April 10th is Equal Pay Day according to the National Committee for Equal Pay. The holiday “symbolizes how far into the year women must work to earn what men earned in the previous year.”
Unfortunately, Equal Pay Day is a holiday created by people that don’t understand economics. If they did, Americans would celebrate the holiday in January.
Equal Pay Day is based on the gender pay gap, which compares the median woman’s wages to the median man’s wages. The resulting 18-percent-plus difference is often portrayed as attributable to gender-based discrimination.
But the gender pay gap is a flawed measure: comparing median men’s and women’s wages doesn’t tell you anything useful. In order to make a fair comparison, researchers must compare male and female workers that have similar characteristics beyond being the middle worker in the income distribution.
Important characteristics include age, education, years of experience, job title, employer, and location. A recent Glassdoor study controlled for these characteristics and the gender pay gap fell from nearly twenty-five percent to around five percent.
Of course, if the remaining five percent gap represents discrimination that is a problem. But the Glassdoor study didn’t control for all relevant characteristics, and it’s likely the adjusted gender pay gap would fall a bit further if it did.
Americans should observe Equal Pay Day part-way through January, assuming the Glassdoor study is correct. Observing Equal Pay Day in January would paint a more accurate picture of the state of gender pay equity.