The Gender Wage Gap: Extent, Trends, and Explanations with Francine Blau

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.

Linking Non-Cognitive Skills and Educational Achievement to Girls in Developing Societies: The Case of Ghana with Sally Nuamah

Sixty-two million girls are school-aged but not in school. We know that girls’ education has positive impacts, not just for girls themselves but for their communities: educating girls is associated with decreased mortality and incidence HIV/AIDS and with increased economic growth. Non-cognitive skills – attitudes, attributes, and personal skills apart from aptitude that individuals can draw on to achieve success – can have important impacts on improving educational outcomes. “Grit” is the paradigm example: perseverance towards one’s goals may be just as important to academic achievement as aptitude. While there is evidence that non-cognitive skills shape academic achievement, it is less clear how these skills are transmitted, and in particular what role schools play in transmitting these skills. Further, much of the research on non-cognitive skills has been done on elite male students in a U.S. context, which may not be entirely generalizable to other settings.

Our first WAPPP seminar of the spring semester featured Sally Nuamah, WAPPP Fellow and Joint Postdoctoral Fellow, University Center for Human Values and Center for Study of Democratic Politics, Woodrow Wilson School, Princeton University.  Dr. Nuamah presented the results of a study on non-cognitive skills and educational achievement focusing on 37 girls in Ghana striving to be the first in their families to go to college. Dr. Nuamah’s research focused on three key questions: What challenges do girls face? What does it take for them to achieve? And how do schools contribute to their achievement?

The girls in the study faced three levels of obstacles to educational achievement: their low socioeconomic status, under-resourced school, and particular gendered challenges, including risk of pregnancy that led many students to drop out of school. Schools have an important role to play in mediating the negative effects of this sociocultural environment. Dr. Nuamah found that the school in her study facilitated “achievement-oriented identities,” positive beliefs about students’ own abilities to succeed and to translate those beliefs into realizable actions. The school emphasized both self-efficacy – impressing upon students that they have the ability to overcome challenges – and strategy – helping students to create, implement, and monitor plans to overcome challenges. This achievement-oriented identity was particularly affirmed at the school leadership level, in after-school programs, and in the religion and morality curriculum.

School leadership: At the time of the study, the school had its first female headmistress. She initially perceived the female students to be timid and took policy steps to change that. Every year, the school held a speech competition at which only male students had delivered the keynote. This year, the headmistress required that a female student give the keynote. This small change had a big impact – the girl chosen to deliver the speech said that it increased her confidence, and “I feel like there’s nothing I can’t do.”

After-school: There is a great deal of research on the benefits of after-school groups: in particular, these groups create social support systems among peer groups. In Dr. Nuamah’s descriptive survey, girls reported an additional 2-5 more hours of housework per day than their male peers, with schedules that allowed for only 4-5 hours of sleep per night. Discipline and time management are critical for these girls, and these values are reinforced in their peer groups.

Curriculum: Dr. Nuamah emphasized the importance of religious and moral education in the Ghanaian context. Formal education in Ghana was historically closely tied to Christian missionaries, and schools’ practices reflect this history, including morning worship and daily prayer. In particular, rhetoric about achievement remains entwined with religion. Students are told to believe in themselves and their God-given gifts. This appeal to faith, even for students who aren’t particularly religious, engenders greater confidence in their ability to overcome challenges like the cost of education.

In conversations with students who had graduated, those seeking to go to college perfectly encapsulated the achievement-oriented identity—having faith and taking positive steps to achieve their goals. One student who had been accepted to university but couldn’t afford the fees voiced her anxiety, but said worrying wouldn’t solve her problem. She just had to pray to God… and she had applied for several scholarships.

Dr. Nuamah’s work highlights how school context can contribute to female students’ achievement, and particularly how schools can help girls grapple with gender-specific challenges, rather than assuming that the sole impediment to achievement is poverty. We look forward to learning more about this exciting area of research!

The Three E's to Reach Equality: Education, Employment and Entrepreneurship

At this week’s WAPPP seminar, Monika Queisser, the Head of the Social Policy Division at the OECD's Directorate of Employment, Labour and Social Affairs, made the economic case for gender equality. Her presentation "Progress and Policies to Achieve Gender Equality in Education, Employment and Entrepreneurship," was based off of the OECD 2012 report of a similar name. The report focuses on what Queisser calls “the three E’s” – Education, Employment and Entrepreneurship.

