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Gender-Based Pay Disparity Study

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Gender-Based Pay Disparity Study Gender-Based Pay Disparity Study FINAL REPORT CONTRACT #: 1605DC-18-C-0041 September 27, 2019 Submitted to: Women’s Bureau U.S. Department of Labor Prepared by: Arpita Chakravorty Jim Murdoch Hiren Nisar 2M Research 1521 N. Cooper St., Suite 600 Arlington, TX 76011 DISCLAIMER This report was developed by 2M Research and funded in whole or in part by the United States Department of Labor (DOL). The content of this report does not necessarily reflect the views or policies of the DOL, nor does any mention of curricula, trade names, commercial products, or organizations imply endorsement by the U.S. government. This report does not constitute a formal statement of federal law, legal requirements, or DOL policy and should not be construed as creating or articulating legal requirements or policy from DOL. Table of Contents OVERVIEW WEAKNESSES OF THE CONSAD STUDY UPDATED STATISTICAL ANALYSIS WHITE PAPER ANNOTATED BIBLIOGRAPHY Gender-Based Pay Disparity Study OVERVIEW CONTRACT #: 1605SDC-18-C-0041 September 27, 2019 Submitted to: Women’s Bureau U.S. Department of Labor Prepared by: Arpita Chakravorty Jim Murdoch Hiren Nisar 2M Research 1521 N. Cooper St., Suite 600 Arlington, TX 76011 In 2009, CONSAD Research Corporation (CONSAD) produced a report summarizing the contributors to the gender-based pay gap in the United States. Using the 2007 U.S. Census Bureau/Bureau of Labor Statistics Current Population Survey (CPS), CONSAD found that most of the pay gap could be explained by gender differences in occupation, human capital, work experience, career interruptions, parenting, and industry sector. Their statistical analysis explained approximately 45 percent of the raw gender wage gap of 20.4 percent. Since 2009, numerous studies analyzing the gender-based pay gap have been published, making now (2019) an appropriate time to reassess and update the CONSAD study. As a result, 2M Research (2M) was contracted to (a) review and synthesize the literature since the publication of the CONSAD study, (b) update the CONSAD study estimates using a newer version of the CPS data, and (c) make new estimations with variables and econometric techniques as suggested by the latest literature. The CONSAD study used various statistical models to estimate the contribution of explanatory factors like occupation, human capital, and industry to the raw wage gap. One of CONSAD’s models used factors that were proven to explain substantial portions of the gender wage gap in previous studies. This model explained approximately 45 percent of the raw gender wage gap of 20.4 percent, leaving 55 percent unexplained and an adjusted wage gap of approximately 11 percent. A second model used explanatory factors that were surrogates for longitudinal variables that were used in earlier studies. This version explained 65 to 76 percent of the raw gender wage gap, leaving an adjusted wage gap between 5 and 7 percent. The 2M research team identified weaknesses in these models that were addressed in updated analyses. In the updated study, 2M applied recent methodological advances to examine the decomposition of the overall gender wage gap over the distribution of wages. The 2M research team found that the raw gender wage gap was 17.4 percent at the mean and about 20 percent at the median. The raw wage gap increases between the 50th and 75th percentile and remains greatest at the higher percentiles. In addition, the 2M research team found that the importance of human capital varied across the wage distribution, and part-time work, as well as female-oriented occupations and industries, were crucial in explaining the wage gap at lower percentiles. The updated results explained about 20 to 70 percent of the raw wage gap over the wage distribution, thereby leaving an adjusted wage gap of 10 to 15 percent. This report is composed of four main sections. In Section 1, we discuss the primary weaknesses of the CONSAD study. These weaknesses were discovered over the course of our research and provide some context for both Section 2 (Replication and Update of CONSAD Estimates) and Section 3 (White Paper: Current Estimates of the Gender Pay Gap from 2018 Current Population Survey Data). Specific concerns with the CONSAD study are presented in Section 2. Section 3 is designed as a “standalone” white paper that can be distributed as is and, therefore, includes some analyses and summaries from other sections of this report. Section 4 (Annotated Bibliography of Literature on the Gender Pay Gap) concludes the report and serves as a standalone reference for future research in this area. Gender-Based Pay Disparity Study WEAKNESSES OF THE CONSAD STUDY CONTRACT #: 1605SDC-18-C-0041 September 27, 2019 Submitted to: Women’s Bureau U.S. Department of Labor