US

Equal Pay

The recent World Cup success of the US women’s national soccer team was swiftly followed by calls for equal pay, and a reminder of the gender discrimination lawsuit that has been filed by the players against the sport’s national governing body, US Soccer. We invited our US panel to express their views on the economics behind this controversy.

We also widened the focus to the gender pay gap across the whole economy, following the proposal by Democratic presidential candidate Kamala Harris that companies should be required to show that they are paying men and women equally – and if unable to do so, be liable to a fine based on their profits. Another candidate, Elizabeth Warren, has also made policy proposals on equal pay.

We asked the experts whether they agreed or disagreed with the following statements, and, if so, how strongly and with what degree of confidence:

(a) In a case like the US women’s national soccer team where the revenues that they generate and their on-field performance both exceed those of the men’s team, there is no justification for lower pay.

(b) Fining companies above a certain size that fail to provide the same remuneration to men and women employees performing comparable roles would be an effective way of closing the gender pay gap.

The US women’s national soccer team

Of our 43 experts, 42 participated in this survey, three of whom voted ‘no opinion’ on both statements. Of the 39 who did express an opinion and weighted by each expert’s confidence in their response, 48% strongly agreed with the first statement, 46% agreed, 2% were uncertain, and 4% disagreed.

Among the short comments that the experts are able to include when they participate in the survey, Eric Maskin at Harvard replied: ‘If the women’s team really does generate more revenues, then, yes, paying them less seems unjustified.’ Darrell Duffie at Stanford said: ‘Seems like equal pay for (at least) equal work, in the same job, should require no additional explanation!’ And David Autor at MIT commented: ‘There’s no simple market price for talent. But I don’t see why women’s team shouldn’t get same share of rents as men’s team.’

While Michael Greenstone at Chicago agreed that: ‘Revenue and on-field performance are compelling output measures for national soccer teams’, other respondents pointed to additional potential determinants of relative pay, as well as questioning whether the women’s team are really earning less than the men.

Oliver Hart at Harvard noted that: ‘Of course, one can provide a justification: maybe their outside options are different. But it is not smart policy by US Soccer.’ Steven Kaplan at Chicago added: ‘Depends on contract. If both have all variable or all fixed pay, yes. If women’s contract is fixed, risk premium could pay men more.’ And Joseph Altonji at Yale pointed out that: ‘Gender differences in total World Cup revenue and in opportunities in professional soccer also affect pay.’

Larry Samuelson at Yale took the view that: ‘It’s a normative judgment, but commonly accepted standards for evaluating pay do not justify a differential.’ Robert Hall at Stanford was less convinced: ‘Justification is not a relevant concept in the economics of wage determination. Wages depend on a variety of forces, some bad and some OK.’ And while he strongly agreed with the statement, Angus Deaton at Princeton concluded: ‘Those are my values. This is not a question about economics.’

Closing the gender pay gap

Opinions on the second statement about policies to close the gender pay gap were far more divided with a substantial degree of uncertainty. Weighted by each expert’s confidence in their response, 28% agreed, 46% were uncertain, 17% disagreed and 9% strongly disagreed.

Among those who agreed that the threat of fines could encourage companies to close the gender pay gap, Bengt Holmström at MIT said: ‘It may take several design rounds. The goal is to change the mindset and attitudes. Some form of collective pressure is needed.’ His MIT colleague Richard Schmalensee was more cautious: ‘Sounds like a sensible plan, but administrative problems may turn out to be serious.’

Other panelists were similarly concerned about implementation. Caroline Hoxby at Stanford remarked: ‘The principle would be very hard to implement in relatively free labor markets. Define comparable outside of bureaucracies: near impossible.’ The challenge of defining comparable roles performed by men and women employees was echoed in other comments.

Kenneth Judd at Stanford replied: ‘Define “comparable roles”. If two jobs perform the same task, but one offers much more flexibility in hours, then a wage difference is fine.’ Christopher Udry at Northwestern added: ‘Defining comparable seems difficult. And wouldn’t address most of the gender gap, which is across, not within, task.’ And Anil Kashyap at Chicago noted that: ‘Comparable is so tricky, for instance, how do we adjust for experience, careers interruptions, etc?’, drawing attention to research evidence on the gender gap among young professionals in financial and corporate careers.

