The Age Pay Gap

by Don Boudreaux on April 3, 2017

in Myths and Fallacies, Seen and Unseen, Work

Here’s a letter to USA Today:

Sheryl Sandberg, as you report, “is calling attention to the gender pay gap with a national retail campaign that will offer discounts to women on Equal Pay Day” (“Lean In puts spotlight on Equal Pay Day with campaign led by Sheryl Sandberg,” April 3).  Specifically, Ms. Sandberg calls for businesses to offer 20 percent price discounts to women customers – 20 percent because that’s the supposed gender pay gap between men and women.

Ms. Sandberg’s effort is a stunt based upon a grotesque misinterpretation of statistics and ignorance of economics.

Yes, women on average are paid about 20 percent less than are men on average.  But when correction is made for factors such as work experience, education, and job type this difference shrinks to only about five percentage points (and even here there’s no good reason to conclude that this small difference reflects gender discrimination).

Yet given Ms. Sandberg’s conclusion that gross differences in average pay necessarily tell a tale of employers’ wrongdoing, the fish that she’s now frying are far too small.  She should think bigger and take note of an even more egregious instance of employer discrimination – namely, discrimination against teenagers.  That’s correct.  Teens are paid, on average, significantly less than is paid, on average, to older workers.  For example, teens on average are paid a mere 44 cents for every dollar earned by workers 55-64!

If Ms. Sandberg’s understanding of statistics and economics is correct, then she must conclude that every percentage point difference in the average pay of teens and the average pay of older workers is the result of employers’ nefarious bigotry or unacceptable irrationality.  But if she instead concludes that teens’ lower pay is explained by other factors – by economically relevant factors that are perfectly acceptable – then she should stop her gender-pay-gap stunt.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

(I thank Cato’s David Boaz for alerting me to this report on Sandberg’s stunt.)


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