Abstract
An emerging literature provides evidence that same-sex behaving men earn significantly less than different-sex behaving men. I corroborate these existing findings and explore the source of these earnings differentials. I show that differences in worker characteristics between same-sex behaving men and different-sex behaving workers cannot explain the significant wage differential that same-sex behaving men experience. Wage differentials for same-sex behaving men are surprising because sexual orientation is not a visible trait. It seems as though same-sex behaving men might use a strategy of “passing” to avoid discrimination. I develop a model of worker-firm interaction that incorporates passing. I show the existence of an equilibrium in which wage differentials reflect a compensating differential, where same-sex behaving workers accept lower wages in exchange for being able to reveal their sexual orientation within a tolerant firm. In this equilibrium, competition will not erode earnings differentials as traditional models of discrimination suggest.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Some of the data used in this analysis are derived from Sensitive Data Files of the GSS, obtained under special contractual arrangements designed to protect the anonymity of respondents. These data are not available from the author. Persons interested in obtaining GSS Sensitive Data Files should contact the GSS at GSS@NORC.org.
In addition to Berg and Lien [2002], Arabsheibani et al. (2005) decompose wages for homosexual men but they use data for respondents in the United Kingdom.
Those who identify as gay may also embody mannerisms associated with homosexuals. Therefore, they may also be more likely to be perceived as gay.
These questions are available in survey rounds from 1994 to present. The data are representative of years 1994–2008.
I impute median income in the CPS separately for each year and income category in the GSS following Badgett [1995]. It should be noted that calculating median income for each category assumes the distribution of income across each category is the same for same-sex behaving and different-sex behaving males. This will bias estimates of wage differentials as the emerging literature suggests same-sex behaving men earn less than different-sex behaving men. As same-sex behaving men earn less than different-sex behaving men, the distribution of income for same-sex behaving men across each category should be concentrated below the distribution of different-sex behaving wages. Thus, this imputation technique yields conservative estimates of same-sex behaving wage differentials.
Occupational controls include: administrative occupations, service occupations, specialty occupations, managerial occupations, sales occupations, and precision occupations. Occupations are as defined as per the US Census Standard Occupational Classification.
The potential experience proxy may introduce bias into regression results. Potential experience may involve systematic errors that are related to the decision to have children, which is likely endogenous to expected earnings. Those with children systematically have less work experience or less attachment to the labor force. Blandford [2003] acknowledges this and reports that results do not appear to be sensitive to estimating regression separately for those with and without children. Further, this error is likely to be more substantial for women.
If those who are married are indeed less likely to disclose their sexual orientation at work, the interaction term may lead to more precise estimates. If same-sex behaving respondents in committed relationships choose to identify as married and disclose their sexual orientation, including the interaction will bias results in the opposite direction.
An exception: I do find that being White significantly increases wages, which is contrary to the findings in Badgett [1995] and Blandford [2003], where the impact of race is insignificant. However, finding being White to be significant is consistent with the literature on wage differentials for racial minorities, for example Altonji and Blank [1999], and further supports the accuracy of these results.
Current states with ENDAs (and year of enactment in parentheses) are: Oregon [2007], Washington [2006], California [1992], Nevada [1999], Colorado [2007], New Mexico [2003], Wisconsin [1982], Illinois [2005], Iowa [2007], Minnesota [1993], Maryland [2001], District of Columbia [1997], Delaware [2009], Connecticut [1991], Rhode Island [1995], New York [2002], New Jersey [1992], Massachusetts [1989], New Hampshire [1997], Vermont [1992], Maine [2005], and Hawaii [1991].
Decomposition results when regional controls and the proxy for intolerance yield estimates of roughly the same size and significance as those reported. Results are not reported here but available from the author.
This explanation is consistent with the well-documented lesbian earnings premium highlighted in Table 1.
Assume that firm type is initially determined by an exogenous factor.
This simplification is made for tractability. Job offers in general are likely to include other factors such as possibility for advancement. Further, employees may make trade-offs between lower wages at the beginning of a job for higher wages after gaining experience. Wage differentials might be more pronounced for homosexual men as they gain more experience with an employer, and employers may gather more information regarding the personal lives of homosexual workers. Whether we model initial wages or a discounted wage profile, the intuition of the model presented remains.
The Appendix is available by request via e-mail or at https://sites.google.com/site/martellmichaele/.
References
Albelda, Randy, Michael Ash, and M.V. Lee Badgett . 2005. Now That We Do: Same-Sex Couples and Marriage in Massachusetts. Massachusetts Benchmarks, 7 (2): 16–24.
Allegretto, Sylvia, and Michelle Arthur . 2001. An Empirical Analysis of Homosexual/Heterosexual Male Earnings Differentials: Unmarried and Unequal? Industrial and Labor Relations Review, 54 (3): 631–646.
Altonji, Joseph G., and Rebecca M. Blank . 1999. Race and Gender in the Labor Market, in Handbook of Labor Economics, edited by O. Ashenfelter and D. Card. Edition 1, Volume 3, Chapter 48. Amsterdam, The Netherlands: Elsevier Science, 3143–3325.
Angrist, Joshua D., and Jorn-Steffen Pischke . 2010. The Credibility Revolution in Empirical Economics: How Better Research Design is Taking the Con Out of Econometrics. Journal of Economic Perspectives, 24 (2): 3–30.
Antecol, Heather, Anneke Jong, and Michael Steinberger . 2008. The Sexual Orientation Wage Gap: The Role of Occupational Sorting, Human Capital and Discrimination. Industrial and Labor Relations Review, 61 (4): 518–543.