Maurice Obstfeld at Berkeley also queried ‘comparable roles’, and raised the issue of potential unintended consequences: ‘Devil is in the details – define ‘comparable’? Opens door to costly litigation, might therefore discourage hiring of women (or men).’ Similarly, Daron Acemoglu at MIT commented: ‘Fighting against discrimination is important, but such tax policies may backfire, for example, by discouraging the hiring of lower skill women.’ Richard Thaler at Chicago added: ‘These assessments are complicated econometrics exercises. This may not be the best strategy.’

Among the experts who expressed their disagreement that the proposed policy would be effective in closing the gender pay , Angus Deaton said: ‘Hard to enforce. Messy and burdensome. Good for lawyers and consultants.’ William Nordhaus at Yale thought it was ‘Not the right tool for changing social attitudes.’ And Steven Kaplan concluded that it was ‘Better to let the labor market sort this out rather than government.’

All comments made by the experts are in the full survey results.

Romesh Vaitilingam
@econromesh
July 2019

 

Question A:

In a case like the US women’s national soccer team where the revenues that they generate and their on-field performance both exceed those of the men’s team, there is no justification for lower pay.

Responses weighted by each expert's confidence

Question B:

Fining companies above a certain size that fail to provide the same remuneration to men and women employees performing comparable roles would be an effective way of closing the gender pay gap.

Responses weighted by each expert's confidence

Question A Participant Responses

Participant University Vote Confidence Bio/Vote History
Acemoglu
Daron Acemoglu
MIT
Agree
4
Bio/Vote History
Respect for market forces is important, but these should be distinguished from systemic discrimination against certain groups such as women
Alesina
Alberto Alesina
Harvard
Strongly Agree
8
Bio/Vote History
Altonji
Joseph Altonji
Yale
Disagree
6
Bio/Vote History
Gender differences in total World Cup revenue and in opportunities in professional soccer also affect pay.
Auerbach
Alan Auerbach
Berkeley
Agree
7
Bio/Vote History
Autor
David Autor
MIT
Agree
8
Bio/Vote History
There’s no simple market price for talent. But I don’t see why women’s team shouldn’t get same share of rents as men’s team
Baicker
Katherine Baicker
University of Chicago
Uncertain
3
Bio/Vote History
Banerjee
Abhijit Banerjee
MIT
Strongly Agree
7
Bio/Vote History
Bertrand
Marianne Bertrand
Chicago
Strongly Agree
8
Bio/Vote History
Brunnermeier
Markus Brunnermeier
Princeton
Agree
8
Bio/Vote History
Chetty
Raj Chetty
Harvard
Strongly Agree
7
Bio/Vote History
Chevalier
Judith Chevalier
Yale
Agree
6
Bio/Vote History
Obviously, revenue isn't the right concept and there are issues about measurement (shared sponsorships, etc).
-see background information here
Cutler
David Cutler
Harvard
Strongly Agree
7
Bio/Vote History
Deaton
Angus Deaton
Princeton
Strongly Agree
8
Bio/Vote History
Those are my values. This is not a question about economics.
