Women, Wall Street, Work, and Compensation

Here we go again. Bloomberg News has a story by Dawn Kopecki on how the Great Recession has heightened pay disparities between men and women on Wall Street. It is the financial industry version of the "76 cent statistic." As Kopecki tells the story:

Women managers in finance, a group that includes bank tellers as well as executives, earned 63.9 cents for every dollar of income men earned in 2000, based on median salaries, according to Government Accountability Office statistics analyzed by Bloomberg. In 2007, the last year for which data are available, the figure was 58.8 cents. The 41-cent gap was the biggest in any of 13 industries surveyed by the GAO, and only two others had a widening disparity.

Kopecki then goes on to provide a number of various possible explanations for the persistent disparity. The first cited is, not surprisingly, the supposed male-dominated sexist culture inside the financial industry. Susan Estrich, law professor at USC in LA, is quoted as saying

“In the old days, the problem was conscious, explicit discrimination -- the doors were literally closed and we had to put our heads against them and pound them in. . .[now] people who are doing the judging unconsciously prefer people they’re comfortable with, people they know, people who look like them, people whose experience they recognize.”

Joan Williams, another law professor from Hastings College of Law says:

“The gender bias faced by female traders is open, dramatic and pervasive compared with other professionals. . .It’s all about masculine signaling -- mine’s bigger than yours. But in this case, it’s measured by salary and fueled by risk.”

 There is a LOT of psychologizing going on here. As the end of the Estrich quote suggests, however, their may very well be rational economic reasons for such disparity. There is good reason to hire someone who you know and whose experience you recognize.

Williams offers another explanation that makes most sense--the consequences of motherhood.

Studies have found that mothers are less likely to be hired or promoted and receive lower pay for similar jobs, Williams said. Becoming a mother is one of the leading reasons women leave Wall Street, she said.

I've written on this issue as it relates to the entire economy many years ago in an article "Women and Work." As I explain it

The big difference between men and women is how they react to marriage and child-birth. Marriage tends to increase men's participation in the labor force and decrease women's. The hours men work tend to increase with the birth of a child. Hours that women work tend to decrease when a child is born. Mothers tend to work less overtime and take fewer jobs that will require that they work long hours in return for high pay than fathers do.

I conclude with the following:

Whether egalitarians like it or not, for the "average" woman her family life trumps other concerns on the margin. Employers and employees are merely recognizing this fact of nature: women and men are not equal in the sense of being identical. They are different and have different comparative advantages when it comes to work outside the home versus child rearing.