Prepared by: Arpita Chakravorty Jim Murdoch Hiren Nisar 2M Research 1521 N. Cooper St., Suite 600 Arlington, TX 76011 As the 2M Research Team tried to duplicate and fully document the CONSAD findings (see Section 2 of this Report), we uncovered several specific weaknesses in the study. These weaknesses led to the creation of a standalone white paper (Section 3) that was not constrained to the same models and data definitions used in the CONSAD study. Rather, the research reported in the white paper was driven by our comprehensive review of the literature (Section 4) and currently accepted econometric practices. The specific details of the CONSAD study are presented in the next section of this report. Here, we present the general weaknesses of the study, which provide important context for the rest of the report. 1. The CONSAD study examined factors that explain the gender wage gap using the 2007 Current Population Survey’s Outgoing Rotation Group (CPS ORG) data. The data come from a complex sample of segments of the U.S. population and, therefore, include weights to ensure appropriate representation. The CONSAD study failed to use the weights in producing estimates of the relationship between wages and explanatory factors. 2. The derivation of key variables used to generate the empirical findings were not documented. The 2M Research Team had to test various definitions to reproduce the descriptive statistics in the CONSAD study. As documented in Section 2, some definitions were never discovered. 3. The CONSAD study provided a synopsis of economic research on the gender pay gap as of 2007. However, the synopsis excluded prominent existing studies that could have provided more insight into the factors that explain gender wage gap. While the inclusion of older articles dating back to the 1970s helped us understand the persistence of wage gaps, excluding extensive research on wage discrimination resulted in a limited framework for both specifying the empirical models and contextualizing the results. For example, the CONSAD study assumed that the lower wages earned by women with more children reflected either lower skill and experience or wage compensation for family-friendly fringe benefits. They failed to evaluate the existing empirical evidence of discrimination against mothers and, instead, assumed that employers with family-friendly policies pay less. 4. The CONSAD study included variables derived from similar people (in terms of age, marital status, and number of children) who were not working part-time or were out of the labor force. The presence of these variables created biased estimates, resulting in the apparent explanation of the wage gap. Without these variables, much less of the gap can be explained. 5. The CPS data used by CONSAD did not contain a measure of work experience—a key explanatory factor for the gender wage gap. This omission was not noted in the CONSAD study. These weaknesses call into question the validity of the empirical findings in the CONSAD study. The next three sections of this report explain how the 2M Research Team tested the findings and also created a new set of findings based on the current literature. Gender-Based Pay Disparity Study UPDATED STATISTICAL ANALYSIS CONTRACT #: 1605DC-18-C-0041 September 27, 2019 Submitted to: Women’s Bureau U.S. Department of Labor Prepared by: Arpita Chakravorty Jim Murdoch Hiren Nisar 2M Research 1521 N. Cooper St., Suite 600 Arlington, TX 76011 Updated Statistical Analysis TABLE OF CONTENTS 1 Introduction ...............................................................................................................................1 2 Data And Methodology ...............................................................................................................1 2.1 Data ....................................................................................................................................1 2.2 Methodology ......................................................................................................................2 3 Results .......................................................................................................................................3 3.1 CONSAD Replication ............................................................................................................3 3.2 CONSAD Study Update Using 2017 CPS Data ........................................................................9 4 Discussion And Next Steps ........................................................................................................ 13 References ....................................................................................................................................... 14 Appendix A Gender-Based Pay Gap For 2007 ...................................................................................
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