Yet More On the Alleged Gender Pay Gap

by Don Boudreaux on April 19, 2016

in Competition, Seen and Unseen, Work

Amir Weitmann, a regular Cafe Hayek reader, sent to me the following e-mail (link added):

I just read the post on men vs women salaries, on the gender gap.

Since the gap is small, which makes sense, is it yet conceivable that at least part of it comes from individual bargaining power which may be overall slightly higher by men?

In others words, if a few percent of your salary is dependent on your relative bargaining power, as it often is, then it may make sense to have a least some gender gap based on bargaining skills.

What do think? Does it make sense?

Here’s my (slightly edited) response:


That’s possible.  Indeed, this possibility is, I believe, the principal explanation offered for the remaining, small gap.  But I’m skeptical of this explanation (although not with any great assurance that my skepticism is justified): a gap of five percent, though indeed small, seems to me to be large enough to be exploitable by businesses intent on gaining whatever competitive advantages they can.

If I’m a businessmen in a competitive market and I know that other employers are underpaying some some women by five percent, then, regardless of the reason(s) for this underpayment, I’ll try to bid them away from their current employers by offering, in effect, to underpay them by only four percent.  Other businesses will similarly compete for a competitive edge.  In this way this pay gap should close to zero (or to so near zero that it is irrelevant).


Put differently, in competitive markets something more than inferior bargaining skills possessed by women is necessary to explain any lasting pay gap.


Add a Comment    Share Share    Print    Email

Previous post:

Next post: