men generally do have equal ability and work equally hard and have equal value preferences, the evidence also suggests that they do not find labor market opportunities that tend to pay them about the same. In my view, this makes the case for government intervention.

The gender wage gap is a good measure of the lack of equal earnings between women and men in the labor market. Many women and men believe the gap should be smaller, that such a large gap as we have in the United States is unfair and reflects an unfair tendency for women to get paid less for what they do than men get paid for what they do. Moreover, such unequal pay inevitably leads to the misallocation of our human resources and a general reduction in U.S. productivity. Not only do women and their families suffer from unequal pay, but our society as a whole suffers as well, a circumstance that furthers the case for government intervention.

Heidi Hartmann is the President of the Institute for Women’s Policy Research.

Women Thrown Under the Bus (Again)

by Heidi Hartmann

Friday evening (4/8/2011) while the Democrats and Republicans were negotiating their budget deal for the remainder of FY 2011, as the news began to trickle out, we learned that once more, women are being thrown under the bus.

True, the Republican negotiator, John Boehner, Speaker of the House, wanted more anti-woman stuff he didn’t get—a ban on Planned Parenthood receiving any women’s health services funds from Title X.  But because of President Obama’s willingness to compromise (as reported by  The Washington Post), Boehner did win a prohibition on the use of DC taxpayers’ funds to provide abortions to low-income women in DC—in other words, thanks to Boehner and Obama, we DC residents can no longer use our own, locally-generated tax dollars to fund abortions for poor women.  Women thrown under the bus by our president!

Sunday morning we awoke to hear on the news interview shows that President Obama will propose ways to rein in the federal debt, both by raising taxes and reducing costs in programs like Medicaid, Medicare, and Social Security in a major speech on Wednesday (4/13/11).  While raising taxes is potentially good news for women, who rely on government programs more than men do, and so will be helped by added revenues, reducing costs in programs like Medicaid, Medicare, and Social Security is almost certainly disastrous news for women.  In other words on Wednesday when President Obama unveils his long term plan for reducing the US debt, he will almost certainly throw women under the bus again!

Women are 61 percent of adult Medicaid recipients, 57 percent of the 65 and older Medicare recipients, and 57 percent of the 65 and older Social Security recipients. Women also rely on Social Security more than men do:  as of 2009, 50 percent of women aged 65 and older and 35 percent of men of the same age range relied on Social Security for 80 percent or more of their income.

With so many more people more reliant on Social Security for retirement income than ever before (given the fall in pension fund balances, savings, and home equity), cutting Social Security benefits in any way (including by raising the retirement age) should be a non-starter for any serious policymaker, whether Democratic or Republican, especially because the American public has responded in survey after survey that they’d rather see Social Security taxes raised than Social Security benefits cut.

Medicare is already subject to very significant cost-savings under the health care reform act passed last year and the ability of the Affordable Care Act to deliver on its promise of covering 34 million uninsured Americans hinges on the continued performance of both Medicare and Medicaid.  It’s hard to see how squeezing more cost-savings from these programs can be done without significantly reducing benefits. A better approach would be to institute efficiencies and cost-controls in the entire health care industry.

To protect the gains women have made in the past 50 years and to keep what is left of America’s social safety net from fraying further, concerted political action is needed now.   Check out the websites of Planned Parenthood in Metropolitan Washington, national Planned Parenthood, NOW, National Women’s Law Center, and other women’s groups to find effective ways to increase your political activism. The Campaign for America’s Future is organizing an email campaign to let the President know what you would like him to say in Wednesday’s speech.

After the speech, please make your opinions known to Congress as they debate the FY 2012 budget, raising the ceiling on the federal debt, and potential cuts to Medicare, Medicaid and Social Security.  Women have much to lose from further spending cuts, as well as from a failure to raise the debt ceiling.

Heidi Hartmann is the President of the Institute for Women’s Policy Research.

One on One with Sara Manzano-Diaz, Director of the U.S. DOL Women’s Bureau

Sara Manzano-Diaz, Director of the Women's Bureau at the U.S. DOL

by Caroline Dobuzinskis

IWPR was honored to have Sara Manzano-Díaz as keynote speaker at a launch event at the Woodrow Wilson Center for our latest report on immigration, Organizations Working with Latina Immigrants: Resources and Strategies for Change. We also had the opportunity to interview Ms. Manzano-Díaz, the Director of the Women’s Bureau at the U.S. Department of Labor (DOL), for this blog on her work championing for the rights of working women and for families.

