Today is Equal Pay Day, which means two things are certain: 1) some groups will be arguing that the pay gap is very real and must be addressed and 2) some groups will be arguing the pay gap is a myth and should be dismissed. Both groups are simultaneously right and wrong. It is true that, adjusting for various economic factors, much of the pay gap goes away (Group 2 is correct). However, it is also true that there is some gap that remains which could be due to discrimination (Group 1 is correct).
But economics is limited in this story. We can provide economic explanations, but there are other factors that other fields could provide insight into as well. For example, why is it that there is an unadjusted 80-cent gap to begin with? Are women encouraged to avoid the higher-paying fields? Sociology could help answer that. Are women just worse negotiators then men? Psychology could help answer that. Are the biological differences that could account? Biology could help answer that. Is there legislation that encourages discriminatory hiring practices? Legal studies can help answer that. These various disciplines could provide valuable insights.
A mistake I think many economists make (myself included) is sometimes thinking the economic way of thinking is the only way of thinking. It is powerful, to be sure, but it is not alone. We can help provide some answers (like on the pay gap) but not all the answers (nor should we. Division of labor).
My two cents on the pay gap: Is discrimination an explanation for the difference between men’s and women’s pay? It’s probable; the size of the effect is difficult to know. Unlikely responsible for a large portion. Is government the solution? Possibly. If the issue is poor incentives from legislation, then government would have to repeal such legislation. If there are other causes, governmental interference would likely cause more harm than good.
I think the pay gap deserves more thought than many economists are willing to give it, and it especially deserves thought from the sociologists and legal scholars (my gut feeling is that is where we will find much of the gap explained).