The gender wage gap declined substantially from 1980 to 2010. What factors contributed to this decline, and how do we account for the gap that remains? This week’s WAPPP seminar featured Francine Blau, Frances Perkins Professor of Industrial and Labor Relations and Professor of Economics at Cornell University. Professor Blau presented new empirical evidence on the extent, trends, and sources of the gender wage gap and used this new evidence as a springboard to review the existing literature on the gender wage gap.
In 1980, women on average earned 62.1% of what men earned, a wage gap of roughly 38%. By 1989, the ratio of women’s to men’s earning had increased to 74%, to 77.2% in 1998, and to 79.3% in 2010. This stark change is impressive, but it’s also important to not how much of the increase occurred in the 1980s. Since then, progress in decreasing the gender wage gap has been slower and less consistent.
Professor Blau incorporated two major specifications into her regression analyses. The first, a human capital specification, controls for education and experience. The other controls for variables like occupation, industry, and unionism. The first category includes differences most often affected by choices individuals make about their own lives, whereas the second category can be heavily influenced by the employer.
Using these two specifications, we can examine the gender wage gap to see how much these factors explain the variation in earnings between men and women. For example, in 1980 the unadjusted ratio of women’s earning to men’s was 62.1%, but controlling for the human capital specification, the ratio was 71.1%. This tells us that experience and education accounted for a great deal of the gap. Adding in the second specification, the ratio climbs to 79.4%. While this analysis demonstrates that all of these control variables play an important role in the gender wage gap, there is still a large portion that remains unexplained. In the data from 1980, women with the same characteristics as men nevertheless earned 20% less.
In 2010, the unadjusted gender wage ratio of 79.4% rises to 82.1% controlling for human capital variables and to 91.6% with the full specification. Experience still accounts for a large portion of the gender wage gap in the 2010 data, but interestingly education now detracts from the explanation. Women are now better educated than men, on average, but education appears to be doing less “work” for them in terms of reducing the gender wage gap. Women’s more frequent workforce interruptions and subsequent fewer years of work experience are now contributing more to the continuation of the wage gap.
Interestingly, it appears that the gender wage gap is closing more slowly at the top of the wage distribution. Professor Blau compared women to men in the 10th percentile, 50th percentile, and the 90th percentile of the wage distribution. In 1980, the ratio of women’s wages to men’s was roughly the same across each of these percentile groups – approximately 60%. In 2010, the wage ratio of women to men in the 10th percentile was 82%, 81% in the 50th percentile, and yet only 73.8% for the 90th percentile. Can this discrepancy be explained by differences in characteristics between women and men in the 90th percentile? Examining the descriptive statistics, there aren’t any significant differences that would account for a gap of this size. Understanding why women at the top are faring particularly poorly, and why this development is occurring now, is an important area for future research.
What accounts for the overall decrease in the gender wage gap? One particularly important answer is that women worked hard for what they got! Women improved their skills, both in terms of their educational attainment – women now receive 57% of Bachelor’s degrees – and their labor force attachment and years of experience. The gender gap in full-time experience fell from 6.8 years to 1.4 years between 1980 and 2010. The change in this gap mostly reflects female gains, but has also been impacted by worse outcomes for men, particularly an increase in unemployment during the recession. Women also moved out of traditionally female clerical and service jobs into higher-paying and traditionally male managerial and professional occupations.
Traditional explanations for the gender wage gap tend to focus on discrimination and differences in human capital. While human capital factors account for less than they did in the past, they remain very important. According to Professor Blau, the economics literature is now incorporating newer explanations for the gender wage gap, such as non-cognitive skills and psychological attributes. For example, women tend to be less comfortable negotiating and tend to shy away from competitively-based compensation schemes, which can negatively affect their wages. In addition, gender norms may play a significant role in the remaining gender wage gap. One paper investigated the norm that a wife should not earn more than her husband and found that if a wife is predicted to earn more than her husband, she is less likely to participate in the labor market or, if she does, her income is lower than would be predicted based on her other attributes. These newer insights about gender differences in non-cognitive skills and the relevance of social norms pertaining to gender may help to illuminate still-unexplained aspects of the gender wage gap, but are not a silver bullet.