Arabsheibani, G. Reza, Alan Marin and Jonathan Wadsworth . 2005. Gay Pay in the UK. Economica, 72 (286): 333–347.
Badgett, M.V. Lee 1995. The Wage Effects of Sexual Orientation Discrimination. Industrial and Labor Relations Review, 48 (4): 726–739.
Bandiera, Oriana, Iwan Barankay, and Imran Rasul . 2010. Social Incentives in the Workplace. Review of Economic Studies, 77: 417–458.
Becker, Gary S. 1957. The Economics of Discrimination. Chicago: University of Chicago Press.
Berg, Nathan, and Donald Lien . 2002. Measuring the Effect of Sexual Orientation on Income: Evidence of Discrimination? Contemporary Economic Policy, 4: 394–414.
Black, Dan A., Hoda R. Makar, Seth G. Snaders, and Lowell J. Taylor . 2003. The Earnings Effects of Sexual Orientation. Industrial and Labor Relations Review, 56 (3): 449–469.
Black, Dan A., Seth G. Sanders, and Lowell J. Taylor . 2007. The Economics of Lesbian and Gay Families. Journal of Economic Perspectives, 21 (2): 53–70.
Blandford, John M. 2003. The Nexus of Sexual Orientation and Gender in the Determination of Earnings. Industrial and Labor Relations Review, 56 (4): 622–642.
Blinder, Alan S. 1973. Wage Discrimination: Reduced Form and Structural Variables. Journal of Human Resources, 8: 436–455.
Carpenter, Christopher S. 2004. New Evidence on Gay and Lesbian Household Incomes. Contemporary Economic Policy, 1: 78–94.
Carpenter, Christopher S. 2005. Self-Reported Sexual Orientation and Earnings: Evidence from California. Industrial and Labor Relations Review, 58 (2): 258–273.
Carpenter, Christopher S. 2007. Revisiting the Income Penalty for Behaviorally Gay Men: Evidence from NHANES III. Labour Economics, 14: 25–34.
Clain, Suzanne H., and Karen Leppel . 2001. An Investigation into Sexual Orientation Discrimination as an Explanation for Wage Differences. Applied Economics, 33 (1): 37–47.
Comolli, Renzo 2005. The Economics of Sexual Orientation and Racial Perception, Ph.D. Thesis, New Haven: Yale University.
Cushing-Daniels, Brendan, and Tsz-Ying Yeung . 2009. Wage Penalties and Sexual Orientation: An Update Using the General Social Survey. Contemporary Economic Policy, 27 (2): 164–175.
Elmslie, Bruce, and Edinaldo Tebaldi . 2007. Sexual Orientation and Labor Market Discrimination. Journal of Labor Research, 28 (3): 436–453.
Fassinger, Ruth E. 1996. Notes from the Margins: Integrating the Lesbian Experience into the Vocational Psychology of Women. Journal of Vocational Behavior, 48: 160–175.
Gates, Gary 2009. The Impact of Sexual Orientation Anti-Discrimination Policies on the Wages of Lesbians and Gay Men, California Center for Population Research Working Paper Series.
Grant Smith, Nation, and Kathleen M. Ingram . 2004. Workplace Heterosexism and Adjustment among Lesbian, Gay and Bisexual Individuals: The Role of Unsupported Social Interactions. Journal of Counseling Psychology, 51 (1): 57–67.
Jann, Ben 2008. A STATA Implementation of the Blinder-Oaxaca Decomposition, ETH Zurich Sociology Working Paper No. 5.
Klawitter, Marieka 2011. Multilevel Analysis of the Effects of Antidiscrimination Policies on Earnings by Sexual Orientation. Journal of Policy Analysis and Management, 30 (2): 334–358.
Klawitter, Marieka, and Victor Flatt . 1998. The Effects of State and Local Anti-Discrimination Policies on Earnings for Gays and Lesbians. Journal of Policy Analysis and Management, 4: 658–686.
Laumann, Edward, John Gagnon, Robert Michael, and Stuart Michaels . 1994. The Social Organization of Sexuality: Sexual Practices in the United States. Chicago: University of Chicago Press.
Martell, Michael E. 2010. Sexual Orientation Disclosure and the Process of Discrimination, Ph.D. Thesis, Washington DC: American University.
Oaxaca, Ronald 1973. Male-Female Wage Differentials in Urban Labor Markets. International Economic Review, 14 (3): 693–709.
Phelps, Edmund 1972. The Statistical Theory of Racism and Sexism. The American Economic Review, 62 (4): 659–661.
Saewyc, Elizabeth M., Greta R. Bauer, Carol L. Skay, Linda H. Bearinger, Michael D. Resnick, Elizabeth Reis, and Aileen Murphy . 2004. Measuring Sexual Orientation in Adolescent Health Surveys: Evaluation of Eight School-Based Surveys. Journal of Adolescent Health, 35 (4): 345.e1–345.e15.
Woods, James D., and Jay H. Lucas . 1993. The Corporate Closet: The Professional Lives of Gay Men in America. New York: The Free Press.
Acknowledgements
I would like to thank Mary Hansen, James Bono, John Willoughby, and Kara Reynolds (in addition to three anonymous reviewers) for their thoughtful comments that improved earlier drafts of this manuscript.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Martell, M. Differences Do Not Matter: Exploring the Wage Gap for Same-Sex Behaving Men. Eastern Econ J 39, 45–71 (2013). https://doi.org/10.1057/eej.2012.4
Published:
Issue Date:
DOI: https://doi.org/10.1057/eej.2012.4