Duffie
Darrell Duffie
Stanford
Strongly Agree
5
Bio/Vote History
Seems like equal for pay for (at least) equal work, in the same job, should require no additional explanation!
Edlin
Aaron Edlin
Berkeley Did Not Answer Bio/Vote History
Eichengreen
Barry Eichengreen
Berkeley
Agree
5
Bio/Vote History
Einav
Liran Einav
Stanford
Strongly Agree
3
Bio/Vote History
Fair
Ray Fair
Yale
Agree
5
Bio/Vote History
Finkelstein
Amy Finkelstein
MIT
Disagree
4
Bio/Vote History
Goolsbee
Austan Goolsbee
Chicago
Strongly Agree
10
Bio/Vote History
Seriously, WTF?
Greenstone
Michael Greenstone
University of Chicago
Agree
5
Bio/Vote History
revenue and on-field performance are compelling output measures for national soccer teams...(plus 9 y.o. daughter feels VERY strongly)
Hall
Robert Hall
Stanford
No Opinion
Bio/Vote History
Justification is not a relevant concept in the economics of wage determination. Wages depend on a variety of forces, some bad and some OK
Hart
Oliver Hart
Harvard
Agree
8
Bio/Vote History
Of course,one can provide a justification:maybe their outside options are different. But it is not smart policy by U.S. football.
Holmström
Bengt Holmström
MIT
Strongly Agree
6
Bio/Vote History
Hoxby
Caroline Hoxby
Stanford
No Opinion
Bio/Vote History
The issues are more complicated than the question's wording assumes. One cannot answer a question that conditions on false premises.
Hoynes
Hilary Hoynes
Berkeley
Strongly Agree
10
Bio/Vote History
Judd
Kenneth Judd
Stanford
Agree
7
Bio/Vote History
Kaplan
Steven Kaplan
Chicago Booth
Agree
1
Bio/Vote History
Depends on contract. If both have all variable or all fixed pay, yes. If women's contract is fixed, risk premium could pay men more.
Kashyap
Anil Kashyap
Chicago Booth
Agree
5
Bio/Vote History
Klenow
Pete Klenow
Stanford
Uncertain
3
Bio/Vote History
Levin
Jonathan Levin
Stanford
Agree
4
Bio/Vote History
Maskin
Eric Maskin
Harvard
Agree
5
Bio/Vote History
If the women's team really does generate more revenues, then, yes, paying them less seems unjustified
Nordhaus
William Nordhaus
Yale
Agree
8
Bio/Vote History
Obstfeld
Maurice Obstfeld
Berkeley
Strongly Agree
10
Bio/Vote History
Saez
Emmanuel Saez
Berkeley
Strongly Agree
7
Bio/Vote History
Samuelson
Larry Samuelson
Yale
Agree
8
Bio/Vote History
It's a normative judgement, but commonly accepted standards for evaluating pay do not justify a differential.
Scheinkman
José Scheinkman
Columbia University
Agree
8
Bio/Vote History
Schmalensee
Richard Schmalensee
MIT
Strongly Agree
7
Bio/Vote History
Shapiro
Carl Shapiro
Berkeley
No Opinion
Bio/Vote History
From a fairness perspective, seems very difficult or impossible to justify. Need to know more re economic setting for full answer.
Shimer
Robert Shimer
University of Chicago
Agree
5
Bio/Vote History
Stock
James Stock
Harvard
Agree
4
Bio/Vote History
Thaler
Richard Thaler
Chicago Booth
Strongly Agree
5
Bio/Vote History
Udry
Christopher Udry
Northwestern
Strongly Agree
8
Bio/Vote History
One could of course make up "justifications", but they would be specious. This is not a market based outcome.

