Edward Lotterman portrait
Edward Lotterman

I can imagine the barb coming all the way from Stockholm: “Take that Tommy, you ignorant twit!”

Um, well, no. The Swedish Royal Academy did not give Harvard Prof. Claudia Goldin the 2023 Economics Nobel just to flip the bird at Alabama’s GOP Sen. Tommy Tuberville. Yet there is a link between her work and his political causes that demonstrates how fruitful insights from economics can extend further than one might think.

But hold that thought while we review the backstory.

Start with Goldin’s Nobel. She got it “for having advanced our understanding of women’s labour market outcomes” and “uncovered key drivers of gender differences in the labour market.”

Most media accounts condensed this to her having “studied the wage gap between women and men.” True, but it’s more complex than one might think.

Goldin is intellectually curious. As a kid she wanted to be an archeologist and then a microbiologist. She was majoring in this at Cornell when economist Alfred Kahn showed her the utility of his discipline. He studied the structure of industries, the degree of competition in them, how they behave and when they should be regulated. Thus he later became President Jimmy Carter’s czar for deregulating airline routes and fares.

Kahn showed Goldin how broad economics can be. She switched majors and wrote her undergrad senior thesis on the economics of communications satellites.

Moving to Chicago to continue on such issues for a Ph.D., she met Gary Becker, a labor economist who pioneered analysis of how people make rational choices in deciding who and when to marry, when to have children and how many, or even whether to commit crimes.

Some of Becker’s work dovetailed with that of an older scholar, Theodore Schultz, a South Dakota farm boy who grew up to study how new technology is developed and how human beings are “capital” in the sense that investing in their health and education makes them more productive. Schultz once said, “If we knew the economy of being poor, we would know much of the economics that really matter.” Substitute “gender” for “being poor” and you have Goldin’s valuable contributions.

In this intellectually rich milieu, Goldin grasped such questions and moved on to economic history. Her doctoral dissertation analyzed U.S slavery, a focus of her adviser, Robert Fogel. Along with Stanley Engerman, Fogel was writing “Time On the Cross,” an economic history of U.S. slavery that was both highly controversial and highly influential. These mentors and colleagues preceded Goldin in getting Nobels: Schultz in 1979, Becker in 1992 and Fogel in 1993.

For more details on her long career, read the Nobel citation itself. In summary, it says Goldin “provided the first comprehensive account of women’s earnings and labour market participation through the centuries. Her research reveals the causes of change, as well as the main sources of the remaining gender gap.”

Read further online and you will see posted sneering comments at Goldin, asserting that the wage gap is zero if you include effects of education, overall experience and tenure with one employer. Most posts seemed to come from men.

Yes, adjusting for such factors does reduce the gap from the “70 percent of men’s wages” often cited, although a gap does remain. But even counterpoints to her research beg the questions of why women long lagged men in education and still lag in measures of work experience and other key variables.

Goldin explored, comprehensively and insightfully, how these variables — education, experience, tenure in one job and other social and cultural factors — do affect earnings. Furthermore, she examined these relationships over time, going back two centuries for the United States and with new analytical approaches.

One key finding was that there had not been any slow steady wage progression up over time. In fact there was a U-turn. Before the heavy industrialization of the 1800s, women’s earnings were closer to men. The gap worsened with industrialization and urbanization. Only in the 20th century did things start to improve and there still is a way to go.

Further closing the gap will require not just societal changes, but deeply cultural ones.

Consider: Women are the ones who bear children and the brunt of raising them. That interrupts one’s work history, reduces overall years of experience and of tenure with one employer. Women are much more likely to have to switch jobs because of their husband’s career relocations rather than vice versa. The psychology of women and men differ. If the model is that one must march in and demand a raise to be paid more, women and less-assertive men will lose out. Some will interpret this to say that women need to become more like men.

But is the “going-in-to-demand-a-raise” model the best way to determine employee compensation? Are the outcomes efficient in an economic sense of maximum satisfaction of human needs from a given set of resources?

Are the people who thus get more pay really the most productive ones? Probably not. Do prevailing wage premiums for total years of experience actually reflect productivity? Or do we  overpay older tenured people or those who never shift jobs? Do we underpay younger workers and those whose circumstances forced relocation?

The upshot is that gender differentials in earnings involve not just fairness and justice or what economists call “equity.” Efficiency is affected also.

As more women got added education and more entered the workforce worldwide, Japan lagged similar-income countries elsewhere. Yes, Japanese women did enter the corporate world, but often dead-ended in low-skill positions rather than in engineering, finance or upper management. Japan was and is a very productive economy, but it is less productive than it could be if it used women’s skills at the same level as the Netherlands or Sweden or even our country

We know that, objectively, women and men are equally capable in most workplace scenarios, from executive functioning to building trades, with exceptions for jobs requiring greater strength and size. People in countries having subjective cultural and institutional barriers to the fullest utilization of women — and by extension Blacks, gays or other disadvantaged groups — will be poorer and get fewer needs met than in countries that adapt and overcome these existing stumbling blocks. In the end, efficiency may prove as important as equity and perhaps more so.

Enter Sen. Tuberville. While he politically paralyzes our nation’s military over abortion access policies, he castigates military leaders, including Charles Q. Brown, the Black Air Force general who is the new chairman of the Joint Chiefs of Staff, for wasting time on diversity. The brass, he says, should focus single-mindedly on having the most effective fighting forces possible! Fairness is just a frill, a harmful distraction.

Now apply that standard to Goldin’s research. What the senator can’t see is what Goldin’s findings on women’s roles points out when extended objectively to all classes for workers — that we will never have his desired optimally capable fighting force if we drive away talented people because of gender, race or sexual orientation. Equity and diversity or even justice are not just frills. Important in themselves, they also lie at the heart of combat effectiveness in the military as well as of economic efficiency in business and households.

When President Harry Truman desegregated the military in 1947, justice was not the only gain. He opened the floodgates to tens of thousands of Blacks who added vigor to all four branches. When the U.S. Navy assigned thousands of WAVES, including my aunt Jeanette, to intercepting, prioritizing and decoding enemy radio messages, it was not just to give a fair chance to women, it was to win the war faster while losing fewer lives.

Insights for efficiency as well as equity flow from Goldin’s work. Justice is important and so is productivity. Citizens should appreciate that even if some politicians do not.

St. Paul economist and writer Edward Lotterman can be reached at stpaul@edlotterman.com.