Friday, November 4, 2011

The Diminishing Gender Wage Gap in the U.S.

Natalia Kolesnikova and Yang Liu of the St. Louis Fed have an interesting overview of the evidence: "Gender Wage Gap May Be Much Smaller Than Most Think."

Start with a provocative figure, comparing median weekly earnings of full-time male and female workers from 1979 to 2011. Back when I was starting college in 1979, it was common to hear the claim that women earned only about 70% of what men earned. The data from the figure in 1979 showing a wage gap of about 35% at that time backs up that claim. But since then, the gap has fallen to 16.5%. 

Of course, this sort of graph is just the beginning of a serious discussion. An obvious next step is to adjust these median wage differentials for demographic characteristics like educational attainment, work experience, occupation, career interruptions, overtime worked, availability of fringe benefits, and the like. These sorts of adjustments typically push the remaining gender wage gap down into low single digits. Moreover, the higher levels of women now attending college certainly suggest that the wage gap will diminish further in the future.

The standard response is to point out that a number of these adjustments to the wage gap are not exogenous choices by women, but instead are part of societal pressures. For example, the ease with which women can leave or re-enter the labor force is related to social, legal, and government support that makes it easier to do so. Adjusting for occupation means adjusting away the fact that women are still more likely to be teachers, nurses, and office clerks than men, and less like to be lawyers, doctors and top executives. Indeed, using the median wage in the figure above, rather than an average, means that the wage ratios are not affected by the much higher growth of incomes in the top few percentage points of the wage distribution--wage growth that has disproportionately benefited men.

Decades ago, newspapers used to run separate help-wanted ads for men's jobs and women's jobs, and if a woman who was teaching school married, she often was required to quit her job. That sort of egregious gender discrimination is largely in the past. But a more delicate interplay of gender roles, legal rules, and labor market outcomes remains.