Gender Differences in Pay

Abstract

We consider the gender pay gap in the United States. Both gender-specific factors, including gender differences in qualifications and discrimination, and overall wage structure, the rewards for skills and employment in particular sectors, importantly influence the gender pay gap. Declining gender differentials in the U.S., and the more rapid closing of the gender pay gap in the U.S. than elsewhere, appear to be primarily due to gender-specific factors. However, the relatively large gender pay gap in the U.S. compared to a number of other advanced countries seems primarily attributable to the very high level of U.S. wage inequality. Over the past 25 years, the gender pay gap has narrowed dramatically and women have increasingly entered traditionally male occupations. These two labor market outcomes are closely linked, since considerable research suggests that predominantly female occupations pay less, even controlling for measured personal characteristics of workers and a variety of characteristics of occupations, although the interpretation of such results remains in some dispute.1 In this article, wedescribe these important gains, analyze their sources, and point to some significant remaining gender differences. We also assess where American women stand relative to women in other countries and conclude with some thoughts about future prospects for the gender pay gap. Overview of Gender Differences and Trends EarningsGender earnings disparities in the United States have shown considerable recent convergence. Figure 1 shows the trends in the female-male earnings ratio for annual earnings of year-round, full-time workers and for usual weekly earnings of full-time workers. These measures can be thought of as adjusting for the fact that women as a group tend to work fewer weeks per year and hours per week than men. (Government data are not available for wage rates over this period.)The data indicate that the gender ratio was roughly constant at about 60 percent from the late 1950s to about 1980. Indeed, as Fuchs (1971, p. 9) pointed out, this longstanding ratio had a biblical antecedent in Leviticus (27:1-4), where it is decreed that a woman is worth 30 shekels of silver and a man 50 shekels. The gender earnings ratio began to increase in the late 1970s or early 1980s.Convergence has been substantial: between 1978 and 1999 the weekly earnings of women full-time 1. See, for example, Sorensen (1990). A recent study by Macpherson and Hirsch (1995) using a 1973-93 panel of data from the Current Population Survey finds that the negative wage effect of percent female in the occupation is reduced by at least two-thirds when occupational characteristics are included and longitudinal wage change models are estimated to control for unobserved fixed effects.2 workers increased from 61 percent to 76.5 percent of men's earnings. However, the ratio appears to have plateaued in the mid-1990s. 2This increase in the gender earnings ratio could represent either the entry of new cohorts into the labor market, each one better ...

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