Education is a top focus of the report because it’s the pathway to employment across the world. The OECD reports that more girls are attending school than ever before. Every one-year increase in a population’s average education level accounts for a 9% increase in GDP per capita. But not all education is created equal. Women are severely underrepresented in STEM, where graduates have the most potential for future earnings and career development. Currently, 70% of engineering graduates are men. This contributes to the persistent global pay gap. Women earn an average of 16% less than men, and this gap rises to 21% among top wage earners.

Queisser argued that gender equality strengthens the labor force and boosts the economy for everyone in turn. The aging population and falling fertility rate in most OECD countries currently leads to a shrinking labor force. To remedy this, there is a need for more migration and/or for women to participate at higher rates. We must break down the economic barriers that are holding women back from full participation, Queisser argued. More women need to work, and those that want to should be able to work full-time.

The report found that when a couple has their first child, women tend to start reducing their paid work hours, while men start increasing them. Women make up for this loss in paid hours by increasing their unpaid work. Though policies could and should help change this, a cultural shift is also necessary. Even in countries with progressive maternity leave policies and strong social welfare, such as the Netherlands, there is still a cultural norm for women to work part-time.

In the report, the OECD laid out recommendations to achieve gender equality in these three areas. Gender equality in education attainment and choices should be promoted, though Queisser admitted that it's hard to alter the choices that children make because of deep-seated biases in our culture. Increasing the number of women in decision-making positions, instituting paid maternity leave, actively reduce the wage gap and implementing family friendly policies for women who are self-employed are all crucial for achieving gender equality in these areas. In addition, countries are encouraged to produce gender-specific data and monitor progress on this issue.

In closing, Queisser said her central question is always how the countries that are doing well got to where they are today. She used a popular example for how policy can dramatically change culture. Iceland, which created a positive tax credit for second earners who are women in the 1960s, consistently tops the World Economic Forum's Global Gender Gap Index. Queisser, a self-described optimist, argued that a combination of improved policy and shifts in our cultural norms could bring us closer to gender equality in this century.

Photo Source: OECD

It’s as simple as it is profound...

The Woman: Melanne Verveer, U.S. Ambassador-at-large for Global Women’s Issues

Last week I had the honor of hearing Ambassador Verveer speak to a crowded room of incredibly impressive women -- the capstone to three days of events, courtesy of the Women in Public Policy bi-annual board meeting. While this post will certainly fall short of the event, I will try and capture just a smidgeon of the essence from someone whose impact is as simple as it is profound: focus on women.  

Four Areas

Ambassador Verveer stressed four areas critical to elevating the status of women: 

1. Access to education
2. Economic participation
3. Access to basic health care
4. Political engagement

These four simple criteria provide both the foundation, as well as the strategies, to gauge and increase the status of women anywhere in the world. And, unfortunately, nowhere does parity on all four of these criteria exist. 

Why are these areas important? 

Education: When women and girls are educated, it provides a positive feedback loop that breaks the cycle of poverty. Girls marry later, have fewer children, raise healthier families, and are more likely to invest in their community. It has an exponential, and extensive, ripple effect that raises individuals and communities out of poverty. It is often colloquially referred to as The Girl Effect.

Economic participation: When women have access to economic opportunities, they reinvest 90 percent -- 90 percent -- into their families, communities, and countries. They raise the standard of living not just for themselves, but the world around them. They invest in the education of their children, the resources of their communities, and their household and financial assets. In places where banking sectors are slim or nonexistent, increased assets in the form of livestock or crops often serve as a necessary form of capital to protect against financial shocks, usually for medical emergencies. 

However, it goes beyond this; in countries where women are economically empowered, the entire countries’ GDP rises. Goldman Sachs calls it “Womenomics”. At a 2011 APEC summit, Secretary Clinton remarked that, “by increasing women’s participation in the economy and enhancing their efficiency and productivity, we can bring about a dramatic impact on the competitiveness and growth of our economies.” Ambassador Verveer also gave this staggering statistic: $46 billion is lost in economic growth from restricted job opportunities for women. The numbers seem to speak for themselves, but they are infrequently echoed.

Healthcare: In addition to economic inclusion, and especially in developing counties, having access to basic healthcare services is critical to ensuring equality. Women and girls are less likely to receive necessary immunizations or medical treatment, and limited financial resources are often extended only for boys. However, when women and girls have access to basic medical care, they are less likely to die in childbirth, more likely to see their children live past the age of five, and tend to raise healthier families. It provides another mechanism to break the cycle of poverty while simultaneously decreasing maternal and child mortality rates. 

