Are Anti-Discrimination States Benefiting From a Homosexual “Brain Gain”?

As a Canadian I am baffled by the fact that a country like the US, with its culture of civil rights, has no federal law to prevent men and women working in the private sector from losing their jobs because of their sexual orientation. As an economist, however, the arrangement that some states protect LGBT workers from discrimination, and others do not, provides a natural experiment that helps us understand how these laws affect the working lives of LGBT people by comparing the labor market experiences of similar workers between states. It’s a rare chance to test if anti-discrimination laws actually make a difference.

New research does just that and finds that men in same sex relationships who live in states with anti-discrimination policies earn about 8% more per year working in the private sector than do similar men living in other, less protective, states. * This effect is not through higher wages but rather through more weeks worked – gay men are better able to find and keep jobs in these states. The biggest winners in these states are gay white men who earn 14% more than similar men in other states and men who are in the top of the earnings distribution who earn 7% more when state laws prohibit discrimination based on sexual orientation.

Just to be clear, gay men in these states do not earn more on average than heterosexual men. The authors of this paper find a huge wage gap for gay men; on average gay men in same sex relationships annually earn about 20% less than men who are married to women. So these observed higher earnings only work to close that gap, not to give gay men a wage premium.  

There is no effect for women in same sex relationships but this is probably because, as I have said before, there appears to be little evidence of an earnings penalty to being a lesbian. 

Before we give all the credit for closing the earnings gap to the laws themselves, there is one other thing to consider; men who have higher earnings and are better educated are pretty mobile workers. What is there to stop gay men in less tolerant states from moving to those that will afford them the greatest protection in the workplace? Absolutely nothing. 

I would expects that a significant portion of this higher earnings effect we observe in the data is not because existing workers are increasing their employment but rather because other, very productive, workers (who happen to be gay men) are moving into states that offer protection and that this change on the extensive margin is increasing the average earnings of all gay men.

The fact that this effect is greatest for men in the top of the earnings distribution suggests these men don’t just work more hours, but they are also better educated and more skilled than about 75% of other men.

My Canadian readers won’t find this result surprising; Canada has benefited from the US homosexual brain drain for at least the past six years, since we legalized same sex marriage at the national level, and probably going back to 1996 when we established national protection for LBGT people in the workplace. 

Freezing winters aren’t for everyone, though, so if you are looking to relocate to a state that protects workers from discrimination based on sexual orientation I suggest you check out this excellent state-by-state description of employment, marriage and adoption rights for LGBT people.

 * Klawitter, Marieka (2011). “Multilevel Analysis of the Effects of Antidiscrimination Policies on Earnings by Sexual Orientation.” Journal of Policy Analysis and Management, Vo. 30, No. 2: pp 334-358.