Equal Pay

The recent World Cup success of the US women’s national soccer team was swiftly followed by calls for equal pay, and a reminder of the gender discrimination lawsuit that has been filed by the players against the sport’s national governing body, US Soccer. We invited our US panel to express their views on the economics behind this controversy.

We also widened the focus to the gender pay gap across the whole economy, following the proposal by Democratic presidential candidate Kamala Harris that companies should be required to show that they are paying men and women equally – and if unable to do so, be liable to a fine based on their profits. Another candidate, Elizabeth Warren, has also made policy proposals on equal pay.

We asked the experts whether they agreed or disagreed with the following statements, and, if so, how strongly and with what degree of confidence:

(a) In a case like the US women’s national soccer team where the revenues that they generate and their on-field performance both exceed those of the men’s team, there is no justification for lower pay.

(b) Fining companies above a certain size that fail to provide the same remuneration to men and women employees performing comparable roles would be an effective way of closing the gender pay gap.

The US women’s national soccer team

Of our 43 experts, 42 participated in this survey, three of whom voted ‘no opinion’ on both statements. Of the 39 who did express an opinion and weighted by each expert’s confidence in their response, 48% strongly agreed with the first statement, 46% agreed, 2% were uncertain, and 4% disagreed.

Among the short comments that the experts are able to include when they participate in the survey, Eric Maskin at Harvard replied: ‘If the women’s team really does generate more revenues, then, yes, paying them less seems unjustified.’ Darrell Duffie at Stanford said: ‘Seems like equal pay for (at least) equal work, in the same job, should require no additional explanation!’ And David Autor at MIT commented: ‘There’s no simple market price for talent. But I don’t see why women’s team shouldn’t get same share of rents as men’s team.’

While Michael Greenstone at Chicago agreed that: ‘Revenue and on-field performance are compelling output measures for national soccer teams’, other respondents pointed to additional potential determinants of relative pay, as well as questioning whether the women’s team are really earning less than the men.

Oliver Hart at Harvard noted that: ‘Of course, one can provide a justification: maybe their outside options are different. But it is not smart policy by US Soccer.’ Steven Kaplan at Chicago added: ‘Depends on contract. If both have all variable or all fixed pay, yes. If women’s contract is fixed, risk premium could pay men more.’ And Joseph Altonji at Yale pointed out that: ‘Gender differences in total World Cup revenue and in opportunities in professional soccer also affect pay.’

Larry Samuelson at Yale took the view that: ‘It’s a normative judgment, but commonly accepted standards for evaluating pay do not justify a differential.’ Robert Hall at Stanford was less convinced: ‘Justification is not a relevant concept in the economics of wage determination. Wages depend on a variety of forces, some bad and some OK.’ And while he strongly agreed with the statement, Angus Deaton at Princeton concluded: ‘Those are my values. This is not a question about economics.’

Closing the gender pay gap

Opinions on the second statement about policies to close the gender pay gap were far more divided with a substantial degree of uncertainty. Weighted by each expert’s confidence in their response, 28% agreed, 46% were uncertain, 17% disagreed and 9% strongly disagreed.

Among those who agreed that the threat of fines could encourage companies to close the gender pay gap, Bengt Holmström at MIT said: ‘It may take several design rounds. The goal is to change the mindset and attitudes. Some form of collective pressure is needed.’ His MIT colleague Richard Schmalensee was more cautious: ‘Sounds like a sensible plan, but administrative problems may turn out to be serious.’

Other panelists were similarly concerned about implementation. Caroline Hoxby at Stanford remarked: ‘The principle would be very hard to implement in relatively free labor markets. Define comparable outside of bureaucracies: near impossible.’ The challenge of defining comparable roles performed by men and women employees was echoed in other comments.

Kenneth Judd at Stanford replied: ‘Define “comparable roles”. If two jobs perform the same task, but one offers much more flexibility in hours, then a wage difference is fine.’ Christopher Udry at Northwestern added: ‘Defining comparable seems difficult. And wouldn’t address most of the gender gap, which is across, not within, task.’ And Anil Kashyap at Chicago noted that: ‘Comparable is so tricky, for instance, how do we adjust for experience, careers interruptions, etc?’, drawing attention to research evidence on the gender gap among young professionals in financial and corporate careers.

Maurice Obstfeld at Berkeley also queried ‘comparable roles’, and raised the issue of potential unintended consequences: ‘Devil is in the details – define ‘comparable’? Opens door to costly litigation, might therefore discourage hiring of women (or men).’ Similarly, Daron Acemoglu at MIT commented: ‘Fighting against discrimination is important, but such tax policies may backfire, for example, by discouraging the hiring of lower skill women.’ Richard Thaler at Chicago added: ‘These assessments are complicated econometrics exercises. This may not be the best strategy.’

Among the experts who expressed their disagreement that the proposed policy would be effective in closing the gender pay , Angus Deaton said: ‘Hard to enforce. Messy and burdensome. Good for lawyers and consultants.’ William Nordhaus at Yale thought it was ‘Not the right tool for changing social attitudes.’ And Steven Kaplan concluded that it was ‘Better to let the labor market sort this out rather than government.’

