The US Gender Pay Gap: Going, Going But Not Gone Francine D. Blau Cornell University DIW Berlin September 12, 2011
Overview Describe trends in the US gender pay gap Consider fundamental explanations for the gender pay gap Use these explanations to understand the US trends Consider the US in an international context Policy options
Trends: Dramatic Increase in Gender Pay Ratio US: after decades of constancy at about 60%, the gender pay ratio started to rise in 1980 Women s earnings now around 80% of men s on average Compares to 75% in Germany and 84% average for EU
Background Since WWII there has been a Quiet Revolution in gender roles Goldin (2006) Engine driving that revolution is the increase in female labor force participation
US Participation Rates (age 15+) 90 83 83 80 77 76 75 73 70 60 52 58 60 59 50 40 30 28 38 Women Men 20 10 0 1940 1960 1980 1990 2000 2007
A crucial part of the story is the growing labor force attachment of women over the life cycle High share of women work full-time (part-time share only 18%)
For comparison Germany: LF Participation: 1990, 45% 2008, 53% % Part-time: 38%
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 85 80 75 70 65 60 55 Gender Earnings Ratios, Full Time Workers (1955 2009) Weekly Annual Earnings Ratio (%)
Explanations for the Gender Pay Gap Qualifications (Human Capital) Education Work experience Discrimination (Unexplained)
Sources of the Wage Differential Between Men and Women, Full-Time Workers, 1998 (From Blau and Kahn 2006) Characteristic Percent Explained Educational attainment -6.7 Labor force experience 10.5 Race 2.4 Occupational category 27.4 Industry category 21.9 Union status 3.5 Unexplained 41.1 [Wage differential = 20.3%]
95.0 Adjusted and Unadjusted Gender Wage Ratios, Full time Workers, 1998 90.0 91.1 (Percent) 85.0 80.0 79.7 81.2 75.0 70.0 65.0 60.0 Unadjusted (Observed wage ratio) Adjusted for human capital variables only Adjusted for all variables
Problems with the unexplained gap as an estimate of discrimination If important omitted variables: could overestimate discrimination If include factors that could be influenced by discrimination: could underestimate discrimination Interpret estimates of discrimination cautiously
Additional Evidence on Discrimination: Experimental Evidence Natural Experiment : (Goldin and Rouse 2000) Symphony Orchestras and blind auditions Audit Study : (Neumark 1996) wait staff, Philadelphia restaurants
Trends Use these insights to explain the decrease in the gender pay gap Have women increased their qualifications? Has discrimination declined? Draw on work by Blau and Kahn Introduce a new factor: impact of broad, market-wide forces
Market-wide Forces Rising wage inequality Rising returns to skill due to the increase in demand for skill Gap between high and low paying industries and occupations also increased Black-white gap has stagnated; gaps have increased between Hispanics and nonhispanics and immigrants and natives
Market-wide Forces But gender pay gap has decreased How did women successfully swim against the tide of rising wage inequality? Women increased their qualifications Women reduced the unexplained gap Women benefitted from shifts in demand favoring women as a group
What Accounts for the Decrease in the Gender Wage Gap? Women improved their skills Labor force attachment and experience Especially the 1980s Gender experience gap fell from 6.6 years in 1979 to 3.5 years in 1998 Education Especially the 1990s Women now receive 57% of Bachelors Degrees
Women upgraded their occupations Moved out of traditionally female clerical and service jobs and into traditionally male managerial and professional occupations Related to increase in women s skills and reduction in discrimination
Decrease in the Unexplained Gap Especially in the 1980s Quantitatively a very important part of the story
Why did the unexplained gap decrease? Decline in discrimination Improvement in women s unmeasured skills Economy-wide trends favoring women raising the demand for women workers relative to men Movement away from blue-collar jobs and manufacturing industries to white collar and service jobs and health and education sectors
Summary for US Trends Women have made dramatic gains in narrowing the gender pay gap over the past three decades Progress was most pronounced in the 1980s and has become slower and more uneven since then Women s gains are related to improvements in their qualifications and likely decreases in discrimination
Women have also benefited from overall shifts in the economy that have raised the demand for women workers relative to men Despite the gains, women continue to earn less than men and the evidence suggests that discrimination plays a role in the gender pay gap
International Comparisons How does the US experience compare to other economically advanced nations? Gender pay gap has been falling in most countries US tends to have a larger gender pay gap than other economically advanced nations This is a bit of a paradox
85,0 Female-to-Male Ratios, Median Full-time Earnings 80,0 79,8 75,0 73,5 75,4 74,8 71,5 70,0 65,0 63,4 60,0 55,0 50,0 1980 1990 2000 United States Non-US Average
Why does the US lag behind these other countries? => Importance of wage setting institutions (Blau and Kahn) => Another example of how economy-wide factors affect outcomes for women => Costs in terms of employment (Bertola, Blau, and Kahn)
Comments on Policy Need a two-pronged approach aimed at reducing discrimination and increasing qualifications of women Discrimination: Important to vigorously combat labor market discrimination Qualifications: facilitating work-family balance Wage setting institutions can be helpful but don t attack the fundamental sources of gender pay gap
Thoughts on Work-Family Policies Policies should be gender neutral Policies should avoid creating a mommy track =>Emphasize e.g., child care, afterschool programs etc. =>Rather than encouraging mothers to take long leaves and work part-time for extended periods