Research reveals pay gap between homosexuals and the cost of exclusion
The pay differentials that exist between men and women and between whites and blacks have received a lot of attention in recent years. But there is another wage gap that tends to be overlooked – between heterosexuals and LGBT + people.
Interestingly, this works in two different directions: most studies show a wage penalty for gay men, but a wage premium for lesbian women over their heterosexual counterparts. Analysis 32 studies from several countries found that, on average, gay men earned 11% less than heterosexual men, while lesbian women earned 9% more than heterosexual women. Studies and surveys have also shown a negative pay gap for bisexual and also for transgender people, although the evidence is much more limited, especially for transgender people.
In data on homosexuals, there are also variations between countries and depending on the exact classification of sexual orientation, for example, whether based on survey data or on cohabitation – and there are studies like this one from the United States who found that gay men actually earned more. But if the above numbers reflect an overall average, why do such differences arise?
One possible explanation is the work choices that homosexuals make. Research suggests gay men are more likely to avoid occupations that are more male-dominated than other men (which includes the highest paying jobs), while lesbian women are more likely to avoid female-dominated occupations than other women (who are generally worst paid). Lesbians maybe also earn more because they tend to work longer hours.
But why do homosexuals enter different professions? Maybe it’s because they make different educational choices. For example, LGBT + students in the United States are less likely finish school and attend university than other students. American men in same-sex couples are more likely to earn a bachelor’s degree than men in different-sex couples, but they are 12 percentage points less likely to complete their degree in a STEM subject.
The role of discrimination
A key question is whether these differences wages and job choice are motivated by prejudices or are they the result of some innate and work-related traits of homosexuals related to their preferences or skills. If gay men are paid less because of prejudice, society is not making the best use of their skills and productivity. This would be economically inefficient and curb production, as it would suggest that gay men are not making the contribution they could.
It is not easy to understand why these differences in pay and employment exist. But recent research using various methods has certainly revealed that discrimination is a key factor.
I will highlight three examples. First, search from australia has shown that gay and lesbian workers choose to move into occupations where workers are less prejudiced, with male-dominated occupations being more likely to be discriminated against.
Second, in a research experiment in the United States, participants were asked to rate CVs. Some of the CVs referred to LGBT + activities while others did not. Male participants penalized CVs that included LGBT + activity.
Third, discrimination against LGBT + people appears in workplace surveys. For example, Stonewall and YouGov found in 2017, 18% of LGBT staff in the UK had been the target of negative comments or behavior from coworkers in the previous 12 months because of their sexual orientation.
Inclusion and economic benefits
Discrimination against homosexuals is a global problem. the Franklin & Marshall Global Gay Rights Barometer gave 62% of countries a failing grade on legal and social protections for LGBT + people in 2018. The contrasts between countries are significant. For example, Finland got a score of 96% on the barometer, while Russia got only 19%.
This raises the question of whether it is possible to quantify the potential economic consequences of this discrimination, especially in countries that are lagging behind world leaders in both economic output and LGBT + rights.
One approach is to estimate the loss of productivity due to discrimination among homosexuals, based on research conducted in countries where such data are available. These estimates can then be applied to the GDP of other countries. Open for business, a global coalition of companies, of which I sit on the Research Advisory Board, just did just that for Hungary, Poland, Romania and Ukraine – four countries with GDP per capita and LGBT + inclusion ratings well below the European average.
At the low end, the report estimate that LGBT + discrimination costs the Hungarian economy between 0.1% and 0.2% of GDP each year, or around £ 200million. At the high end, the estimated cost to the Romanian economy is between 0.6% and 1.7% of GDP, or up to 3 billion pounds.
While these numbers are unlikely to make or break a country’s economy, they are substantial in context. For example, Romanian government spending on education was 3.1% of GDP in 2017. The loss of GDP due to limited inclusion of LGBT + people could fund half of this spending each year.
Moreover, these estimates only represent the direct costs of exclusion. There could be additional indirect economic costs associated with brain drain, the detrimental welfare effects of discrimination, or even foreign investors moving elsewhere because they fear the prejudices of a country’s workforce will damage their reputation.
One thing this report does not take into account are the potential negative effects of inclusion. For example, could increased participation of homosexuals in the labor market actually deter heterosexuals with prejudices, for example, from working as productively or even from working at all?
There are two reasons why this is unlikely. First, several studies on the legalization of same-sex marriage in the United States found no effect on opposite-sex couples, including any impact on the likelihood of knowing whether they are employed.
Second, although there are prejudices, attitudes change as LGBT + rights evolve. Recent research has show that attitudes towards LGBT + people have become more positive after the enactment of laws recognizing same-sex relationships across Europe. More inclusive laws have led to more tolerant views, not the other way around.
One explanation is that equality laws confer legitimacy on sexual minorities – and attitudes adjust accordingly. This suggests that such laws could eventually be accepted, even in countries where acceptance of LGBT + people is low.
If so, and given the potential economic benefits, this is another reason why greater inclusion is worth pursuing. Beyond the level of each country, this could also bring benefits to the global economy.