Why do women still earn less than men?

The Issue:

In 2016 women who worked year-round and full-time earned, on average, around 81 cents for every dollar earned by men. Though still substantial, the difference in women’s average earnings relative to men’s has narrowed considerably since the 1970s. But the largest improvement in women's wages relative to men's happened during the 1980s and progress has been slower and more uneven since then. This is especially true for women at the top of the income distribution. Gender wage gaps at the higher levels of the wage scale are larger and declined more slowly over time than at lower and mid-income levels.By 2010, the wage gap between men and women was larger for the highly skilled than for other workers, suggesting that developments in the labor market for executives and highly skilled workers especially favored men.

The largest improvement in women's wages relative to men's happened during the 1980s. Progress has been slower since— especially for high-skill workers.

The Facts:

The gap in earnings between men and women has closed substantially since the mid-1950s with the most dramatic progress happening during the 1980s (see chart). After many years of little progress, women working year-round and full-time went from earning about 60 percent as much as men did in 1980 to making about 72 percent by 1990 (the gap in wages of full-time workers measured on a weekly basis tends to be smaller). The progress of women's wages relative to men's continued after the 1980s but at a slower and more uneven rate of increase. By 2014, women full-time workers earned about 79 percent of what men did on an annual basis and about 83 percent on a weekly basis (numbers cited come from this study we co-authored, which offers a comprehensive review of the trends and explanations for the gender wage gap).

Women surpassed men in education and nearly caught up with them in terms of work experience, which played an important role in reducing the wage gap. In the case of education there was a dramatic reversal of the gender gap. In 1981, women had lower average levels of schooling than men and were less likely to have exactly a bachelor’s or an advanced degree. But, beginning in the 1980s, young women began to catch up to and eventually surpass young men in pursuing higher education. In 2014, for example, women earned 57 percent of bachelor's degrees and 61 percent of associate degrees. They also surpassed men at the post-graduate level receiving 60 percent of master's degrees, 52 percent of Ph.D'.s and 49 percent of first professional degrees (see here,chapter 8). With the continued infusion of younger cohorts in which women were more highly educated than men, gender differences in education flipped and women are now more highly educated on average than men. In terms of work experience, the story is also one of considerable narrowing of the differences between the genders. In 1981, men had nearly 7 more years of full-time job experience on average than women. By 2011, the gap had fallen markedly to only 1.4 years, with the fastest catch up occurring during the 1980s. As a result of these advancements, a much smaller portion of the current wage gap between men and women can be attributed to differences between them in schooling or work experience. In 1980 the fact that women lagged behind men in education and experience accounted for 27 percent of gender wage differences, by 2010 differences in education and experience only accounted for about 8 percent of the – much smaller – wage gap. Although the type of education women receive has changed toward more mathematics and career-oriented programs, they continue to lag in higher-paying STEM fields (science, technology, engineering and mathematics).

Differences in the occupations and industries in which men and women tend to work remain important in accounting for the gender wage gap — and their importance has risen over time. Since the 1970s, women have made progress in climbing the occupational ladder from less well-paid administrative support and service occupations towards managerial positions. Similarly, women have made significant inroads into higher-paying professions that were traditionally male dominated: Women have branched out from teaching or nursing and become more prevalent in traditionally male-dominated law, medicine and engineering. However, reductions in occupational segregation by sex seem to have plateaued or slowed since the 1990s. And, the differences in employment among the genders across occupations and industries remain significant. Moreover, while women have ascended managerial ranks, they remain underrepresented at the very top tier of the management hierarchy: although women are nearly half of managers in Fortune 500 companies, they comprised only 14.3 percent of executive officers in 2012, and made up 3.8 percent of CEOs and held just 16.6 percent of board seats in 2011 (see herefor more information on women in S&P 500 companies). Changes in the relative returns to different occupations also played a role: Increasing returns to occupations in which men are more heavily represented contributed to the gender wage gap. Consequently, by 2010 — especially given the diminishing importance of education and experience — gender differences in occupation and industry together accounted for over one half of the gender wage gap.

Is there a glass ceiling? The move towards greater gender parity in pay since the 1980s has not been uniform across the income spectrum. Women at the top of the income distribution made less progress in narrowing the gap with respect to their male counterparts than women at the middle and bottom of the income distribution. Though they started out trailing men by similar percentages in 1980, by 2010 women's earnings at the top were between 74-77 percent of their male counterparts, while at the bottom of the income distribution women were earning 82-88 percent of men's wages and about 82 percent at the median. The convergence in earnings at the bottom reflects, in part, losses by men who have seen a decrease of lucrative jobs for less educated workers in sectors such as manufacturing. It is difficult to determine whether the lower pay and scarcity of women at the top is due to the fact that women are relative newcomers and it takes time to move through the ranks or whether there are particular barriers to their advancement that present a "glass ceiling." It could also reflect greater work-family conflicts for women that reduce their productivity or interest in high-level positions. There is some evidence that career-family tradeoffs are a particularly important factor in wage differences for women in high-skilled jobs. Workforce interruptions, fewer hours worked or greater workplace flexibility have a considerable cost in terms of earnings in some higher-paying occupations. Studies of lawyers and business school graduates have found that men and women earn equivalent wages after graduation but diverge widely as they progress in their careers: 15 years after graduation male lawyers earned 52 percent more than their female counterparts and male MBA graduates earned 82 percent more 10-16 years out of school. To the degree that women continue to assume traditional gender roles within the family, they are more likely to take time off to have or raise children and may place a higher value on workplace flexibility than men. As a result, they may be willing to accept lower wages in return for greater flexibility.

A substantial share of the gender wage gap cannot be explained by differences in the observable characteristics between men and women, suggesting that discrimination may continue to play a role. This unexplained portion of the wage gap decreased markedly during the 1980s, suggesting a potential decrease in discrimination during the decade, but has remained fairly steady since then. Economists have found evidence of men being favored over equally qualified women in specific instances. For example, an audit study of high-priced restaurants in Philadelphia found women to have a 40 percent lower probability of being called for an interview and to be 50 percent less likely to receive a job offer. Another study found that when symphony orchestras began to adopt "blind" auditions for musicians — in which a screen is used to conceal the identity of the candidate — it substantially increased the probability that women would advance out of preliminary rounds and be winners in the final round. Beyond discrimination, it may be that there are differences between the genders that are more difficult to measure than education or work experience that result in different wages. For instance, gender differences in psychological factors or non-cognitive skills may account for a small portion of the unexplained gender wage gap. Women have been found to be less willing than men to negotiate and compete. On the other hand, there is some evidence that women have better interpersonal or “people” skills and are more agreeable than men. Firms and industries may place higher or lower values on such attributes and compensate accordingly. The extent to which these factors are due to societal expectations or are ingrained is a subject of debate.

Gender roles and the gender division of labor within the family continue to impact women's work. Research continues to indicate a negative relationship between children and women’s wages, commonly known as the motherhood wage penalty. This penalty could be attributed to the firm’s anticipating that motherhood may cause a woman to leave her employer or alter her productivity. Evidence also indicates that women are more likely to quit their jobs or to exit the labor market for family-related reasons, while men are more likely to quit for job-related reasons, adversely affecting women’s wages relative to men’s. Additionally, the greater tendency of men to determine the geographic location of the family, even among highly educated couples, continues to be a factor in the gender wage gap.