Ms. Manzano-Díaz’s resume includes judicial, state, and federal titles: Deputy Secretary of State for Regulatory Programs at the Pennsylvania Department of State (appointed by Governor Edward G. Rendell), Deputy General Counsel for Civil Rights and Litigation at the U.S. Department of Housing and Urban Development, Assistant Attorney General in New York, and a Judicial Assistant and Pro Se Attorney in the New York State Judiciary. She also served as co-chair of The Forum of Executive Women’s Mentoring Committee, which mentors young professional women as they begin their careers, and participated in Madrinas, a program that provides mentors for at-risk Latina girls to encourage them to finish high school and attend college. Ms. Manzano-Díaz holds a Bachelor of Science degree in Public Relations and Communications from Boston University and a Juris Doctor degree from Rutgers University School of Law.

IWPR:  Please tell me about your background: What led you to pursue a degree in law?  What inspired you to pursue work in the civil service—specifically for women and families?

Sara Manzano-Díaz:  Since the age of five I envisioned myself becoming a lawyer. Growing up in a Puerto Rican household, I became the family translator at a very young age. As a result, a love for advocacy grew from that experience. I became an advocate for my own family, which fueled a passion to advocate for all working families and women. Now, I represent 72 million working women as Director of the U. S. Department of Labor’s Women’s Bureau.

IWPR:  What influence do you think the Women’s Bureau has on policy?  How does it help to empower women?

SMD:  When the law was passed in 1920 creating the office, the Women’s Bureau was given authority to formulate standards and policies that promote the welfare of wage-earning women, improve safety and working conditions, and advance their opportunities for profitable employment. One of the agency’s early achievements was the inclusion of women under the Fair Labor Standards Act of 1938, which, for the first time, set minimum wages and maximum working hours.  As the advocate for women within the Labor Department, the agency was also instrumental in the development of the Family and Medical Leave Act, Pregnancy Discrimination Act and the Equal Pay Act.

In the 21st Century, our vision and the policy direction of the program still remains one of empowering all working women to achieve economic security. That translates into preparing them for high paying jobs, ensuring fair compensation, promoting workplace flexibility as well as helping homeless women veterans reintegrate into the workforce. Empowerment of women makes the world work and strengthens the American economy.

IWPR:  What are your goals for the Women’s Bureau?

SMD:  During my tenure, I want to see the Women’s Bureau continue to make a real difference in the lives of women of all races and to help families who have suffered in this economy. Our four priorities include: equal pay, workplace flexibility, higher paying jobs for women and assisting women veterans experiencing homeless. Lucrative jobs exist for women in the skilled trades, green sector and other non-traditional industries. Our goal is to link women to occupations in high-growth and emerging industries that can move them and their families into middle class status. Later this spring, we expect to publish a guide that links women to the green job sector nationwide. Another project will help Latino women, the fastest growing female population in America, achieve financial security through a financial literacy course in Spanish.

IWPR:   The anniversary of Equal Pay Day will be on April 12th this year. How far do you think we have come since the 1963 passage of the Equal Pay Act? What do we have left to accomplish for gender equality?

SMD:  Women continue to make great strides since passage of the Equal Pay Act of 1963. This administration supports the Pay Check Fairness Act and we are working hard every day towards economic security for women. In 1963 women earned $.59 on average for every dollar earned by men, today women earn $.81 on the dollar (based on the 2010 Census). As part of the President’s Equal Pay Taskforce, we are working to ensure that women have the tools to get fair pay in the workplace.

IWPR:  You have had a very accomplished career. What do you consider your greatest achievement?

SMD:  As an attorney, I have spent my career advocating for the voiceless. President Obama and [Secretary of Labor Hilda Solis] share that vision and passion to care for the most vulnerable members of society. I feel fortunate to have the opportunity to work for two historic individuals and know that the work we do will impact the lives of working class women and families. As Director of the Women’s Bureau, I get to advocate on a national scale and represent women of all ethnicities in the fight for their economic security, from rural women to single moms to homeless women veterans.

Caroline Dobuzinskis is the Communications Manager with the Institute for Women’s Policy Research.

How the White House Is Putting Social Security at Risk

This blog post was originally published on New Deal 2.0. It is also published on The Huffington Post.

The payroll tax holiday in Obama’s deal endangers our largest and most loved social program.

By Heidi Hartmann, Ph.D.

In trying to make a silk purse out of a sow’s ear, the president’s advisors added a payroll tax holiday to the tax agreement they were working out with the Republicans last weekend. After giving away Bush’s estate and income tax cuts for the uber rich, they sought to get something back, and, they told me, the Republicans would not agree to the refundable aspects of the Making Work Pay Tax Credit, the president’s own signature tax cut initiative included in the 2009 stimulus package.

Earnest White House and Treasury staff members have been assuring various interest groups all week that in negotiating a payroll tax reduction of some 32 percent (a 2 percentage point cut from the worker’s share of 6.2 percent), they meant no harm to the long-term finances of the Social Security system. Not only is the higher tax rate proposed to be reinstated (without requiring a vote) after a year, but the Social Security Trust Fund is made whole by a transfer of like amounts from general revenues all during the year, so the Fund will even earn the same amount of interest it would have from payroll tax receipts. As they came under increasing pressure from Social Security advocates, the White House released a letter on Friday from Social Security’s chief actuary confirming that the Trust Fund would lose no money.

