Gender-Based Pay Discrimination and Pregnancy

It is a commonly-cited fact that in New Zealand (and around the world), men and women have different incomes; with women usually, if not always, receiving lower pay. Whether women receive lower pay for doing an identical job or are simply less present in 'high powered' jobs is unclear; I think it is likely a mix of the two. However, simply citing this fact doesn't prove the existence of residual sexism (although this may also exist). There are important (but not irremediable) differences between women and men in the current labour market which at least partially account for this difference in pay.

The one I want to focus on is pregnancy and childcare, which is an interesting problem of asymmetric information. Suppose that at a particular company, a woman and a man both work, and both add the same amount of value to the workplace. Their employer knows this, and so hasn't discriminated based on gender so far. The employer however knows that both the employees are young, and likely to have children at some point. Moreover, the employee cannot know estimate the exact probability of a person having a child; marriage is no longer a good guide, as many children are born out of wedlock. The only guide (that I can think of) would be age, which I will discuss later. So the employer, to maximise expected return from the employees, has to guess, using averages.

On average, women spend more time off work during pregnancy (because they physically have to), and (I suspect) spend more time off after pregnancy as well to look after newborn babies. This means that even if they are equally good at their job, a women's expected value to their employer is lower, even if they don't plan on getting pregnant (because the employer probably doesn't know this). This means that even in a world free of sexism and any other reason to discriminate through pay, women will be paid somewhat less than men (After some basic algebra and wild guesses I very provisionally estimate this to be by about 5%).

What should we do? A popular solution is so-called 'pay equity laws', which force employers to pay women the same as men. This seems intuitive if you think the problem is sexism, but if you (like me) think there are at least some other factors involved, what you are essentially doing is placing quite an onerous minimum wage, which is likely to result in less women being employed, and probably perpetuate differences in earning power. We obviously can't make men give birth, and we can't stop people having babies. What might be a better solution (to the problem I have outlined here) is that we try to encourage more men to take on equal (or to cancel out pre-pregnancy inequalities, slightly more) responsibility for newborns post childbirth. Maybe this goes against biology, I don't know. But I suspect that if this did happen, women's pay would start to close the gap.

Note: Obviously this shouldn't be the case with older women, as after a certain age they are unable to give birth. In fact we might expect to see the effect reversed, as men can still impregnate women up to a very old age! In reality I doubt we would however, as inequalities are likely to be entrenched by late-middle-age, and older people are probably less likely to have babies at all, making the numbers relatively insignificant.