THE article in Saturday’s Bendigo Advertiser “Agency ‘oversimplified’ gender pay data, says GCA” reported that new male university graduates were being paid more than new female graduates.
It was suggested that CEOs were somehow responsible for this in their firms.
It is not that simple.
One could have a situation where, in every firm, women were paid more than men, yet overall, men would earn more.
Suppose that we have only two firms, A and B.
Firm A employs 20 females who are paid $50,000 per year, and 10 males who are paid $45,000.
Firm B employs 10 females who are paid $80,000 per year, and 20 males who are paid $75,000.
In each firm, women are paid more than men.
Yet overall, the 30 females earn an average of $60,000 per year, and the 30 males earn an average of $65,000 per year.
In mathematics, this is called Simpson’s paradox.