The Gender Wage Gap Will Narrow But Is Unlikely Ever To Disappear

A key driver of differences in men and women”s pay is the fact that women are more likely to be in jobs with fewer training opportunities. And while women”s participation in the labour market has soared in the past 40 years, their enthusiasm for working – as transmitted from parents to daughters – remains less than men”s. These are among the conclusions of new research by Luisa Escriche, published in the April 2007 Economic Journal.

Policy measures favouring equal job opportunities – such as child allowances, longer maternity and paternity leave, flexible work-time arrangements, the provision of crèches and other measures that help women combine work and child care/housework – may eventually reduce gender differences in labour market participation and pay.

Nevertheless, policy-makers should also be concerned with non-labour market issues, such as education, family policy and more equal sharing of childcare and household work between men and women.

The ratio of female to male hourly earnings in the United Sates rose substantially between 1979 and the mid-1990s (from 65% to 80%) but has hardly risen in the last decade. One of the main factors that account for this gender wage gap is that women are persistently segregated into jobs with less training opportunities than those offered to men.

The reason for this is that girls and boys are not educated in the same way with respect to the relative value of market and non-market work. This different treatment is reflected in the rate at which women leave the labour market, to which employers respond, knowing that any training investment is lost when a worker leaves the firm.
Nevertheless, society evolves. Parents realise that firms” policies can change and, consistent with this fact, try to transmit the most valuable preferences for market and non-market work to their children. As the preferences among the women”s population changes, women”s probability of leaving the labour market also changes and so, in turn, do firms” training policies.

This study tries to untangle these factors to assess whether we can expect that the wage differential due to differences in training will disappear. The results show that women will not achieve the same rate of labour market exit as men because there will be always a portion of parents that will transmit their preference for non-market work to their daughters. This preference will not disappear, even in the long run.

Nevertheless, gender differences in levels of on-the-job training will diminish over time. Consequently, while the gender wage gap will not disappear, it will diminish.

The labour market participation of women will increase as a result of the spread of job-priority preferences, but the differentials in participation rates between men and women will persist in the long run. If fewer women withdraw from the labour market, the participation rate will increase.

Since 1950, there has been an unprecedented increase in the participation of married women in paid labour in the United States. Between 1950 and 2003, their participation rates rose from 34% to about 60%, with the largest increase between 1965 and 1990, and rising slightly since them. This rate has increased greatly in Western countries but it has not equalled that of men (60% compared with 90%).

There seems to be a ceiling on women”s participation rates, which suggests that those women who are out of the labour force may very well have a very strong taste for remaining at home. Unless these tastes change, the labour force participation rates of married women may not increase much above their current rate.

”Persistence of Occupational Segregation: The Role of Intergenerational Transmission of Preference” by Luisa Escriche is published in the April 2007 issue of the Economic Journal.

Luisa Escriche

University of Valencia | +34-96-382-87-76 | luisa.escriche@uv.es