Gender gap in earnings: can it be closed?

A question from Yahoo! Answers:

Why do women still earn 77 cents to a man’s dollar?

How is it that women still make 77 cents to every dollar a man earns for the same position? What can we do to improve this and get equal wages? It seems absurd during these “modern” times to still be grappling with this. Please no sarcastic answers.

We may or may not be able to achieve this (no doubt noble) objective. There are two economic issues here.

One is options embedded in employment contracts. When you hire a woman, you essentially write her an option on a maternity leave. This is a valuable option (time to expiration is indefinitely long, plus it can be exercised multiple times), so you collect your premium by paying her less than you would pay a man in the same occupation.

The other is asymmetric information. There are women that may not be interested in exercising the above-mentioned option (they may already have children, or have no plans to have children, or be unable to have children due to health issues of their own or their spouse), but the employers are legally prohibited from even asking about any of it (which, in my opinion, is a good thing).

So, realistically, the only thing we can do as a society is to decrease the value of the maternity leave option to the employer. About the only way to do it known to the human race is separation of employment and healthcare. The system of employer-provided health insurance must be replaced with a national health plan funded out of tax revenues…

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