Earnings Effects of Sexual Orientation Revisited: Evidence from the CPS

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Rehrig, Clay
Economics; Income Distribution; Other Economics
project description
Objective. To measure the wage premium or penalty associated with sexual orientation of partnered lesbians and gays and to compare these estimates with those produced using smaller sample sizes and alternative definitions of homosexuality.Data Source and Sampling Methods. Data are drawn from the Current Population Survey, produced by the U.S. Census Bureau. Extracting household information from the out-going March rotation provides a sample of 37,000 households interviewed in the years 1995 and 2000. Only workers living with a partner are included in the analysis.Study Design. Following the methodology used by Black et al. (2003), this study uses a Mincerian wage regression to determine the effect of demographic and employment characteristics on earnings. A respondent’s sexual orientation is determined by marital status and whether or not they live with a partner of the same sex. With logged wages as the dependent variable, I estimate the effect of sexual orientation on earnings using an ordinary least squares regression. I run two regressions for each gender: one with controls for occupation and one without. Demographic control variables are: education, potential experience, race/ethnicity, and the region in which the respondent resides.Principal Findings. Not controlling for occupation, gay partnered couples earn more than similar heterosexual married couples, although this effect is stronger for men than for women. Controlling for occupation, being gay still has a positive and significant effect on men’s earnings. Once occupation is added, however, there is a positive effect of being gay on women’s earnings, but this effect is no longer statistically significant.Conclusion. Homosexuals living with a partner earn significantly higher wages than those in heterosexual partnerships. This wage premium diminishes slightly when controlling for a worker’s occupation and remains statistically significant for men. These results are consistent with various hypotheses of the effect of sexual orientation on labor market outcomes. It also suggests that lesbians earn a wage premium because they tend to cluster into higher paying occupations.