Political participation: Political engagement is paramount. In countries where women are not allowed to receive inheritance or are denied property rights, they lack the legal and political rights to change these laws and policies. Even in the U.S., women represent less than 17 percent of Congress. Holding such a minimal amount of power prevents the dialogue and discourse from tackling issues impacting 50 percent of the population -- equal pay, preventative health care, and violence against women. Outside the U.S., and in newly minted countries, constitutions are being written without a single female voice. The inclusion and acceptance of women in the political process is essential to increasing their equality.

While these four areas are essential, they are not exhaustive. Ambassador Verveer discussed several other arenas where the role of women are paramount, yet often neglected. 

Women, Peace and Security

In December of last year, the U. S. State Department released the U.S. Action Plan on Women, Peace, and Security. The plan calls for women to be integrated into peace processes, conflict-prevention, transitional committees, and negotiating teams. Perhaps more importantly, it provides a bold declaration from the U.S. government that women are essential, perhaps even the crucial linchpin, to continued peace, stability and prosperity for countries. Personally, I like to believe the 2011 Nobel Peace Prize Laureates send a similar international message. 

Women are the canary

Ambassador Verveer said the State Department often views the role of women in a society as the canary. In regions where international security concerns are heightened, the role of women can speak volumes about the direction the country is headed. While the Ambassador did not mention specific situations, the metaphor easily translates: when the role of women is silenced or compromised, countries often find themselves headed towards instability.  

The importance of allies

Ambassador Verveer added an additional, often overlooked, component to the discussion - the importance of allies, specifically men, in securing the equality and inclusion of women. Allies are fundamental to encouraging this paradigm shift in women’s economic and political participation.  “Women’s issues are still perceived as ‘soft’. In reality, women’s issues are the hardest issues out there.” However, this asymmetry in power can be broken, especially when groups are familiar with the social, moral, and economic justifications of women's rights.  

Melissa Sandgren is a MPP1 at the Harvard Kennedy School and a participant in WAPPP's From Harvard Square to the Oval Office program.

*Photo cpyright World Economic Forum (www.weforum.org) / Photo Eric Miller emiller@iafrica.com

Negotiating a Better Future - WAPPP Seminar Series

The Women:
Kathleen McGinn, Cahners-Rabb Professor of Business Administration, Harvard Business School
Nava Ashraf, Associate Professor, Harvard Business School

The Talk: Negotiating a Better Future: Measuring the Impact of Negotiation Skills on Health and Social Outcomes in Zambia

The Question: Can teaching young girls negotiating skills impact their health and education?

Teaching girls negotiating skills may not just boost morale, it may also change lives. At least that’s what research from Harvard Business School is finding when it comes to young girls in Zambia making choices around pursuing education and making decisions around sexual behavior. While the study is ongoing, the research suggests that when girls are taught negotiation skills and techniques -- in addition to information about sexual behavior and education -- they are better equipped to influence their future.

The Numbers.

Currently 57 percent of adults living with HIV in Zambia are women; young girls have a higher prevalence of HIV compared to boys of the same age; and girls are less likely to be enrolled in school. This puts girls at an increased risk of early pregnancy, marriage, HIV infection, and lowered economic and social capital.

Plenty of research exists on the role of public health campaigns and educational programs to reduce HIV and prevent early pregnancy; yet, simply teaching safe sex practices may not be enough.

Why Not?

Teaching women and girls about condom use, reproductive health and the importance of education assumes one critical component -- women and girls have the agency to influence and make these decisions.

“Information is power, but not if you’re powerless,” says Kathleen McGinn. For example, negotiating sex or requesting money for education may not be areas where young girls can control the outcome. Patriarchal systems, social stigmas, male-favoritism -- a myriad of reasons -- means that having the information does not necessarily translate to gaining the desired results.

This is where the power of negotiation enters. When women and girls couple negotiation skills with knowledge, they may be more likely to effectively influence and persuade those in power, thus leading to better results. In terms of education and health, this could have an exponential impact for girls, families and communities. Furthermore, the World Health Organization recently cited both “negotiation skills for women” and “expanded efforts to keep girls in school” as two significant tools for women and girls to protect themselves from HIV. McGinn, Ashraf and Low appear to be reinforcing this recommendation.

While the trials are still ongoing, McGinn et al found that girls in their program reported positive impacts in both school and social environments. These included advocating for themselves, setting ambitious goals, and effectively communicating.

“There is great variation in how well individuals can take advantage of the information in front of them. That ability is a skill that we believe can be taught,” says McGinn.

*Photo courtesy of Nava Ashraf, taken by Kelsey Jack.

Melissa Sandgren is an MPP1 candidate at the Harvard Kennedy School and a participant in WAPPP's From Harvard Square to the Oval Office program.