FRBSF Economic Letter
2007-17; June 29, 2007
The Narrowing of the Male-Female Wage Gap
According to several measures, the difference in wages
between men and women, the so-called "male-female
wage gap" (MFWG), has shrunk substantially--by about
half--over the past several decades. This phenomenon has
been the subject of much research, speculation, and contention.
For example, some seek to explain why the gap narrowed
so dramatically in the 1980s only to narrow much more slowly
in subsequent years. Others have considered the role of
new technology, which may have helped level the playing
field between the sexes; this view recalls the rise of
office work at the turn of the 20th century, which is also
thought to have benefited women (Goldin 1990).
In this Letter, we focus on an important portion of the
research in this area, particularly as it pertains to
the very sharp decline in the MFWG during the 1980s. We
summarize
three of the more well-known possible explanations: declining
discrimination against women, rising skills and workforce
attachment of women, and changing selection. While each
has strong merit in its own right, none has come to be
the dominant explanation. We speculate that it may be
fruitful, though challenging, to consider whether these
three explanations
worked together, occurring simultaneously and reinforcing
one another, to result in the sharp narrowing of the
MFWG in the 1980s.
Measuring the male-female wage gap
There are several ways to compare the wages of males
and females, and no single measure is perfect or preferable
in every instance. The method most often used in academic
studies is to examine hourly wages for only full-time
workers
using data sets such as the Current Population Survey
(CPS) or Decennial Census. These studies typically measure
the
difference in wages between the sexes after controlling
for differences in years of education and age. This approach
ensures that, for example, the wage of a 50-year-old
female with a post-college degree is not directly compared
to
that of an 18-year-old male who dropped out of high school.
 Figure 1 presents estimates of the evolution of the MFWG
from 1979 to 2005 using CPS data and controlling for
age and years of education. It shows that the average hourly
wages of men who worked full time in 1979 were 37% higher
than the wages of their female counterparts. These estimates,
like those of others, show that the MFWG fell at a rapid
rate through the 1980s and then decelerated in the 1990s
and 2000s. Viewed in a historical context, as provided
in Goldin (1990), the rapid narrowing of the MFWG in
the
1980s is quite unusual.
Decline in discrimination
Differences in pay between men and women may be partly
the result of discrimination against women in the workplace.
Such gender discrimination may have lessened, especially
as a result of changes that occurred in the 1970s and
1980s. For example, in Pittsburgh Press Co. v. Pittsburgh
Commission
on Human Relations (1973), the U.S. Supreme Court upheld
an ordinance that prohibited publishing job advertisements
that sorted positions into "Help Wanted: Male" and "Help
Wanted: Female." In addition, Simon and Landis (1989)
found that opinion polls showed that men's willingness
to accept women in the workplace rose considerably in the
1970s and 1980s.
Unfortunately, ascertaining whether the MFWG has shrunk
because of lessening discrimination against women is
difficult, because measuring discrimination itself, let
alone changes
in discrimination, is difficult.
Rising skills and attachment to the workforce
Unlike discrimination, trends in the skills of women
and their attachment to the workforce (that is, their staying
in the workforce) since the 1970s are more easily demonstrable.
In terms of education, Goldin, Katz, and Kuziemko (2006)
show that American women born after 1960 began completing
college at higher rates than men. Perhaps more importantly,
during the 1970s, women entered professional graduate
programs
and went on to professional careers in record numbers
(Goldin and Katz 2002). This is important because professional
occupations tend to have higher pay than many of the
jobs
that used to be listed in the "Help Wanted: Female" ads.
Additionally, women's attachment to the labor force may
have increased. For instance, opinion surveys show a dramatic
rise in the proportion of women who say they planned to
work at age 35 during the 1970s (Goldin 2005). Also, as
shown in Valletta (2007), from 1983 to 2006, the median
job tenure rose noticeably for women but remained relatively
unchanged for men.
These trends could help reduce the measured MFWG in several
ways. An increased attachment of women to their careers
would tend to raise women's average wages by lengthening
their average work experience. If, for a given age and
education, women gained more experience, then their wages
relative to men's would be expected to increase. Similarly,
if women made career investments that are not picked
up in surveys (such as what they study in school instead
of
years of schooling), then that could lead to a narrowing
in the measured MFWG.
Establishing the relative importance of the rise in workplace
human capital among women on the narrowing of the MFWG,
however, has not been straightforward. One reason is
that the data sets used most frequently in such analyses
contain
only indirect measures of either workplace experience
or career investments. For example, potential work experience
in many studies is derived using the age and education
of workers in the sample. By contrast, Blau and Kahn
(2006)
use a data set that does contain years of actual work
experience. They found that the rising wages and work experience
of
women could account for some of the increase in women's
relative wages in the 1980s and 1990s. They also found
that human capital (a combination of work experience
and education) of women increased in the 1980s at about
the
same pace as it did in the 1990s. So although the increase
in human capital may have helped close the MFWG, the
human capital story says little about why the MFWG closed
faster
in the 1980s than it did in the 1990s.