But the Trust Fund is not actually the advocates’ main concern. They’re more worried about being able to get the payroll tax up again in 2012 after the emergency situation of a tanking economy has hopefully passed. The central problem is a political one. Already some Republican members of Congress have said that a move back to 6.2 percent will be seen as a tax increase (in fact, close to a 50 percent increase), always unpopular, especially in an election year. If the payroll tax isn’t raised, squeezing the money out of general revenues every year when Social Security would be competing with all other spending could be extremely difficult, and pressure for benefit cuts would grow. As of now, the American people don’t mind paying the payroll tax: 86 percent said so in a recent survey, so giving them a short-term gift they don’t particularly want and, in exchange, putting the program that is their life support at risk is just a bad deal.

I have no doubt that the staffers working on this who have spoken with me mean well. They carefully explained to me that they set the size of the payroll tax reduction so that a person earning $20,000 per year would get a $400 tax cut, the same as under Making Work Pay; that required a 2 percentage point tax cut, which when aggregated to all workers paying the FICA tax is some $112 billion. They were pleasantly surprised when the Republicans agreed to that large a tax cut, which constitutes significant stimulus to the economy since much of that extra disposable income will be translated into demand for housing, transportation, meals, and so on.

While a payroll tax cut would be good at getting small amounts of money into each paycheck, it has some other less desirable features as stimulus. Most importantly, a lot of it goes to high-income people who tend to hold onto added income. Everyone earning more than $106,800 per year (the maximum salary on which workers will pay FICA tax in 2011) will get the full $2,136 reduction, including members of Congress, the president, Wall Street traders, and top managers across the country, and many of these high earners will save rather than spend their extra income.

Under Making Work Pay, every person with earnings of at least $6,451 got the maximum credit of $400 and married couples with earnings of at least $12,903 got the maximum couples credit of $800 (whether one or both worked). These credits started phasing out at $75,00 for singles and $150,000 for couples, and no one earning more than $95,000 ($190,000 for couples) received anything at all. For low-income people who owed no federal income taxes, the credits were refundable, so an eligible person or couple received a check from the government. With a payroll tax reduction, every individual making less than $20,000 and every married couple earning less than $40,000 (roughly 40 million workers in total) would get less than they would under a Making Work Pay extension, but the payroll tax rebate at least gives them something back. Since Republican opposition to refundability would have left many low-income people with nothing had the income tax been used as the delivery mechanism, the payroll tax cut seemed like the better alternative to White House staffers concerned about low earners.

What is most troubling now is that even though the risk to Social Security has been pointed out to the White House, these same staffers continue to insist that the rebate must take the form of a payroll tax cut delivered in every paycheck in 2011 and that other alternatives won’t do. For example, Congressman Brad Sherman has suggested issuing a rebate check to each worker early in 2011 for 2 percentage points of the 6.2 percent FICA tax each paid in 2010. Dollar-wise, that’s essentially the same as giving workers 2 percentage points in 2011. Sure, there will be more workers in 2011 (if we’re lucky and get some employment growth), but they could be included by issuing rebate checks early in 2012 based on what they earned in 2011. Also, even though research shows that lump sums aren’t spent as readily as smaller amounts, the portion spent after 3-6 months is quite substantial. And since we will need stimulus all through 2011, the difference between these two distribution systems can’t be so great as to make the Sherman alternative totally unacceptable to the White House — when it has the very important advantage of never reducing the payroll tax rate to 4.2 percent and so never having to figure out how to get it back up to 6.2 percent. While Sherman’s proposal virtually mimics the payroll tax cut, Nancy Altman, co-chair of Social Security Works and a leading advocate against the payroll tax rate cut, suggests a more progressive alternative, one that would likely increase the stimulative value of the tax cut — an identical lump sum to every worker who paid FICA tax. Such a method would direct more dollars toward lower earners (the average benefits would be on the order of $800) and therefore generate more spending.

Many people are becoming aware of the dangers to Social Security from a cut in its tax rate — phone calls, organized by groups like NOW and the National Committee to Preserve Social Security and Medicare, have been pouring into Congress and the White House. For sake of Social Security and the millions of women and men who depend upon it, I hope Congress will be able to negotiate a change in the agreement. Since the payroll tax cut is viewed as a Democratic win, the Republicans should not object to whatever mechanism the Democrats choose to deliver the same amount of funds. Of course, it would be better for all if the White House would just do the right thing and stop insisting on a payroll rate reduction.

Heidi Hartmann, Ph.D., is an economist and the president of the Institute for Women’s Policy Research, a scientific research organization that she founded in 1987 to meet the need for women-centered, policy-oriented research. She has published numerous articles in journals and books, and her work has been translated into more than a dozen languages.