The U.S. women’s national soccer team just won the World Cup championship while the U.S. men’s soccer team failed to even qualify for the men’s World Cup last year. And yet, the women players make only about 20% as much as the men players.
That seems unfair, so what gives?
Certainly when two people perform the exact same job, they should receive the exact same pay, regardless of their gender, race, hair color, height, or any other irrelevant characteristic.
A deeper dive into what’s really going on behind the so-called “pay gap” in both soccer and across the U.S. helps clarify some of the reasons behind these differences in pay. The U.S. soccer-pay difference is unique from the broader gender-based pay difference across the U.S.
There are multiple factors at play in U.S. soccer, including the superstar phenomenon, performance-based pay, and the player’s own compensation choices. Government-imposed overseers such as the U.S. Soccer Federation and FIFA also significantly impact pay.
The superstar phenomenon happens when a small group of people who are exceptionally good at something — think actors and athletes — receive enormous sums of money because customers want the highest quality good, and there’s a technology that makes that good available to all customers at a low cost: such as live broadcasts and movies.
There’s also the fact that in soccer and across most sports, men’s teams generate significantly more revenue than women’s teams. Pay-for-performance dictates that workers’ pay should reflect what they produce.
The women’s World Cup is expected to generate $131 million in revenues — just 2% as much as the $6.1 billion generated by the men’s 2018 World Cup. Within the U.S., however, the success of the women’s soccer team has turned the tables, and the women’s team has generated slightly more revenue than the men over the past few years.
The final choice-based factor at play is not unique to soccer, but actually explains almost all of the difference in pay between men and women across the U.S.
It turns out that the U.S. women’s soccer players chose, through their union’s collectively bargained agreements, higher base pay and benefits such as maternity-leave pay in exchange for lower performance-based pay that dominates the male players’ compensation agreements (the men have essentially no base pay or benefits and only get paid if they’re called in to play).
Until the women’s current CBA expires in 2021, U.S. Soccer has no choice but to pay the players according to their contract.
Across the U.S., choices that men and women make explain almost the entirety of the alleged 20-cent pay gap.
After accounting for measurable differences — things like occupations, education, experience and hours — a 2009 Department of Labor study found a 5- to 7-cent gap and a more recent 2018 payscale.com study found a mere 2-cent gap.
If the difference in pay were the result of discrimination, that would be a problem. But pay discrimination is already illegal under both the Equal Pay Act of 1963 and the Civil Rights Act of 1964, and the free market penalizes employers who discriminate.
Instead, the data indicates that choices — not discrimination — are the primary reason behind differences in pay. And a choice-based gap is cause for celebration.
Not that long ago, women had very few choices and opportunities in the labor market. Today, they can choose whether they want to climb the corporate ladder, take flexible jobs that let them balance family needs, or opt for jobs that let them work remotely.
But some policymakers who equate women’s worth with their paychecks are intent on “equalizing” pay, even if it means taking away women’s choices and reducing total incomes and economic output.
Studies show that incomes and output decline by 6 to 10% when companies — whether through government dictate or rigid union regimes — implement fixed pay scales that don’t let employers offer flexibility or reward extra effort.
Moreover, when Denmark tried to reduce its wage gap by requiring companies to report their salaries by gender and race, it reduced the gap by 2 percentage points, but that was primarily because companies lowered men’s wages rather than raising women’s. Overall, workers were no better off, and the businesses’ productivity fell as well.
No doubt, there’s a significant difference in overall wages for men and women, but those differences can be explained by the choices men and women make and the free-market principles that create higher incomes and opportunities for everyone.
Rachel Greszler is a research fellow in economics, budget and entitlements in the Grover M. Hermann Center for the Federal Budget, of the Institute for Economic Freedom, at The Heritage Foundation (heritage.org).
