The Stagnation of the Gender Pay Gap: A Closer Look

New research has brought to light a concerning trend: while the gender pay gap has been closing over the past several decades, progress has nearly stalled since the mid-1990s. This stagnation means that women are not reaping significant benefits from the incremental improvements that continue to be made.

This finding comes from a working paper by Jaime Arellano-Bover of the Yale School of Management, Nicola Bianchi from Northwestern University, Salvatore Lattanzio of the Bank of Italy, and Matteo Paradisi of the Einaudi Institute for Economics and Finance. According to their analysis, women on average are paid 84 cents for every dollar paid to men. This is only a slight improvement from 2002, when women earned roughly 80% of what men earned, based on data from the U.S. Census Bureau analyzed by the National Women's Law Center.

The researchers examined over 40 years of pay data from the Census Bureau's current population survey to uncover the reasons behind the persistent pay gap and to identify potential pathways toward achieving equity. In the 1970s, two major factors were instrumental in narrowing the wage gap: young men and women were entering the workforce with similar wages, and older workers, who typically had wider wage gaps that had compounded over time, were retiring.

Between the mid-1970s and mid-1990s, these forces worked together to reduce the overall gender pay gap, with newer cohorts showing progressively more gender equality in their outcomes. However, by the late 1990s and early 2000s, the pay gap among young workers stopped narrowing. The retirement of older workers with wider gaps became the sole factor in decreasing the overall gender pay gap.

The study’s findings challenge the assumption that the narrowing gender pay gap is the result of improved career opportunities for women. Instead, it suggests that the narrowing gap may be due to poorer wage and career opportunities for men. Researchers observed that young men were falling in wage distribution rather than young women rising. In other words, young women have made slight improvements, but these gains are small compared to the decline in young men's wages.

The Importance of Early-Career Interventions

The stagnation in the wage gap for young workers is particularly troubling because early-career gaps can have long-term consequences. Therefore, the authors recommend that policies aimed at closing the wage gap should focus on early-career interventions for young women entering the job market.

Addressing disparities when young people first enter the labor market, or even earlier when they are deciding what to study, is crucial. Educational opportunities play a vital role in shaping future career paths. For example, previous research has shown that while similar shares of Gen Z boys and girls have opportunities to learn about STEM subjects in school, girls are more likely to say they are not interested in these topics or feel they will not excel at them. This perception gap may stem from how girls believe they will be perceived if they try something new, compared to the "irrational confidence" young men might have in their abilities.

Furthermore, girls are more likely to feel that STEM careers are not accepting of people like them. When young women do not pursue high-paying fields like those in STEM, it can have lasting impacts on their earnings. Despite more women than men graduating from college, men are still more likely to study majors that lead to high-paying jobs. This gap in major choice has remained flat for the last 20 to 30 years, mirroring the persistence of the wage gap.

Moving Forward

To achieve true gender equality in the labor market, it is essential to address these disparities early on. This could involve encouraging young girls to pursue interests in high-paying fields, offering more support and mentorship in these areas, and creating a more inclusive environment within these industries.

In conclusion, while progress has been made in closing the gender pay gap, it has nearly stalled since the mid-1990s. Early-career interventions and educational opportunities are key to fostering gender equity in the labor market. By addressing these issues, we can create a more equitable future for all workers.