Do the White House and Goldman Sachs’ gender pay gaps reflect discrimination?

Marillyn Hewson, chairman, president and chief executive officer of Lockheed Martin, speaks during an interview in Washington, D.C. Hewson is one of just nine female CEOs among the 300 companies studied in a new report on gender balance in corporate leadership. Photographer: Andrew Harrer/Bloomberg
Marillyn Hewson, chairman, president and chief executive officer of Lockheed Martin, speaks during an interview in Washington. (Andrew Harrer/Bloomberg News)

Last week, there was a minor kerfuffle about the gender pay gap at the White House. As The Washington Post reported, women working at 1600 Pennsylvania Avenue make only 87 cents for every dollar that a man makes in those hallowed halls. Another Post reporter jumped on the White House after it released this salary data, saying that administration officials once again have to explain why they have a gender pay gap even as they complain about the gender pay gap. (This same contradiction had arisen when the White House released its payroll data in April.)

But, while the White House gender pay gap may be a public relations problem, unlike the pay gap across the country, where women make just 77 cents compared to men, the White House pay gap doesn’t seem to be due to discrimination.

Discriminating against women would be out of the president’s character. For example, President Obama has argued in favor of raising the minimum wage and taking other steps that would boost the income of women. He’s also appointed many women to his Cabinet — Hillary Rodham Clinton at State, Sylvia Mathews Burwell at Health and Human Services, and Sally Jewell at Interior, for example.

Thus, it’s hard to argue with White House spokeswoman, Jessica Santilla, when she says that “At the White House, we have equal pay for equal work.”

In fact, a close look at the White House salary data shows that there are as many women as men — there are eleven of each — at the top of the White House pay scale.

The latest White House salary data show that the salary gap arises because women tend to work at low paying jobs. Of the 226 women The Post identified as working at the White House, 97, or 44 percent of them earn less than $60,000.

Thus, it appears that the problem is that women may be stuck at the bottom of the pay scale. (Although at least one woman, Anita Breckenridge, did get a substantial promotion. She moved from personal aide to the president making $95,000 a year to deputy chief of staff for operations making $172,200 a year. She became famous during the 2012 election for paying a higher tax rate than her boss, the president.)

But, that problem is not likely due to discrimination at the White House.

In fact, Obama could close the gender wage gap by deciding to hire as many women as men at each salary level.

The real concern, in fact, should be in the private sector where there are just 23 women heading Fortune 500 companies, and 14.6 percent of senior executive officers are women, according to Catalyst.  Marillyn Hewson of Lockheed Martin, the world’s largest defense contractor, is one of those chief executives.

A recent lawsuit, for example, argues that discrimination is a problem for women in the private sector.

Take the case of Goldman Sachs.

Three women who used to work at Goldman Sachs sued the firm four years ago, charging that the global investment banking, securities and investment management firm systematically favors male professionals over their female counterparts and alleging that Goldman pays its female professionals less than similarly situated male professionals even when they have the same titles and do the same job.

Women also may not get promoted fairly at Goldman. According to figures Goldman Sachs released in 2009, women made up 29 percent of the firm’s vice presidents and 17 percent of managing directors.

This law suit may be about to become a bigger deal than it already is.

Last week, two of the women who filed the original lawsuit, Cristina Chen-Oster and Shanna Orlich, asked to turn their claim into a class-action lawsuit that would cover thousands of female associates and vice presidents who have worked in certain divisions at Goldman Sachs since the early 2000s.

In addition to claiming that the firm has an “uncorrected culture of sexual harassment and assault,” last week’s court filing also claims that the firm discriminates against women in terms of their pay and promotion.

This claim isn’t based on a mere comparison of the average salaries of men and women or of the number of women at each level of seniority.

Nope, the latest evidence comes from a rigorous econometric evaluation of several years’ worth of Goldman Sachs’ salary and personnel data by Professor Henry Farber, a labor economist at Princeton University.

By controlling for all of the reasons why women might be paid less than men — they don’t have as much work experience, their academic credentials aren’t as strong, and so forth — Farber is able to figure out whether the differences in pay are due to economics or to something else, say discrimination.

And, it’s here where Farber finds possible discrimination. Even though the women are just as qualified and have performed just as well as the men, the firm pays its female employees less than its male employees.

Specifically, Goldman Sachs pays its female vice presidents 21 percent less and its female associates 8 percent less than their male counterparts.

In other words, for every dollar that a male vice president at Goldman Sachs makes, a female VP with the same credentials and doing the same work is paid just 79 cents.

Unfortunately, the lawsuit has redacted the details on how much a Goldman vice president and associate make each year, so it’s not possible to put a dollar figure on this discrimination. The only detail comes from one of the plaintiffs in the current and earlier lawsuit, Cristina Chen-Oster, a former Goldman vice president, who reported that she was paid $800,000 in 2000, an amount she says was at least 50 percent less than what her male counterparts were paid.

Another reason why women may not earn as much as men do is because women aren’t in the top positions. Failure to reach the top could be because women don’t stay in the labor force as long as men do, which is one of the arguments made against the existence of discrimination. It’s hard to reach the top if you’re no longer in the running.

But, it might also be that women don’t get to the top because companies refuse to promote women.

Once again, Farber tackled the question in the case against Goldman Sachs. He built a model that predicted how many women would be promoted given certain characteristics like experience, tenure, education that lead to promotions for men.

And, once again, Farber found that Goldman appears to discriminate against women.

Farber found that women received 23 percent fewer promotions than they would have received had they had been promoted according to the model that applies to men.

In sum, the women claim that Goldman has “maintained common, discriminatory performance review, compensation, and promotion procedures” resulting in “systemic disparate impact and disparate treatment against women” in violation of the Civil Rights Act of 1964.

A spokesman for the firm says the suit has no merit.

Joann Weiner teaches economics at George Washington University. She has written for Bloomberg, Politics Daily, and Tax Analysts and worked as an economist at the U.S. Treasury Department. Follow her on Twitter @DCEcon.
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