Transgender people, people whose gender differs from their sex assigned at birth, comprise about 1.4 million people in the United States, a population comparable to that of Maine or Vermont. In 2020, the U.S. Supreme Court ruled that federal civil rights laws protect against employment discrimination on the basis of transgender status. However, despite an increased focus on transgender people and their rights, not much is known about their economic situation. In the paper, “Transgender earnings gaps in the United States: Evidence from administrative data” (National Bureau of Economic Research, Working Paper 32691, July 2024), Christopher S. Carpenter, Lucas Goodman, and Maxine J. Lee employ multiple strategies to evaluate the labor market situation of transgender Americans.
There are multiple ways through which transgender status could impact one’s employment and pay. First, discrimination in labor markets, public accommodation, and housing may increase the difficulty of a transgender person obtaining a steady job. Also, health needs and vulnerabilities as well as discrimination may impact a transgender person’s ability and efficiency at work. For example, transgender individuals experience a higher likelihood of mental health conditions and substance abuse disorders, which may limit labor market opportunities. However, the effects of transgender status on employment and pay do not necessarily only go one way. For example, employment may allow transgender workers to develop their gender identity by providing health insurance and money for gender-affirming care.
Previous surveys have indicated that transgender adults have lower employment and earnings than nontransgender people in similar situations. However, these surveys are limited in several ways. First, the surveys only had small samples of people who identified as transgender. Second, while the surveys had questions regarding employment, they typically did not ask further questions on topics such as earnings, occupation, and industry. Also, survey evidence may suffer from underreporting because of antitransgender sentiment and misreporting by nontransgender people seeking to protest. The authors sidestep the limitations of survey-based evidence on transgender status by using confidential administrative data of individuals who changed their gender with the Social Security Administration and who also had changed their names on Internal Revenue Service tax records.
Carpenter, Goodman, and Lee provide comprehensive evidence of an earnings gap for transgender Americans. The authors use three strategies to estimate the transgender earnings gap: a within-person panel evaluation, a within-sibling fixed effects design, and a within-occupation fixed effects design. In each of these approaches, the authors find evidence that transgender Americans are at a disadvantage in the labor market. Their research shows that transgender men and transgender women face different levels of wage penalty, and that hiring discrimination can account for all of the difference in wages between transgender men and nontransgender men.
Those included in the sample are only those who had the time and resources to change their gender on official government documents, and that suggests that transgender people without such resources are likely facing worse economic prospects. Ultimately, Carpenter, Goodman, and Lee believe that their findings support the notion that transgender Americans may benefit from enhanced labor market protections.
United States Department of Labor
