Wagenomics: Do You Earn Less Because of Your Race, Gender or Other Feature?

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Gender

Since the beginning of time, inequality of outcome has lead people to point blame towards a source of troubles. There’s no questioning that women, minorities and others have been treated unfairly in the workplace and have suffered from lower wages; but the question remains if those inequalities today are the result of discrimination or individual choices and market factors. Gender seems to be the most widely discussed reason for income inequality among demographics, most of that originating from the left, with many prominent Democrats like Kirsten Gillibrand (D-NY) and Elizabeth Warren (D-MA) mentioning “equal pay” with regard to the gender pay gap.

Meanwhile, there still remains a racial pay gap as well in America.

Gender

According to the Bureau of Labor Statistics, full-time women bring home approximately 82% of the median weekly earnings of men. However, this doesn’t reflect life choices that would perhaps explain this difference, as inequality as an outcome doesn’t mean inequality of opportunity.

The first flaw in the method with which this was measured is that it doesn’t count for the fact they work different hours. “Full time” by definition includes everyone working 35 or more hours a week, but men work 43.4 hours a week on average while women work 41.4 hours per week, but will be paid equal to 45.1 and 42.1 hours respectively when overtime is factored in, and if you do that, the hourly salary is already 87.7%.

There is something a bit peculiar about the numbers: the wage gap varies significantly based on age.

Women aged 16-24 make a staggering 94.9% of the average male salary in the same age group, while women aged 55-64 only earn 73.7%. Also, if men and women in this age group working full time do so at the national average, women here would make 1.69% more hourly.

Looking further, something interesting happens when people hit middle age (35-44): after that, the median income for a man continues to grow like it did the last twenty years until he hits retirement age, but the median female salary slowly plummets. Why? Childbirth and marriage?

When women have children, more often than not, men pick up more hours and continue their careers while women cut their hours down, pass up job opportunities or take significant time off.

Single women without any children under 18 took home 96.1% of men’s earnings, and I would be willing to guess the stats would be practically equal if they didn’t also count in old widows or middle-aged women who were pregnant in their teens.

Two studies actually confirm my suspicions.

Among people who were never married, without children, women make 8% more than men on average; women in this demographic make more than their male counterparts in 147 of the 150 biggest cities in the US, with it reaching more than 20% in Memphis and Atlanta. Does this mean there’s some form of reverse discrimination towards men? Absolutely not!
In 2013, 40% more women graduated with some form of college degree than did men and 93% of inmates are men – not exactly something employers are looking for in job applicants.

If the empirical data wasn’t enough, if women were truly universally being compensated 20% less for the same work as organizations like Buzzfeed suggest, every “evil corporation” would become highly profitable overnight by hiring strictly women.

Race

Racially, Asians outpace Caucasians, African Americans, and Hispanics when it comes to wages. The median wage for an Asian person is $68,636, for white Americans it’s $57,009, for Hispanics it’s $39,005, and for African Americans it’s $33,321 per year.

On a weekly basis, white Americans work 39 hours on average, Asians average 38.9, Latinos work 37.9 hours and African Americans come in last at 36.1 hours.
Thus, Asians, Caucasians, Latinos, and African Americans earn an hourly wage of $33.93, $28.11, $19.79 and $17.75 respectively.

This is where the math begins to gets difficult.

First, it is important to factor in different levels of education, which means weighing each ethnicity by the percent that attained each level of education and factor in how it compares to average wages.

Less than a high school diploma creates a 42.7% reduction in income, only a high school diploma leads to a 21.2% drop in average income and so on.

A staggering 61% of Asian Americans hold a bachelor’s degree or higher, and a whopping 26% of Latinos have less than a high school diploma (You will have to weigh the different degrees as well to find that people with a “bachelor’s degree or higher” average a $1263.15 paycheck).

Factoring all of this in, Asians earn $28.12, Caucasians earn $26.45, Latinos earn $22.20 and African Americans earn $17.72.

Next it’s important to factor in the five major Bureau of Labor Statistics occupations:
(1) Production, transportation and material moving ($36,213)
(2) Management, professional and related ($84,231),
(3) Sales and office ($38,168)
(4) Natural resources, construction and maintenance ($42,234)
(5) Service ($23,808).
Seeing as an impressive 52.3% of Asian Americans work in the management sector while 25.4% of Hispanic Americans work in service, we can factor this in and expect Asian incomes to be higher. If we weighed this out, the median Asian, white, Black and Hispanic household should accumulate an income as follows (rounded): $59.9k (107.4%), $54.0k (96.77%), $48.4k (86.7%), $45.1k (80.77%), the parenthesis represent the percent of the average national household income according to the same source; the fact it measures by household rather than by individual is irrelevant since I’m just going to weigh it percentage wise.

Thus, dividing the previous number by the percent listed, we can estimate what someone of each race with the same degree, hours worked, and occupation would approximately make:
Asian American ($26.18 per hour), white American ($27.33 per hour), Hispanic American ($27.49 per hour), and African American ($20.44 per hour).

Why do three ethnic groups earn more or less the same when accounting for different work hours, levels of education and occupation, but one makes 26% less than his Hispanic co-worker? I do not know.

I could calculate how age factors in, or perhaps criminal background, but I can’t imagine those closing the income gap between African Americans and the rest of America (both graphs are from the Bureau of Labor Statistics).

What I can tell you is that if you’re Asian, white or Hispanic – there’s almost no likelihood you’re being discriminated against by employers, you’re likely being treated fairly.

If you’re black, that may not be the case.

I think it’s worth the research to see if a major market force is causing African Americans to earn less than their white, Asian or Hispanic counterparts, but I will say that the idea of African Americans being discriminated against is not a new one.

One study showed that white Americans with a criminal record (17%) are more likely to get an interview callback than a Black American without one (14%).

Obviously, people that aren’t hired aren’t factored into the “wage gap”, but it does support the claim that African Americans suffer from discrimination by employers, especially seeing the black unemployment rate is double the Asian or white unemployment rate.

Thus, it’s more than plausible to conclude this wage difference between African Americans and their Asian, White and Hispanic counterparts is a result of discrimination.

Age, education, sexuality and religion

I refuse to analyze these factors for simple, but credible reasons.

Age and education definitely impact your pay and for good reason: people with experience and a Harvard degree will be rewarded.

Sexuality and religion aren’t apparent like gender and race. There are Muslims from Algeria to Indonesia, Christians from Norway to South Africa and Atheists from here to Japan.

As compensation and sexuality is concerned, lesbians earn a massive 17.9% more than straight women, while gay men outperform straight men by 4.5% when it comes to annual earnings. The fact that lesbian women outperform straight women by that wide of a margin further proves the point that there is no gender pay gap, as I can’t imagine many lesbian women taking time off for child birth or marriage quite like straight women do.

Final remarks

I may not be from the left-wing and I often intentionally avoid race politics, but I will be the first person to say that fighting against a black wage gap is worth fighting for, or at the very least researching to see if there is some other market factor contributing to it.
That said, I still believe that any person, regardless of race, gender or religion can make it in America and financially prosper.

I think that on principle, leftists, conservatives, libertarians and everyone in between believe that people who create the same amount of profit or good for the company in the same position and circumstances should be paid equally and given the same opportunity, and people generally provide that.

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Jake Dorsch

Jake Dorsch is a libertarian activist, bank teller, investor and aspiring future economist from Green Bay, Wisconsin that is pursuing a bachelor’s degree in both political science and quantitative economics at Drake University. He is currently on track to graduate a year early and will likely continue to obtain a master’s degree in econometrics.