Saturday, September 06, 2008

Two Professional Women Help Explain the Pay Gap

Ms. Katty Kay (BBC anchor and reporter) and Ms. Claire Shipman (ABC News reporter), writing in today's WSJ:

Fed up with 50- and 60-hour weeks and a career ladder we didn't build and don't want to climb, women are looking for jobs that demand fewer and freer hours. We want to work but we also want quantity time, as well as quality time, with our children. Most of us no longer buy the onwards-and-upwards drive to the corner office at the cost of a fragmented family life. More and more, women are choosing a tapestry of family and work in which we define our own success in reasonable terms -- even if we sacrifice some "prestige."

In 1992, 57% of women with degrees wanted more responsibility at work, but by 2002 that figure had plummeted to 36%, according to the Family and Work Institute. Four out of five women want more flexibility at work and call it a top priority; 60% of us want to work part-time. What we're saying is we'll trade responsibility, title -- even paycheck -- for more time and more control.

MP: Doesn't that help explain the graph above (click to enlarge)?


At 9/06/2008 3:39 PM, Blogger Danny Gamache said...

Not really.

Men have the same desires as women in this area. More and more men are choosing more leisure time and less work time. More and more men are giving up promotions in favor of more options in their personal life. The study needs to look at what men would say in the same situation. It would no doubt be similar.

At 9/06/2008 6:18 PM, Anonymous Anonymous said...

Yes really.

Why Men Earn More: The Startling Truth Behind the Pay Gap -- and What Women Can Do About It by Warren Farrell

At 9/07/2008 3:27 AM, Anonymous Ian Random said...

At my previous employer my female boss went from full time to part time. This is not an isolated case in my experience.

At 9/07/2008 10:21 AM, Anonymous QT said...

The marriage penalty is also a consideration for many women.

At 9/07/2008 2:14 PM, Anonymous Norman said...

A bigger message here is that since 1973 real men's earnings are totally flat. From 1981-P men's earnings are +2.4%; women's, +32.6%.

Men of the World, UNITE.

At 9/07/2008 7:08 PM, Blogger PeakTrader said...

The Real U.S. Economy

The U.S. created 17.6 million jobs between 1993-98, and created only 3.7 million jobs between 2001-06. However, U.S. real GDP growth was only slightly higher from 1993-98 than from 2001-06. So, the U.S. became much more productive in the 2000s, i.e. using fewer inputs to produce more output.

The quick and massive U.S. Creative-Destruction process, generally between 2000-02, freed-up resources, e.g. labor, capital, raw materials, energy, etc. Freed-up capital was redeployed into firms that generated even more capital, including U.S. Agricultural and Industrial Revolution firms. Older U.S. firms gained greater market power, since they focused on higher quality "core" products, while offshoring less profitable goods to Third World countries for larger profits (rather than discontinue operations of those products). Consequently, U.S. corporations generated double-digit profit growth for a record 20 consecutive quarters in the 2000s, which resulted in strong balance sheets. Much of the redeployed capital flowed into business start-ups, which helped keep the U.S. unemployment rate low. U.S. Information and Biotech Revolution firms continued to lead the rest of the world combined (in both revenues and profits) after the Creative-Destruction process. The only way to move from one economic revolution into the next is through efficiencies, which free-up limited resources. It's all interrelated, and inevitable, which is why the U.S. leads the world in the Agricultural-Industrial-Information-Biotech Revolutions.

It's important to note that U.S. actual output has generally been below U.S. potential output throughout the 2000s. Export-led economies have been absorbing U.S. dollars to maintain acceptable levels of employment and output. Just like the volume of output in itself will cause declining prices and induce demand, the volume of capital will in itself cause interest rates to fall and induce demand. The gains of U.S. assets increased faster than the gains of U.S. liabilities. Similarly, the increases in U.S. output exceeded the rises in U.S. inflation, which induced demand and raised living standards. Export-led economies needed to accept small gains of trade to spur export growth (which imply the U.S accepts large gains of trade). Also, while the U.S. dollar depreciated, export-led economies were required to accept even smaller gains of trade to maintain export-led growth. The U.S. had abundant capital from foreign capital inflows and capital creation of U.S. firms. Much of that capital flowed into the U.S. housing market creating an oversupply of houses and causing a crisis, i.e. Americans who couldn't really afford to buy houses were able to buy them, and Americans who couldn't really afford to buy more expensive houses were able to buy them. The U.S. economy can be viewed as a Black Hole attracting imports and capital. Now, the U.S. is also attracting foreigners who own that capital, e.g. through the depreciated dollar, relatively low prices, low interest rates, etc.

