The gender-pay gap misses manly risk

The debate over the gender-pay gap has raged for years, and we know quite a bit about it. This 2017 paper, for example, indicates that the gender gap has been shrinking while the motherhood gap has persisted.

I’m not here to question these findings or the “fairness” of the gap, but reflect a little more on motherhood, risk and productivity.

As a first step, let’s agree that men tend to take more risks than women, on average. These risks might be good for society (inventions! discoveries!), but they can be bad for individual men (death!) or their firms (bankruptcy!), so risk will be relevant to firms, profits and productivity.

Turning to motherhood, we know that it’s predictable (at least in the last few months that might lead to maternity leave), that it’s likely to reduce a mother’s availability for the job, and probably going to lead to even less risky behavior by a mother who wants to take care of herself, her child(ren), and family.

Employers might pay women less for their predictable chance of having children but fail to reduce men’s pay for the unpredictable risks they bring…

Taken together, we can suppose that employers might pay women less for their predictable chance of having children but fail to reduce men’s pay for the unpredictable risks they bring to the firm. The list of such risks is long and stereotypical: lying salesmen, heart-attack stress, over-aggressive purchases,  bad hires based on hunches, sexual harassment, etc. These risks are hard to predict or plan for, so they are more like uncertainties (“known unknowns”) than risks that can be insured against, which means that firms may be “paying too much” for the generic male employee.

My one-handed conclusion is that the risk of a woman having a baby might  be correctly priced in terms of a wage discount while the risk of errant male behavior may not be correctly priced, meaning that men (especially those who are younger, childless and/or aggressive towards their careers) may be paid too much, relative to the risk they represent to the firm.

Note: This post also links to my earlier post on “pondering” because women — in my experience — tend to wait and ponder before acting while men rush into action without as much reflection. (Got an angry email to send? Write it today but send it tomorrow, after a good sleep and careful reread.)

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

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