Will the Gender Pay Gap Get Smaller?

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In the early 1980s, the earnings gap for women was 63 percent. That is, real median annual earnings for a man working full-time were about $52,000, while median earnings for a woman were about $33,000, or about 63 percent of what a man earned.¹

Over the past 30 years, this earnings gap has narrowed 17 percentage points to an average of 80 percent.² Economists have identified numerous factors contributing to the narrowing gap, including:

• Increases in the labor force participation rate of women
• Most notably, the educational attainment of women, which now surpasses that of men

The result has been an increased share of women in higher-paid professional occupations, although women are still underrepresented in the occupations with the highest earnings.³

The Eighth Federal Reserve District economy typically resembles the national economy when comparing most major economic indicators. In many ways, local measures of earnings inequality have followed a similar trend as the nation.

In the early 1980s, Missouri had the largest gap in the District at 58 percent, or about 5 percentage points below the national average. Arkansas and Mississippi had the narrowest gaps at 65 percent. Earnings gaps across the District have generally converged since then, with the areas with the largest gaps narrowing faster.

In recent years, regional earnings gaps have been very close to the national rate of 80 percent. However, the dynamics of how each region evolved to this point were very different.

As shown in the table below, women’s real earnings increased about 20 percent over the past 30 years on a national level, while men’s earnings declined about 5 percent.

In other words, about 80 percent of the 17 percentage points (or 14 percentage points) of the narrowed gap is directly attributed to increases in women’s earnings. The remaining 20 percent (or 3 percentage points) is from declines in men’s earnings.

Arkansas provides another perspective, as the earnings gap narrowed by less in Arkansas than in many other states. However, its overall picture is better than this statistic indicates:

• Women’s earnings grew faster than the national rate.
• Unlike the nation, men’s earnings also increased.

Thus, while the gap narrowed by less and remains wider, both women and men in Arkansas fared better than their national counterparts.

Therefore, one should be cautious in interpreting this dynamic. It is not the case that gains in women’s earnings are coming directly at the expense of men’s earnings.

While substitution of labor may occur, the data indicate that the industries and occupations for men and women are often very different, and the macroeconomic factors impacting sectors can be very different as well.

For example, men represent around 90 percent of construction jobs and 70 percent of employment in the manufacturing sector. On the other hand, women comprise about 80 percent of office and administrative support positions and about 80 percent of education and health service positions.

In the past 30 years, we’ve seen the gender earnings gap narrow 17 percentage points. Do the trends indicate it will take another 30 years for the gap to shrink another 17 percentage points? The jury is still out.

Data for the past five years suggest the earnings gap has remained unchanged at around 80 percent. The part of the earnings gap that existed due to differences in men’s and women’s skills has largely been eliminated. The earnings gap that still exists, however, continues to be driven by household dynamics and the arrival of children.

Despite contributing more toward household income, women continue to be more responsible for child care. The earnings gap gets wider with age and is different across occupations, often narrower in occupations with fewer women. Recent research finds that the contributing factor is the premium workers are paid for working continuous hours. Occupations that afford the least flexibility in working hours are associated with larger earnings gaps.⁴

¹ Full time is defined as those working at least 35 hours a week and at least 50 weeks in the last year. Earnings data are adjusted for inflation and reported in 2015 dollars.

² Due to relatively small sample sizes at the regional level, five-year averages are used.

³ See Juhn, Chinhui; and McCue, Kristin. “Specialization Then and Now: Marriage, Children, and the Gender Earnings Gap across Cohorts.” Journal of Economic Perspectives, Winter 2017, Vol. 31, Issue 1, pp. 183-204.

⁴ See Goldin, Claudia. "A Grand Gender Convergence: Its Last Chapter." American Economic Review, 2014, Vol. 104, Issue 4, pp. 1091-119. Also see Canon, Maria; and Golan, Limor. “Gender Pay Gap May be Linked to Flexible and Irregular Hours.” The Regional Economist, July 2016, Vol. 24, Issue 3, pp. 10-11.

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