A ‘pay gap’ tells us nothing about discrimination against Latinas

News reports have been highlighting Dec. 8 as “Latina Pay Gap Day.” Promoters are seeking to convince the public, and perhaps lawmakers, that there is widespread discrimination against female Hispanic workers, and that discrimination needs to be addressed. The problem is the data they use tell us little to nothing about a real or perceived Latina pay gap.

Here’s how the Margaret Sloss Center for Women and Gender Equity at Iowa State University describes “Equal Pay Day”: “Latina women’s Equal Pay Day (December 8, 2022) is a day to acknowledge the pay gap that Latinx American women face. Latina women earn 57 cents for every dollar paid to a white, non-hispanic [sic] man. This means that Latina women must work 21 months to make a white man’s yearly earnings.”

A worker advocacy and equity group for women called Lean In claims the current gap between Latinas and white men is 54 cents.

There probably is a pay gap between Latina women and white men, but it’s likely due to several factors that have nothing to do with workplace inequities or discrimination.

Let’s begin with the data. The primary source of pay-gap data comes from the U.S. Bureau of Labor Statistics (BLS). Looking at third-quarter 2022 data, BLS says the median weekly earnings for white men (16 years old and older) working full time was $1,192, but only $782 for Hispanic women — roughly 66 percent of white males’ median earnings. (Advocacy groups’ lower 54 cents for the Latina pay gap apparently includes part-time workers.)

So, yes, white men on average do make more than Hispanic women. Here’s the problem: The BLS data being cited refer to the median pay of all white men or Hispanic women with no distinction for such important earnings factors as educational levels, career choice and other choices.

This is the same approach taken by those on the left who complain there is a pay gap between men and women workers. BLS says the median weekly full-time earnings for all men was $1,164, versus $971 for all women, or about 79 percent of what men earn.

However, the claim that the pay gap is a result of discrimination has been repeatedly refuted by economists. And yet the claim refuses to die.

To demonstrate why the earnings comparison is largely meaningless, consider this example.

Suppose we know the Smith household spends $500 a month on food, while the Garza household spends $250 a month. What does that tell us? Virtually nothing useful. You’d have to know more information.

Perhaps the Smith household has eight people while the Garza household has only three. Or perhaps the Smiths live in a high cost-of-living city like New York City whereas the Garzas live in low-cost Mississippi. Or perhaps the Smith family has some members who choose to buy more expensive organic products. Any number of factors could explain the variance in spending. The same is true for earnings.

With respect to the Latina pay gap, if white men are more likely than Latina women to have college degrees, or post-graduate degrees, or choose higher-paying careers – and they have been – their median earnings would be higher on average.

By contrast, Asians, who also have a long history of being discriminated against, tend to aggressively pursue education and high-paying careers. BLS puts the median weekly earnings of Asian women at $1,177, only $15 below white men. And Asian men come in at $1,656 — $464 more than white men.

Advocates may at least implicitly recognize the problem with their data, because they note that the pay gap shrinks significantly when comparing white men with Latina women when both have a college degree or work in the same occupation.

One explanation for the remaining pay gap may be seniority. Lean In says, “Latinas are going to college at higher rates than ever before.” Agreed, but if those relatively new college graduates are still early in their careers, they will likely be earning less than white men who may have been on the job for decades.

So, while the pay gap tells us nothing about discrimination, it is helpful in looking at change over time. The gap has tended to shrink as more women and minorities graduate from college, obtain post-graduate degrees and seek careers in high-paying industries, such as engineering, the sciences and health care.

To be clear, this analysis does not deny that some pay discrimination may exist. Fortunately, there are laws against such discrimination, and employers who are accused of unlawful actions should be held accountable if the claims are verified.

But differences don’t necessarily imply discrimination. We will likely see the pay gaps between men and women and between whites and some minority groups gradually decline over years, not because employers are discriminating less, but primarily because Latinas and other women and minorities are seeking more education and higher-paying careers.

Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas. Follow him on Twitter @MerrillMatthews.