A New Study about Gender and Pay Gaps

I learned about this via Marginal Revolutions and Freakonomics. Briefly, Uber keeps an enormous amount of data on its drivers, allowing economists to study the different ways that women and men are paid. The Freakonomics folks interviewed an Uber economist:

LIST: So we have mounds and mounds of data. We have millions of drivers. We have millions of observations, and 25 million driver-weeks across 196 cities. So just the depth of the data and the understanding of both the compensation function and the production function of drivers gives us a chance to — once we observe if there is indeed a gap — gives us a chance to unpack what are the features that can explain that gap.

They did find a pay gap that broke down by gender — 7%:

LIST: We found something very surprising. What you find is that men make about 7 percent more per hour on average …

DIAMOND: … which is pretty substantial.

LIST: For doing the exact same job in a setting where work assignments are made by a gender-blind algorithm and pay structure’s tied directly to output and not negotiated.

Was it because of discrimination on an individual level? They don’t think so:

DUBNER: Right. So let me just make sure I’m clear. You’re saying there’s no discrimination on the Uber side, on the supply side, because the algorithm is gender-blind and the price is the price. And you’re saying there’s no discrimination on the passenger side. So does that mean that discrimination accounts for zero percent of whatever pay gap you find or don’t find between male and female Uber drivers?

LIST: That’s correct.

The interview is long and full of juicy details and tough questions. I haven’t read the whole thing carefully yet, but it’s fascinating all the way through:

DUBNER: What is the overall driver attrition rate? I don’t know whether it’s measured in six months or a year, or whatever.

DIAMOND: Yes, six months is what we’ve been looking at.

LIST: More than 60 percent of those who start driving are no longer active on the platform six months later.

DIAMOND: So the six-month attrition rate for the whole U.S. for men is about 63 percent, and for women it’s about 76 percent.

DUBNER: Wow. So that would connote to me, an amateur at least, that maybe this gender pay gap among Uber drivers is reflected in the fact that women leave it so much more. Maybe it’s just a job that on average, women really don’t like. Is that measurable?

There’s a whole discussion about that, and a lot  of other things too besides.

So what does explain the 7% pay gap, in the end? They have theories, foremost among them is that men drive faster than women:

LIST: That’s right. So after we account for experience now we’re left scratching our heads. So, we’re thinking, “Well, we’ve tried discrimination. We’ve done where, when. We’ve done experience. What possibly could it be?” What we notice in the data is that men are actually completing more trips per hour than women. So this is sort of a eureka moment.

DUBNER: They’re driving faster, aren’t they?

HALL: Yeah. So the third factor, which explains the remaining 50 percent of the gap, is speed.

It’s not hard to speculate about how something like how quickly men vs. women tend to drive to possible sources of systemic cultural discrimination. (Are men more confident drivers? Are they less fearful of the law? etc.)

Still, what these economists are finding is that (a) the pay gap is persistent, even in the face of an equalizing pay structure and (b) possible factors explaining the gap will not be simple to address. For example, one source of the gap could be that men tend to work more hours, gaining more experience which pays dividends later, so that one source of the Uber gap is that men are getting paid for experience, not something that you can easily address:

DIAMOND: I think this is showing that the gender pay gap is not likely to go away completely anytime soon. Unless somehow, things in our broader society really change, about how men and women are making choices about their broader lives, than just the labor market. But it’s not also a worry that the labor market is not functioning correctly. It makes sense to compensate people who are doing more productive work. It makes sense to pay people more if they work more hours. I mean, I don’t think those are things that we would ever consider thinking should be changed because that they’re a problem. Those are just real reasons that productivity can differ between men and women. And we should compensate people based on productivity.

What would the implications of this finding be? It’s not that individual discrimination isn’t responsible for the pay gap in general — this would likely depend on the field and the job, right? — but that there are deeper factors at play that might explain a pay gap between men and women.

This shouldn’t really surprise anyone working in education. Men and women teachers are paid according to the same standardized salary schedule in public schools. If you pooled all the male and female teachers, though, you’d see that there is a gender pay gap because of disproportionate numbers of male/female teachers in elementary vs. middle vs. high school. Men make more not because administrators choose to pay them more — largely, it’s because men choose to teach older kids more than women.

There’s no easy way to address this discrimination, if it’s even quite right to call this discrimination. Certainly it’s possible (likely? I don’t really know) that cultural factors partly explain the choices of men and women. At a certain level, though, this is irrelevant. Do we want to mess with the choices of men and women about where and how to work?

(This quickly gets tangled in questions of diversity and representation. Is it a policy priority to ensure that men and women are represented in the teaching force at numbers that are proportional to the students they instruct?)

There might be structural pay gaps that outstrip what can be explained by discrimination. Whether biological or culturally constructed, there might be persistent and not-bad differences between men and women. As I continue to think about this, it seems to make sense to me that we’d want to continue to battle discrimination while also thinking of ways to address inequities using other angles, besides battling pay gaps. Past a certain point, of course.

One last juicy morsel, at the very end of the interview. As Uber introduces tipping it seems that drivers make LESS and that the pay gap narrows somewhat because women are tipped more:

LIST: Yeah, I think when you look at the tipping data in general, you do find a tilt in favor of women compared to men in general. We’ll have a tipping paper for you in a few months. Because the economics of tipping is sort of wide open, and we’ll have a paper just like this one called something like “A Nationwide Experiment on Tipping.”

DUBNER: Right.

LIST: And we’ll do the tipping roll out and show you how earnings change with the introduction of tipping. And the earnings actually go down a little bit. They don’t go up after you introduce tipping.

DUBNER: Now how can that be?

LIST: What happens is the supply curve shifts out enough to compensate the higher tips. And when the supply curve shifts out, the organic wages go down. And what you have is drivers are underutilized. So what I mean by that is typically they’ll sit in their car empty 35 percent of the time. With tipping, maybe it’ll go up to 38 percent of the time.

DUBNER: In other words, the wage declines because more drivers think they’re going to make more money since tips are now included, but that increases the supply of drivers, which means there’s less demand to go around.

LIST: Exactly. That’s perfect.

 

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