Sexual Orientation And Earnings: How Being In Partnership Matters – Analysis

Previous studies on labour market discrimination based on sexual orientation have not revealed whether reported differences in earnings have been due to differences in the samples, populations, or outcomes, nor what the likely cause might be. Using a UK-wide dataset of sexual orientation and labour market earnings, this column shows that the overall difference in earnings for men who identify as gay is near zero irrespective of whether they are in a partnership or not, while women with a lesbian orientation have an earnings premium of about 5.5%. Specialisation explains earnings differences that depend on partnership status, though outside London there is some evidence of discrimination.

By Cevat Giray Aksoy, Christopher S. Carpenter and Jefferson Frank*

Since the mid 1990s, many researchers have investigated labour market discrimination based on sexual orientation (e.g. Badgett 1995, Black et al. 2003, Arabsheibani et al. 2004, Plug and Berkhout 2004). These studies frequently find large earnings differences. Partnered gay men earn significantly less than partnered heterosexual men, and partnered lesbian women earn significantly more than partnered heterosexual women. When individual level self-reports of sexual orientation are available, the earnings differences are generally smaller.

The previous studies have struggled with a trade-off between representativeness and sample size. Couples-based datasets such as population censuses in Canada, the US, and the UK provide large samples of same-sex couples, but do not identify the sexual identity of non-partnered individuals. In contrast, datasets with individual-level information on sexual orientation or sexual behaviour have been much smaller. The few studies with individual-level information on sexual orientation and reasonably large samples of sexual minorities have been limited to single states (e.g. Carpenter 2005), limited to young adults (Plug and Berkhout 2004), or lacked information on labour market earnings (Carpenter 2008a). As a result, we do not know whether differences in estimated earnings effects of a minority sexual orientation in studies have been due to differences in the samples, populations, or outcomes. It has also been difficult to disentangle the causes of sexual orientation-based differences in labour market outcomes (is it specialisation or discrimination?).

A nationally representative dataset

In a recent paper, we overcome these problems by using confidential versions of the 2012-2014 UK Integrated Household Surveys (IHS), linked to high-quality labour market earnings data from the country’s Annual Population Survey (Aksoy et al. 2016). To our knowledge, it is the first country-wide dataset combining partnership status, self-identified sexual orientation, and high-quality data on labour market earnings.

We use to it identify large samples of sexual minority individuals — more than 2,500 self-identified lesbians, gay men, and bisexuals (LGB) — through their responses to a direct question about sexual orientation. We also identify those in same-sex partnerships. This means we can directly test for how measurement of sexual orientation (individual level self-reports versus same-sex partnerships) is related to earnings differences between sexual minorities and heterosexuals, and comment more directly on possible explanations for differences in earnings.

Partnership status matters: Full-time employment

We discover that it is important to have data on both partnered and non-partnered sexual minorities. Our full-time employment models indicate that gay (bisexual) men are 4.5 (11.9) percentage points less likely to be working full time than similar heterosexual men. This difference for gay men is driven by the partnered sample. Partnered gay men are 6.1 percentage points less likely to be working full time than similar partnered heterosexual men. In contrast, the difference for bisexual men is driven primarily in the non-partnered sample. Non-partnered bisexual men are 11.7 percentage points less likely to be working full time than similar non-partnered heterosexual men.

Lesbians are 8.2 percentage points more likely to be working full time than similar heterosexual women, while bisexual women are 5.4 percentage points less likely to be working full time. As with gay males, the lesbian difference in full-time employment (although of opposite sign) is predominantly driven by the partnered sample. Partnered lesbians are 15.4 percentage points more likely to be working full time than similar partnered heterosexual women.

Partnership status matters: Earnings

After controlling for observable determinants of earnings such as education, location, and family structure, we find a positive and statistically significant difference in earnings for partnered lesbians compared to partnered heterosexual women, but no earnings differential for non-partnered lesbians compared with similar non-partnered heterosexual women.

