Gender and Pay
Pay discrimination concerns have recently generated a flurry of legislative activity. The new Congress quickly passed the Lilly Ledbetter Fair Pay Act, while the Paycheck Fairness Act awaits Senate consideration after House approval. Not everybody, however, is convinced of the need for such legisation, as a study commissioned by the Bush Administration’s Department of Labor (and released days before President Obama’s Inauguration) repeated the contention that pay differentials are primarily the result of gender-based differences in investments in human capital development — e.g., that women on average are more likely than men to choose careers that maximize flexibility in accommodating family caregiving responsibilities at the expense of employment hours and advancement.
But this reminded me of a remarkable study released last year that examined the wages of transgender people – individuals who change their gender, typically with hormone therapy and surgery – to learn more about the relationship between gender and workplace experience while holding human capital investments constant. The authors found that workers who transitioned from male to female (MTFs) experienced “significant losses in hourly earnings,” while those who transitioned from female to male (FTMs) experienced “no change in earnings or small positive increases in earnings from becoming men.”
More specifically, authors Kristen Schilt and Matthew Wiswall concluded “that while transgender people have the same human capital after their transitions, their workplace experiences often change radically. We estimate that average earnings for female-to-male transgender workers increase slightly following their gender transitions, while average earnings for male-to-female transgender workers fall by nearly 1/3. . . .These findings suggest that regardless of childhood gender socialization and prior human capital accumulation, becoming women for MTFs creates a workplace penalty that FTMs do not generally encounter when they become men. And, while MTFs may benefit from being men at work before their gender change, they cannot always take this gender advantage with them into womanhood. We view these findings as evidence that the gender gap in workplace outcomes does not entirely reflect omitted variables, such as unobserved human capital. Rather, the change in posttransition MTFs’ earnings suggests that the labor market is not gender neutral.”