Changing selection
As stated earlier, the MFWG is usually computed using
only full-time workers. However, full-time workers may
not be
representative of the population. Put another way, not
everybody works, and economists believe that people's
decisions to work or not depend, in part, on what they
would earn
if they did work, their so-called "earnings potential." Therefore,
researchers have studied how much the decline in the MFWG
may reflect the selective entry of women with high earnings
potential into working. Mulligan and Rubinstein (2005)
argue that the "stay-at-home" women of the 1960s
had high earnings potential compared to those who were
working; in other words, they were disproportionately women
who would have had high pay if they had chosen to have
a career. During the 1970s and 1980s the pay for high-skill
and professional jobs increased relative to the pay for
low-skill jobs. This better pay may have induced women
with high earnings potential to pursue careers rather than
stay at home. This latter point is buttressed by Black
and Juhn (2000).
Since changes in women's earnings potential cannot be
observed directly (one only observes the wages of those
who are
actually working), Mulligan and Rubinstein offer indirect
evidence to support their story. They show that two groups
of women likely to have high earnings potential--women
with high "IQs" and women with educated mothers--have
increased their propensity to work significantly more than
other women. In addition, they show that wages grew more
quickly over the past 30 years for the kinds of women who
were least likely to work in the 1960s--for example, married
women with children--and less quickly for women who always
had higher rates of participation, such as single women.
Overall, Mulligan and Rubinstein suggest that most of the
closing of the MFWG was due to changing selection.
While many might agree that changing selection played
a role in the increase in women's wages--due in part to
Mulligan
and Rubinstein's evidence--there is less consensus over
how much changing selection contributed to the increase
in women's pay. For instance, Blau and Kahn (2006), using
other methods, suggest that the impact is much smaller.
Possible interactions
Exploring whether and how these three explanations may
have worked together to narrow the MFWG so dramatically
in the 1980s is challenging both theoretically and empirically,
and it is beyond the scope of this Letter. However, we
believe it may be a fruitful avenue to pursue. For example,
consider the link between the decline in discrimination
and rising skills among women: It is conceivable that
less discrimination reinforced women's decisions to invest
more
in their own human capital, perhaps by furthering their
education or pursuing more lucrative occupational paths.
The decline in discrimination also could be linked to
the selection explanation, in that it may have lured women
with high earnings potential into the labor market. The
causality between discrimination and labor force attachment
could also go the other direction: For example, greater
attachment to the labor force may itself help reduce
discrimination
if the perceptions of women's attachment to the labor
force change as a consequence. Clearly, the phenomenon
of the
MFWG remains a rich field of research, not only to understand
the rapid narrowing of the gap in the 1980s and the slower
narrowing in later years but also the persistence of
the gap today.
Mark Doms
Senior Economist
Ethan Lewis
Dartmouth College
and Visiting Scholar, FRBSF
References
[URLs accessed June 2007.]
Black, Sandra, and Chinhui Juhn. 2000. "The Rise of
Female Professionals: Are Women Responding to Skill Demand?" American
Economic Review 90(2) (May) pp. 450-455.
Blau, Francine D., and Lawrence M. Kahn. 2006. "The
U.S. Gender Pay Gap in the 1990s: Slowing Convergence." Industrial
and Labor Relations Review 60(1) (October) pp. 45-66.
Goldin, Claudia. 1990. Understanding the Gender Gap.
New York: Oxford University Press.
Goldin, Claudia. 2005. "From
the Valley to the Summit: A Brief History of the Quiet
Revolution that Transformed
Women's Work." FRB Boston Regional Review Q1,
pp. 5-12.
Goldin, Claudia, and Lawrence F. Katz. 2002. "The
Power of the Pill: Oral Contraceptives and Women's Career
and Marriage Decisions." Journal of Political
Economy 110(4) pp. 730-770.
Goldin, Claudia, Lawrence F. Katz, and Ilyana Kuziemko.
2006. "The Homecoming of American College Women: The
Reversal of the College Gender Gap." Journal
of Economic Perspectives 20(4) (Fall) pp. 133-156.
Mulligan, Casey, and Yona Rubinstein. 2005. "Selection,
Investment, and Women's Relative Wages since 1975." National
Bureau of Economic Research Working Paper 11159.
Simon, Rita J., and Jean M. Landis. 1989. "A Report:
Women's and Men's Attitudes about a Woman's Place and
Role." The
Public Opinion Quarterly 53(2) (Summer) pp. 265-276.
Valletta,
Robert. 2007. "Anxious
Workers." FRBSF
Economic Letter 2007-13 (June 1).
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do not necessarily reflect the views of the management
of the Federal Reserve Bank of San Francisco or of the
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