We find a negative and marginally significant earnings penalty for partnered gay men compared to partnered heterosexual men, but no earnings differential for non-partnered gay men compared with similar non-partnered heterosexual men. Taking partnered and non-partnered individuals together, we find that the earnings difference associated with a gay sexual orientation for men is near zero, while the associated population-based earnings difference among women associated with a lesbian orientation is a premium of about 5.5%, and is statistically significant.

Specialisation or discrimination?

Our results are consistent with specialisation. Heterosexual partnerships typically involve gendered specialisation. The man is more engaged in market activities than the woman, particularly given that many couples have children. Even if the degree of household specialisation were the same in heterosexual and gay male households, gendered heterosexual specialisation means that the average partnered heterosexual man would be more focused on market activities than the average partnered gay man.

The same argument implies the average partnered lesbian would be more focused on market activities than the average partnered heterosexual woman. These differences would not accrue to non-partnered individuals. Our data support these specialisation-based predictions. Our finding that the lesbian premium among partnered individuals accrued approximately equally to lesbians who are household heads and lesbians who are not household heads also supports the idea that there is less specialisation in a lesbian household.

There is some limited evidence for discrimination as an explanatory factor. Our results show that older gay men and partnered gay men earn less than comparable heterosexual men. It is likely that, as men get older, not being in a heterosexual marriage becomes more of a signal of sexual minority status (Carpenter 2007, Frank 2007). It may also be easier to see that partnered gay men are gay, compared to their counterparts who do not have partners. For example, they may have photos of a same-sex partner or list their same-sex partner as a beneficiary. If there is discrimination against gay men, more observable individuals may bear a greater penalty. The gay male penalty occurs only outside London, where there is likely to be a stronger taste for discrimination. Finally, the bisexual male penalty occurs only in the private sector, and not the public sector where there is greater protection against discrimination.

Our unique samples of partnered and non-partnered sexual minorities, and high-quality data on earnings, provide evidence to support a role for specialisation in explaining sexual orientation-based differences in labour market earnings, with less evidence for selectivity, and limited and mixed support for discrimination.

*About the authors:
Cevat Giray Aksoy
, Research Economist, European Bank for Reconstruction and Development

Christopher S. Carpenter, Professor of Economics, Professor of Law, Professor of Education, Professor of Medicine, Health, and Society, and Professor of Health Policy, Vanderbilt University

Jefferson Frank, Professor of Economics, University of London, Royal Holloway College

References:
Aksoy, C G, C Carpenter and J Frank (2016). “Sexual orientation and earnings: new evidence from the UK”, EBRD Working Paper No. 196, also forthcoming in Industrial and Labor Relations Review.

Arabsheibani, G R, A Marin, and J Wadsworth (2005). “Gay Pay in the UK,” Economica 72: 333-347.

Badgett, M V L (1995). “The Wage Effects of Sexual-Orientation Discrimination,” Industrial and Labor Relations Review, 48(4): 726-739.

Black, D, H Makar, S Sanders, and L Taylor (2003). “The Earnings Effects of Sexual Orientation,” Industrial and Labor Relations Review, 56(3): 449-469.

Carpenter, C (2005). “Self-Reported Sexual Orientation and Earnings: Evidence from California,” Industrial and Labor Relations Review, 58(2): 258-273.

Carpenter, C (2007b). “Do Straight Men ‘Come Out’ at Work Too? The Heterosexual Male Marriage Premium and Discrimination Against Gay Men.” In M. V. Lee Badgett and Jeff Frank (Eds.) Sexual Orientation Discrimination: An International Perspective, New York: Routledge Press.

Carpenter, C (2008a). “Sexual Orientation, Work, and Income in Canada,” Canadian Journal of Economics, 41(4): 1239-1261.

Frank, J (2007). “Is the male marriage premium evidence of discrimination against gay men?” In M. V. Lee Badgett and Jeff Frank (Eds.) Sexual Orientation Discrimination: An International Perspective, New York: Routledge Press.

Plug, E and A Berkhout (2004). “Effects of Sexual Preference on Earnings in the Netherlands,” Journal of Population Economics, 17(1): 117-131.


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