Question B Participant Responses

Participant University Vote Confidence Bio/Vote History
Acemoglu
Daron Acemoglu
MIT
Uncertain
5
Bio/Vote History
Fighting against discrimination is important, but such tax policies may backfire, e.g., by discouraging the hiring of lower skill women
Alesina
Alberto Alesina
Harvard
Uncertain
2
Bio/Vote History
Altonji
Joseph Altonji
Yale
Uncertain
5
Bio/Vote History
It would probably reduce the gender gap by a modest amount, would also have costs.
Auerbach
Alan Auerbach
Berkeley
Agree
3
Bio/Vote History
Autor
David Autor
MIT
Uncertain
5
Bio/Vote History
I strongly support equal pay. Extremely difficult to write good laws that enforce this goal since marginal product is not usually observable
Baicker
Katherine Baicker
University of Chicago
Uncertain
3
Bio/Vote History
Banerjee
Abhijit Banerjee
MIT
Uncertain
7
Bio/Vote History
Bertrand
Marianne Bertrand
Chicago
Uncertain
6
Bio/Vote History
Brunnermeier
Markus Brunnermeier
Princeton
Agree
6
Bio/Vote History
Chetty
Raj Chetty
Harvard
Uncertain
7
Bio/Vote History
Chevalier
Judith Chevalier
Yale
Agree
5
Bio/Vote History
Implementation issues an important challenge.
Cutler
David Cutler
Harvard
Agree
3
Bio/Vote History
Deaton
Angus Deaton
Princeton
Disagree
7
Bio/Vote History
Hard to enforce. Messy and burdensome. Good for lawyers and consultants.
Duffie
Darrell Duffie
Stanford
Uncertain
1
Bio/Vote History
There may be better ways? Naming and shaming might be effective? I expect US Soccer to respond properly to the justified outcry.
Edlin
Aaron Edlin
Berkeley Did Not Answer Bio/Vote History
Eichengreen
Barry Eichengreen
Berkeley
Agree
5
Bio/Vote History
Einav
Liran Einav
Stanford
Disagree
3
Bio/Vote History
Fair
Ray Fair
Yale
Agree
5
Bio/Vote History
Finkelstein
Amy Finkelstein
MIT
Uncertain
7
Bio/Vote History
Goolsbee
Austan Goolsbee
Chicago
Uncertain
1
Bio/Vote History
Greenstone
Michael Greenstone
University of Chicago
Uncertain
2
Bio/Vote History
Hall
Robert Hall
Stanford
Agree
5
Bio/Vote History
That is not to say that such a policy is the best way to deal with malignant sources of depressed earnings of women
Hart
Oliver Hart
Harvard
Agree
7
Bio/Vote History
I think it could help. Whether it is the best way is another matter. There would no doubt be some distortions.
Holmström
Bengt Holmström
MIT
Agree
4
Bio/Vote History
It may take several design rounds. The goal is to change the mindset and attitudes. Some form of collective pressure is needed.
Hoxby
Caroline Hoxby
Stanford
Uncertain
10
Bio/Vote History
The principle would be very hard to implement in relatively free labor markets. Define comparable outside of bureaucracies: near Impossible.
Hoynes
Hilary Hoynes
Berkeley
Uncertain
7
Bio/Vote History
Judd
Kenneth Judd
Stanford
Disagree
7
Bio/Vote History
Define "comparable roles." If two jobs perform the same task, but one offers much more flexibility in hours, then a wage difference is fine.
Kaplan
Steven Kaplan
Chicago Booth
Strongly Disagree
10
Bio/Vote History
Better to let the labor market sort this out rather than government.
Kashyap
Anil Kashyap
Chicago Booth
Uncertain
7
Bio/Vote History
comparable is so tricky, for instance how do we adjust for experience, careers interruptions, etc?
-see background information here
Klenow
Pete Klenow
Stanford
Disagree
3
Bio/Vote History
Seems too easy to get around through sorting, and might even backfire.
Levin
Jonathan Levin
Stanford
Uncertain
1
Bio/Vote History
Direct way to mandate pay equity, but hard to assess without specifics.
Maskin
Eric Maskin
Harvard
Uncertain
7
Bio/Vote History
This questions is stated too vaguely. What does "comparable roles" mean?
Nordhaus
William Nordhaus
Yale
Disagree
4
Bio/Vote History
Not the right tool for changing social attitudes.
Obstfeld
Maurice Obstfeld
Berkeley
Uncertain
6
Bio/Vote History
Devil is in the details -- define "comparable"? Opens door to costly litigation, might therefore discourage hiring of women (or men).
Saez
Emmanuel Saez
Berkeley
Agree
5
Bio/Vote History
Samuelson
Larry Samuelson
Yale
Uncertain
1
Bio/Vote History
Too much lies in the details, such as what would comprise "comparable roles" and how this is to be implemented, to evalutae this proposal.
Scheinkman
José Scheinkman
Columbia University
Disagree
8
Bio/Vote History
Compensation should depend also on performance.
Schmalensee
Richard Schmalensee
MIT
Agree
4
Bio/Vote History
Sounds like a sensible plan, but administrative problems may turn out to be serious.
Shapiro
Carl Shapiro
Berkeley
Agree
6
Bio/Vote History
Effective in the sense of achieving the stated goal.
Shimer
Robert Shimer
University of Chicago
Strongly Disagree
8
Bio/Vote History
Stock
James Stock
Harvard
Disagree
4
Bio/Vote History
Thaler
Richard Thaler
Chicago Booth
Uncertain
1
Bio/Vote History
These assessments are complicated econometrics exercises. This may not be the best strategy.
Udry
Christopher Udry
Northwestern
Uncertain
5
Bio/Vote History
Defining comparable seems difficult. And wouldn't address most of the gender gap, which is across, not within, task.