Gender Gap

The gender gap in U.S. labor force participation has been eroding steadily for at least 110 years (see Figure 1). In 1890, 15 percent of women in the United States aged twenty-five to forty-four (all marital statuses and races) reported an occupation outside the home. This figure increased to 30 percent by 1940, 47 percent by 1970, and 76 percent by 2000, when it was 93 percent for men in the same demographic groups. Whereas the trend for women was decidedly up, that for men was slightly down. As a result, the gender gap in labor force participation has greatly shrunk. By 2000, of all twenty- to sixty-four-year-olds, women made up 47 percent of the total labor force.

Advances in participation among women occurred at different times for different demographic groups. In the 1940s, for example, although the increase for the group shown in Figure 1 was not great, it was substantial for women in older age groups. Participation rates for younger (married) women grew significantly in the 1970s and 1980s. And the 1980s witnessed an increase in labor force participation of the sole group that had resisted change in previous decades—women with infants.

The gender gap that gets the most attention, however, is in earnings. The ratio of female earnings to male earnings in full-time, year-round positions has increased greatly since the 1980s, when the ratio stood at 0.6, to a ratio in excess of 0.75 (see Figure 2) today. That is, women’s earnings rose from, on average, about 60 percent of what men made to about 75 percent. Although no comprehensive data exist for the period before about 1950, evidence for major sectors of the economy, when properly combined, suggests that the gender gap in earnings narrowed substantially during two earlier periods in U.S. history. Between about 1820 and 1850, an era known as the industrial revolution in America, the ratio of female-to-male full-time earnings rose from about 0.3, its level in the agricultural economy, to about 0.5 in manufacturing. From about 1890 to 1930, when the clerical and sales sectors began their ascendancy, the ratio of female earnings to male earnings again rose, from 0.46 to 0.56. But in neither of these periods did married and adult women’s employment expand greatly. Yet, between 1950 and 1980, when so many married women were entering the labor force, the ratio of female earnings to male earnings for full-time, year-round employees was virtually constant, at 60 percent.

What accounts for the difference in earnings between men and women? According to the literature, observable factors that affect pay—such as education, job experience, hours of work, and so on—explain no more than 50 percent of the wage gap. The most recent studies, as reported in a review by economists Francine Blau and Lawrence Kahn (2000), found that the fraction explained is now even lower, about 33 percent. The reason is that the decrease in the gender gap in earnings was largely due to an increase in the productive attributes of women relative to men. The remainder of the gap—termed the residual—is the part that cannot be explained by observable factors. This residual could result from workers’ choices or, alternatively, from economic discrimination. Surprisingly, the differing occupations of men and women explain only 10–33 percent of the difference in male and female earnings. The rest is due to differences within occupations, and part of that is due to the observable factors. In just about any year chosen, the ratio of women’s to men’s earnings decreases with age and rises with education. Most telling is that the ratio is higher for single than for married individuals, particularly for those without children. Family responsibilities have been an important factor in slowing women’s occupational advancement over the life cycle.

Many observers have noted the paradox that as married women entered the labor force in steadily increasing numbers between 1950 and 1980, their earnings and occupational status relative to men did not improve. However, that is not as paradoxical as it might seem. Indeed, with so many new female entrants to the labor force, an economist would expect women’s wages to fall (relative to men’s) because of the huge increase in supply. In other words, the pay of women relative to men probably stayed constant not in spite of, but because of, the increase in the female labor force.

There is another, complementary reason why the gender gap in earnings was stagnating at the same moment that the gender gap in employment was narrowing. As more and more women entered the labor market, many of the new entrants had very little job market experience and few skills. If women tend to stay in the labor force once they enter it, the large numbers of new entrants will continually dilute the average labor market experience of all employed women. Various data demonstrate that the average job experience of employed women did not advance much from 1950 to 1980 as participation rates increased substantially. Economists James P. Smith and Michael Ward (1989) found that, among working women aged forty, for example, the average work experience in 1989 was 14.4 years, hardly any increase at all over the average experience of 14.0 years in 1950. Because earnings reflect the skills and experience of the employed, it is not surprising that the ratio of female to male earnings did not increase from 1950 to 1980.

The gender gap in earnings has decreased substantially since 1980. From 1980 to 1994, the ratio increased from 0.6 to 0.74, although the ratio has stagnated since 1994. Thus, in the fourteen years from 1980 to 1994, 35 percent of the preexisting gender gap in pay was eliminated. Moreover, these annual earnings data overstate the size of the gender gap because women who work full time actually work about 10 percent fewer hours than do men.

According to economists June O’Neill and Solomon Polachek (1993), the ratio of women’s to men’s pay increased for virtually all ages, all levels of education, and all levels of experience in the labor market during the 1980s. What is more, the gains occurred across all age groups. Although women in their thirties had the greatest gains relative to men their own age, the pay of older women relative to older men rose almost as much.

In this sense, the move to greater gender equality in the 1980s was remarkable. It was not merely a reflection of increased opportunities for younger or more-educated women in relation to comparable groups of men. Moreover, the increase did not occur only at the point of initial hire. It is not surprising, therefore, that conventional methods of explaining the decrease in the gender gap in earnings—those that rely on changing composition of the female workforce by education, potential job experience, occupational skill, and industry—can account for, at most, 20 percent of the increase.

Just as the stability of the earnings gap between 1950 and 1980 was probably due to the large influx of inexperienced women into the labor force, the narrowing of the gap from the 1980s to the mid-1990s may owe to the fact that female participation rates became very high. Because a larger proportion of women employed in the 1980s and 1990s were previously in the labor force, their skills and experience had expanded with time and were not greatly diluted by the addition of new entrants. The skills many of these women acquired when young enabled them to advance in ladder positions, allowing more women to have “careers,” not just jobs.

Other changes also account for the decrease in the earnings gap. Educational advances, particularly among the college educated, have placed more women on a par with men. Whereas in 1960 male college graduates outnumbered females by five to three, by 1980 the numbers of female and male college graduates were equal, and today women earn 57 percent of all bachelor’s degrees. College-educated women, moreover, now major in subjects very similar to those chosen by men, and they pursue advanced degrees in almost equal numbers. In the 1960s, for every hundred male recipients of professional degrees (in medicine, dentistry, law) there were fewer than five female recipients. But by 2001, women earned 46 percent of all professional degrees. That is, more than eighty females earned professional degrees for every hundred males. Young women are now forming more realistic expectations of their own futures than was the case thirty-five years ago. In 1968, only 30 percent of fifteen- to nineteen-year-old females said that they would be in the labor force at age thirty-five; by the mid-1980s, more than 80 percent thought they would be. Because the 1968 group vastly underestimated their future participation rate, they may have “underinvested” in their skills by taking academic courses that left them less prepared to compete in the job market.

To what extent has legislation narrowed the gender gap? One piece of legislation is Title VII of the Civil Rights Act of 1964, which forbids discrimination on the basis of sex in hiring, promotion, and other conditions of employment. The other is affirmative action. There is only scant evidence that either law has had any effect on the gender gap in earnings or occupations, although not enough research has been done to justify strong conclusions one way or the other.

The gender gap in employment, earnings, and occupations narrowed in various ways during the twentieth century, most especially, it seems, in the 1980s. The lessening of these gender gaps appears to have stalled in the late 1990s and has remained stalled since then. Whether or not the gap will continue to narrow and eventually disappear is uncertain and probably depends on the gender gap in time spent in child care and in the home.