U.S. GDP was $14 trillion in 2007, while U.S. exports were about $1.5 trillion (in 2000 dollars). Currently, 20% of U.S. households earn over $100,000 a year, while U.S. Agricultural and Industrial firms are producing higher quality/ higher paying/more profitable "core" goods. U.S. median family (household) income is $60,000 (half earn more and half earn less), including $50,000 from wages and salaries. With low interest rates and deflation in the housing market, along with falling prices of many goods, because of "excess" assets and goods, except for many commodities, U.S. living standards rose at a steeper rate. U.S. per capita income was $45,000 in 2007, which was over $10,000 more than E.U. per capital income. The U.S. with less than 5% of the world's population produces about 30% of the world's output, and consumes more than it produces. Americans have proven adept at maintaining autonomous consumption (or higher living standards). So, Americans in general will attempt to at least maintain their higher living standards, while some will lose and others will gain. Consequently, U.S. labor will work longer to pay-down debt and build-up saving, which will add to future economic growth and postpone retirements. U.S. income will be more than $160 trillion over the next 10 years and U.S. assets are over $100 trillion, while the U.S. captured real gains in assets and goods in the global economy. The U.S. is both the largest manufacturer and largest exporter in the world.

The U.S. is a most diverse and fragmented society. There has been tremendous U.S. upward mobility and increases in absolute living standards. Millions of Third World immigrants moved to the U.S., and had tens of millions of children, to raise their living standards. Many of those immigrants, who earned less than $3 a day or didn't have jobs in their countries, earn $20,000 to $50,000 with overtime in the U.S. Major U.S. cities would have become ghost towns without Third World immigrants. Almost the entire overextended U.S. housing boom took place in upper and middle class neighborhoods, which expanded and new neighborhoods were created. It's important to understand the U.S. housing boom. Throughout the 2000s, U.S. actual output was generally below potential output. Without the U.S. housing boom, actual output would have been even lower. Deflated housing prices will also add to future economic growth and postpone retirements. The NeoKeynesians believe building pyramids benefits society when output is too low. Obviously, houses are more useful.


In the free market system, when demand exceeds supply, prices rise, and there's excess profit. So, new supply is created, until excess profit disappears. This is a mechanism to keep supply and demand in equilibrium. "Speculation" helps keep future supply and demand in equilibrium, to prevent future shortages.

The price of oil has risen from $50 to $135 a barrel over the past 18 months. In the 2000s, the U.S. underproduced and overconsumed, while export-led economies overproduced and underconsumed. The price of oil is linked to the value of the dollar, i.e. a negative correlation. For example, when the U.S. Fed increases the money supply, economic growth is stimulated. So, demand for oil increases. China's economy is linked to the U.S. economy. Consequently, when the U.S. economy is stimulated, China's economy is also stimulated, i.e. when the U.S. raises actual output towards potential output, China overproduces even more. However, China is adding "fuel to the fire" by subsidizing oil, which adds to overproduction.

The U.S. has made the proper adjustments. On the production side, U.S. firms became substantially more energy efficient. However, on the consumption side, there was less energy efficiency, because U.S. houses, autos, etc. became even larger. However, China has not made the proper adjustments to slow its overproduction. Instead, it continued to subsidize oil, with dollars, including shifting the flow of dollars from U.S. Treasury bonds into barrels of oil. China continues to squander its gains of trade to maintain high output and employment, while the U.S. has captured its gains of trade. The free market system has allowed the U.S. to either gain the most or lose the least, in the global economy, while Chinese economic policies created a lose/lose situation in China.

The free market system contributed to least three major booms in the U.S. during the 2000s. U.S. households had a consumption boom, including the housing & related goods booms (through rising incomes, abundant & accessible capital, low interest rates, and low prices). U.S. firms had a profit boom, because they offshored low profitable goods for higher profits, imported those goods at lower prices, and shifted limited resources into higher quality/higher priced/higher wage/more profitable goods. The U.S. government basically was able to refinance its debt at lower interest rates. Consequently, U.S. living standards rose at a steeper rate, while the U.S. economy strengthened substantially.

At 9/08/2008 12:17 PM, Blogger bobble said...

peaktrader:". . . major booms in the U.S. during the 2000s. U.S. households had a consumption boom, . . . through rising incomes . . . "

uh, no. the consumption boom was primarily financed by housholds taking on larger and larger amounts of debt.

At 9/08/2008 5:19 PM, Blogger OBloodyHell said...

> More and more men are giving up promotions in favor of more options in their personal life. The study needs to look at what men would say in the same situation. It would no doubt be similar.

Uh, sorry, Danny, NO. This is a blatant case of social sexism -- men are EXPECTED to give up things for their family.

Anon 6:18 --
Yes, that book, and The Myth of Male Power
... are both must-reads on the topic of "sexism".

The latter includes mention of THIS particularly telling statistic --

The U.S. Census Bureau found that as early as 1960, never-married women over 45 earned more in the workplace than never-married men over 45.

In other words, women with the same sort of goals as men, earned as much or more than men... **before** the beginning of the so-called Women's Movement

> Peaktrader: about 30% of the world's output

Actually, thanks to the burgeoning rise in output of India and China, that percentage is about 25% -- not as a result of any decline on our part but as a result of the whole world getting richer -- a good thing in and of itself...

The rest of your thesis seems to me to be spot-on.

I just thought you ought to be aware that that number needed updating (it was accurage for most of the last decade).


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