The Gender Pay Gap: Challenging the Rationalizations. Perceived Equity, Discrimination, and the Limits of Human Capital Models

Abstract

A gender gap in earnings has proven both persistent and universal. This paper relies mainly on U.S. data, but a gap between women’s and men’s earnings exists in every country. There is a continuing debate as to the extent to which the gap reflects merely the inevitable and reasonably fair result of differing work patterns and behaviors by women and men or the impact of employment discrimination against women. The human capital approach, in which various explanatory variables are used to shrink the perceived size of the gap, is often used to argue that much of the gap is due, not to discrimination, but to differing investments in employment by women and men. However, neither “investments” nor “outcomes” can be assessed in gender-neutral ways and the model’s underlying notion of rational choices made against the backdrop of a gender-neutral playing field is flawed. Discrimination appears to be entwined with gendered work patterns and behaviors; many of the human capital “explanatory” variables themselves require explanation. Understanding the gap requires recognition of the limitations of human capital models, and a willingness both to take a more sophisticated approach to such models, and to think beyond this approach.