Why do women tend to earn less than men?

A Facebook friend linked to this Georgetown paper showing the earnings of people with a terminal BS in different college majors.  Looking through some of the tables, I was struck by how big a difference there was between the share of women vs. men in different college majors.  I was reminded of a point made by my friend Matt Rousu, who has done some analysis showing that choice of college major went a long way toward explaining the often-discussed gap between the pay of men and women.

So, I cobbled together some data from the Georgetown paper, looking specifically at the most popular college majors.  Here is the table I pulled together: 

Among the most popular majors, those with a major in computer science earn the most (the median is $75,000 per year).  Interestingly, however, only 22% of computer scientists are women.  By, contrast, the lowest-earning major (among the most popular majors) is elementary education at $40,000, and a whopping 91% of elementary education majors are female.

A simple correlation between % female and median earnings is -0.76.  There is strong evidence that women are choosing majors (or if you want to think conspiratorially, are being keep out of majors)  that have relatively higher earnings.  If I use the numbers above to do a back-of-the-envelope calculation, I figure that for the average man and women in this sample of popular majors, there will be a "gender gap" in median wage of about $5,640 (or a roughly 10% earnings discount for women) that is completely explained by differences in the choice of major.  

There has been research attributing the "gender gap" to factors like discrimination, differences in time off for child care, differences in willingness to negotiate, etc., but I think it is also safe to say that choice of major matters a great deal. 

So choose wisely. 

I might add that one can do a lot worse than majoring in agricultural economics.  We are in the top 10 majors in terms of employment, with a 94% full employment rate and a 98% employment rate; see tables 39 and 41 in the report), and BS graduates have a median income of $60,000.  However, only 18% of our graduates are women and 90% of graduates are white.  So, help improve diversity in our profession, find some great professors and topics, AND make a little more money.  Choose Ag Econ!   

Are US Farmers More or Less Productive Than They Once Were?

That's the question asked in this recently published paper by authors at the USDA Economic Research service appearing in the journal Applied Economics Perspectives and Policy.  They find: 

Our empirical results show that two types of structural change have occurred since WWII, and both have influenced the U.S. agricultural productivity. First, we identified a break in trend in 1974. Prior to 1974, productivity grew at an average annual rate of 1.71%, but this rate slowed to 1.56% per year after 1974. The break in trend coincided with the 1973 oil embargo, which resulted in a rapid and unexpected rise in energy prices.

and

A different type of structural change occurred in 1985 when we observed an upward intercept shift for the level of productivity. This may have been due to a number of factors including a U.S. economic recovery, and a liberalization of farm policy since the mid-1980s. The 1.56% annual trend rate of growth persisted after the 1985 breakpoint.

Farmers are getting more productive, just not as fast as they once were.  

How much do you value the present over the future

Economists have long been interested in people's "discount rates" - the rate at which people discount the value of a dollar in the future as compared to a dollar today.  If given the choice between being given a dollar today or a dollar ten years from now, I suspect almost everyone would take the dollar today.  The key question researchers try to answer is this: exactly how many dollars would you have to be given in, say, 10 years to make you indifferent to 1 dollar today?  

What this number is has important implications for how we should "discount" the value of projects that provide benefits in the future by incurring costs today.  Examples where a discount value is needed include road building, going to college, and building a factory.  But, the issue has become particularly heated in relation to debates over climate change.  Whether and to what extent one is willing to incur costs today to mitigate carbon emissions depends critically on the extent to which the future benefits (and potential costs) are discounted.   

One can get a feel for this time trade-off by looking at market interest rates but that doesn't tell the whole story.  As a result, many economists have turned to laboratory experiments where people make choices like the one I described above.  The trouble has been that such experiments have been limited to making future payoffs that are typically only 1 to 6 months away.  My co-authors, Threse Grijalva and  Douglass Shaw, and I found away around this, and the results are discussed in a paper forthcoming in the journal Environmental and Resource Economics: 

We use a laboratory experiment to elicit discount rates over a 20-year time horizon using government savings bonds as a payment vehicle. When using a constant (exponential) discount rate function, we find an implied average discount rate of 4.9 %, which is much lower than has been found in previous experimental studies that used time horizons of days or months. However, we also find strong support for non-constant, declining discount rates for longer time horizons, with an extrapolated implied annual discount rate approaching 0.5 % in 100 years. There is heterogeneity in discount rates and risk preferences in that people with more optimistic beliefs about technological progress have higher discount rates. These findings contribute to the debate over the appropriate discount rate to use in comparing the long-term benefits of climate change mitigation to the more immediate costs.