All comments made by the experts are in the full survey results.

Romesh Vaitilingam
@econromesh
July 2019

Question A Participant Responses

Participant	University	Vote	Confidence	Bio/Vote History
Daron Acemoglu	MIT	Agree	4	Bio/Vote History
	Respect for market forces is important, but these should be distinguished from systemic discrimination against certain groups such as women
Alberto Alesina	Harvard	Strongly Agree	8	Bio/Vote History
Joseph Altonji	Yale	Disagree	6	Bio/Vote History
	Gender differences in total World Cup revenue and in opportunities in professional soccer also affect pay.
Alan Auerbach	Berkeley	Agree	7	Bio/Vote History
David Autor	MIT	Agree	8	Bio/Vote History
	There’s no simple market price for talent. But I don’t see why women’s team shouldn’t get same share of rents as men’s team
Katherine Baicker	University of Chicago	Uncertain	3	Bio/Vote History
Abhijit Banerjee	MIT	Strongly Agree	7	Bio/Vote History
Marianne Bertrand	Chicago	Strongly Agree	8	Bio/Vote History
Markus Brunnermeier	Princeton	Agree	8	Bio/Vote History
Raj Chetty	Harvard	Strongly Agree	7	Bio/Vote History
Judith Chevalier	Yale	Agree	6	Bio/Vote History
	Obviously, revenue isn't the right concept and there are issues about measurement (shared sponsorships, etc). -see background information here
David Cutler	Harvard	Strongly Agree	7	Bio/Vote History
Angus Deaton	Princeton	Strongly Agree	8	Bio/Vote History
	Those are my values. This is not a question about economics.
Darrell Duffie	Stanford	Strongly Agree	5	Bio/Vote History
	Seems like equal for pay for (at least) equal work, in the same job, should require no additional explanation!
Aaron Edlin	Berkeley	Did Not Answer		Bio/Vote History
Barry Eichengreen	Berkeley	Agree	5	Bio/Vote History
Liran Einav	Stanford	Strongly Agree	3	Bio/Vote History
Ray Fair	Yale	Agree	5	Bio/Vote History
Amy Finkelstein	MIT	Disagree	4	Bio/Vote History
Austan Goolsbee	Chicago	Strongly Agree	10	Bio/Vote History
	Seriously, WTF?
Michael Greenstone	University of Chicago	Agree	5	Bio/Vote History
	revenue and on-field performance are compelling output measures for national soccer teams...(plus 9 y.o. daughter feels VERY strongly)
Robert Hall	Stanford	No Opinion		Bio/Vote History
	Justification is not a relevant concept in the economics of wage determination. Wages depend on a variety of forces, some bad and some OK
Oliver Hart	Harvard	Agree	8	Bio/Vote History
	Of course,one can provide a justification:maybe their outside options are different. But it is not smart policy by U.S. football.
Bengt Holmström	MIT	Strongly Agree	6	Bio/Vote History
Caroline Hoxby	Stanford	No Opinion		Bio/Vote History
	The issues are more complicated than the question's wording assumes. One cannot answer a question that conditions on false premises.
Hilary Hoynes	Berkeley	Strongly Agree	10	Bio/Vote History
Kenneth Judd	Stanford	Agree	7	Bio/Vote History
Steven Kaplan	Chicago Booth	Agree	1	Bio/Vote History
	Depends on contract. If both have all variable or all fixed pay, yes. If women's contract is fixed, risk premium could pay men more.
Anil Kashyap	Chicago Booth	Agree	5	Bio/Vote History
Pete Klenow	Stanford	Uncertain	3	Bio/Vote History
	-see background information here
Jonathan Levin	Stanford	Agree	4	Bio/Vote History
Eric Maskin	Harvard	Agree	5	Bio/Vote History
	If the women's team really does generate more revenues, then, yes, paying them less seems unjustified
William Nordhaus	Yale	Agree	8	Bio/Vote History
Maurice Obstfeld	Berkeley	Strongly Agree	10	Bio/Vote History
Emmanuel Saez	Berkeley	Strongly Agree	7	Bio/Vote History
Larry Samuelson	Yale	Agree	8	Bio/Vote History
	It's a normative judgement, but commonly accepted standards for evaluating pay do not justify a differential.
José Scheinkman	Columbia University	Agree	8	Bio/Vote History
Richard Schmalensee	MIT	Strongly Agree	7	Bio/Vote History
Carl Shapiro	Berkeley	No Opinion		Bio/Vote History
	From a fairness perspective, seems very difficult or impossible to justify. Need to know more re economic setting for full answer.
Robert Shimer	University of Chicago	Agree	5	Bio/Vote History
James Stock	Harvard	Agree	4	Bio/Vote History
Richard Thaler	Chicago Booth	Strongly Agree	5	Bio/Vote History
Christopher Udry	Northwestern	Strongly Agree	8	Bio/Vote History
	One could of course make up "justifications", but they would be specious. This is not a market based outcome.