Why American Farming is Different than European Farming - Blame 4-H

As a 4-Her growing up, I was quite interested in this article in the Economist, which discusses differences in American and European farming.  The article posits that American farmers are more interested in science, competition, and progress; or as seen in a more derogatory way by other countries:

Rivals in other lands have sniffy theories about why America, a rich country, is so good at producing cheap food. They paint American farmers as pawns of giant agri-corporations, bullied by market forces to produce genetically modified Frankenfoods. Lexington has not forgotten the face pulled by a French agriculture minister, interviewed during a previous posting to Europe, as he mocked America’s “aseptic” farm produce.

One of the main reasons for the difference in outlook, the author claims, is the youth organization 4-H.

4-H was born to spread hard science as well as to shape character. Some 2m children attend the group’s clubs and camps, while millions more follow 4-H programmes in schools. A big push is under way to reach more urban children, with schemes such as classroom egg incubators so that eight-year-olds learn that “chicken doesn’t come from McDonald’s”. In farm states such as Nebraska, the organisation reaches one child in three. 4-H clubs and camps form the youth wing of a partnership between government and public universities financed by gifts of federal land, dating back to the civil war and set up to transmit new technologies into every county in the union.

Visiting the Nebraska State Fair recently, Lexington toured a pavilion of 4-H projects. Some entries might be found at fairs in many countries: jars of jam, prize-winning vegetables and woodwork (your columnist frankly coveted a Perspex-fronted squirrel-feeding maze). But there was a striking emphasis on science and business, too

I'm not so sure that 4-H is a cause as much as it is a symptom of American's differential attitudes toward science, technology, independence, and business.   But, whatever the reason, I have not doubt it gives us an edge.   

P.S.  Take a look at the comments below the article in the Economist.  Many are based on faulty narratives that do not mesh with the facts (like that there are no more "real" farmers in the U.S.).  But, one comment is especially worth pointing out for it's lack of economic logic.  According to one comment, the Economist article is bogus because:

Agricultural output (IMF stats):

- USA: 179 $ billion for around 300 Million people. that's around $600 per person
- France: 55 $ billion for around 63 Million people. That's around $870 per person

France is the world 2nd biggest agricultural exporter with only 3% of its active population working in the agricultural sector. Do you think they achieve that without science?

Many European countries are indeed quite productive, but this line of reasoning is off base for many reasons, including:

1) The US exports about 20% of its agricultural production (and as much as 40-50% for major crops), so it is wholly inappropriate to divide the value of agricultural output by only the size of the US population; the French export a lot too (mainly to close neighbors) but not nearly as much as the US.

2) Stating production in terms of dollars (rather than output) can mislead.  Many European countries (including France) have much more government involvement in the agricultural sector, which tends to drive up agricultural prices.  The same bushel of wheat may have a higher (domestic) price in France than the US because of trade restrictions and government subsidies.  Thus, in this kind of comparison, we want to compare bushels produced not the "value" of those bushels.

3) Such a calculation literally compares apples to oranges.  US and French farmers do not produce the same commodities.  Just because wine sells for a higher price (say, per pound) than does wheat, that doesn't mean French farmers are more productive.  One has to take into account the volume of inputs used and the costs of those inputs if one is to make statements about relative agricultural productivity.  

4) Studies that have compared differences in productivity growth over time show that the US fairs quite well relative to other countries.  This study, for example, reports the following changes in total factory productivity for different countries and country-groupings.  Only Asia grew faster than North American over the time period studied (and that is likely because they started at a much lower absolute level of productivity relative to North America).  Europe, as you can see, experience a mush slower rate of growth in agricultural productivity.

Consumer Attitudes toward Big Food circa 1900

I've been reading an advanced copy of Maureen Ogle's new book, In Meat We Trust: An Unexpected History of Carnivore America .  I'm about half way through, and so far it is fantastic.  

In one section, Ogle writes about Americans' attitudes toward meat packers in the early 1900s:  

Americans insisted on access to cheap food, regardless of its true cost, but believed the worst of those who made that cheap food possible and abundant

Is it any different today?  By the way, when she's referring to "true cost" she doesn't mean externalities - she's talking about the material costs of raising beef and getting it to market, which the average consumer under-estimates.  

She also cited a magazine article written around the same time about by a journalist who actually understood the the effects brought about by the Swift meat packing company:  

“We make great outcry against the concentrated bigness of the packers, yet the probability is that we would make yet greater outcry if the modern system of food supply were suddenly cut off and we were put back on the basis of local butcher-shops.” He was right. in the United States, the mechanisms of food supply were so efficient that they had become taken for granted  —  and when it came to food, Americans took nothing for granted so much as low price. 

They say that the more things change, the more they stay the same.  Here we are a hundred years later, and it remains the case that the mechanisms of food supply are so efficient that they are taken for granted.