Question B Participant Responses

Participant	University	Vote	Confidence	Bio/Vote History
Daron Acemoglu	MIT	Uncertain	5	Bio/Vote History
	Fighting against discrimination is important, but such tax policies may backfire, e.g., by discouraging the hiring of lower skill women
Alberto Alesina	Harvard	Uncertain	2	Bio/Vote History
Joseph Altonji	Yale	Uncertain	5	Bio/Vote History
	It would probably reduce the gender gap by a modest amount, would also have costs.
Alan Auerbach	Berkeley	Agree	3	Bio/Vote History
David Autor	MIT	Uncertain	5	Bio/Vote History
	I strongly support equal pay. Extremely difficult to write good laws that enforce this goal since marginal product is not usually observable
Katherine Baicker	University of Chicago	Uncertain	3	Bio/Vote History
Abhijit Banerjee	MIT	Uncertain	7	Bio/Vote History
Marianne Bertrand	Chicago	Uncertain	6	Bio/Vote History
Markus Brunnermeier	Princeton	Agree	6	Bio/Vote History
Raj Chetty	Harvard	Uncertain	7	Bio/Vote History
Judith Chevalier	Yale	Agree	5	Bio/Vote History
	Implementation issues an important challenge.
David Cutler	Harvard	Agree	3	Bio/Vote History
Angus Deaton	Princeton	Disagree	7	Bio/Vote History
	Hard to enforce. Messy and burdensome. Good for lawyers and consultants.
Darrell Duffie	Stanford	Uncertain	1	Bio/Vote History
	There may be better ways? Naming and shaming might be effective? I expect US Soccer to respond properly to the justified outcry.
Aaron Edlin	Berkeley	Did Not Answer		Bio/Vote History
Barry Eichengreen	Berkeley	Agree	5	Bio/Vote History
Liran Einav	Stanford	Disagree	3	Bio/Vote History
Ray Fair	Yale	Agree	5	Bio/Vote History
Amy Finkelstein	MIT	Uncertain	7	Bio/Vote History
Austan Goolsbee	Chicago	Uncertain	1	Bio/Vote History
Michael Greenstone	University of Chicago	Uncertain	2	Bio/Vote History
Robert Hall	Stanford	Agree	5	Bio/Vote History
	That is not to say that such a policy is the best way to deal with malignant sources of depressed earnings of women
Oliver Hart	Harvard	Agree	7	Bio/Vote History
	I think it could help. Whether it is the best way is another matter. There would no doubt be some distortions.
Bengt Holmström	MIT	Agree	4	Bio/Vote History
	It may take several design rounds. The goal is to change the mindset and attitudes. Some form of collective pressure is needed.
Caroline Hoxby	Stanford	Uncertain	10	Bio/Vote History
	The principle would be very hard to implement in relatively free labor markets. Define comparable outside of bureaucracies: near Impossible.
Hilary Hoynes	Berkeley	Uncertain	7	Bio/Vote History
Kenneth Judd	Stanford	Disagree	7	Bio/Vote History
	Define "comparable roles." If two jobs perform the same task, but one offers much more flexibility in hours, then a wage difference is fine.
Steven Kaplan	Chicago Booth	Strongly Disagree	10	Bio/Vote History
	Better to let the labor market sort this out rather than government.
Anil Kashyap	Chicago Booth	Uncertain	7	Bio/Vote History
	comparable is so tricky, for instance how do we adjust for experience, careers interruptions, etc? -see background information here
Pete Klenow	Stanford	Disagree	3	Bio/Vote History
	Seems too easy to get around through sorting, and might even backfire.
Jonathan Levin	Stanford	Uncertain	1	Bio/Vote History
	Direct way to mandate pay equity, but hard to assess without specifics.
Eric Maskin	Harvard	Uncertain	7	Bio/Vote History
	This questions is stated too vaguely. What does "comparable roles" mean?
William Nordhaus	Yale	Disagree	4	Bio/Vote History
	Not the right tool for changing social attitudes.
Maurice Obstfeld	Berkeley	Uncertain	6	Bio/Vote History
	Devil is in the details -- define "comparable"? Opens door to costly litigation, might therefore discourage hiring of women (or men).
Emmanuel Saez	Berkeley	Agree	5	Bio/Vote History
Larry Samuelson	Yale	Uncertain	1	Bio/Vote History
	Too much lies in the details, such as what would comprise "comparable roles" and how this is to be implemented, to evalutae this proposal.
José Scheinkman	Columbia University	Disagree	8	Bio/Vote History
	Compensation should depend also on performance.
Richard Schmalensee	MIT	Agree	4	Bio/Vote History
	Sounds like a sensible plan, but administrative problems may turn out to be serious.
Carl Shapiro	Berkeley	Agree	6	Bio/Vote History
	Effective in the sense of achieving the stated goal.
Robert Shimer	University of Chicago	Strongly Disagree	8	Bio/Vote History
James Stock	Harvard	Disagree	4	Bio/Vote History
Richard Thaler	Chicago Booth	Uncertain	1	Bio/Vote History
	These assessments are complicated econometrics exercises. This may not be the best strategy.
Christopher Udry	Northwestern	Uncertain	5	Bio/Vote History
	Defining comparable seems difficult. And wouldn't address most of the gender gap, which is across, not within, task.