June O'Neill

Why the gender gap in wages narrowed in the 1980s

Since 1976 the gender gap in wages on average declined by about 1% per year. This article focuses on identifying the factors underlying this trend. Three data sets are analyzed-the Current Population Survey, the Panel Study of Income Dynamics, and the National Longitudinal Survey. We find that convergence in measurable work-related characteristics (schooling and work experience) explains one-third to one-half the narrowing. The remainder is attributable to a relative increase in womens returns to experience as well as to declining wages in blue-collar work and other factors.

The Trend in the Male-Female Wage Gap in the United States

Despite the rise in the feminist movement, the enactment of equal opportunity legislation, and the rapid increase in womens labor force participation, a substantial sex differential in wages has persisted in the United States for at least 4 decades. Measured by hourly earnings of year-round workers, this wage gap was 31% in 1955, widened to a 35%-37% range by the 1960s and early 1970s, and then narrowed to 33% by 1982. This paper examines the extent to which changes in the characteristics of men and women in the labor force and other factors can account for the observed pattern. The main finding is that increases in womens labor force participation were initially associated with a declining skill level of employed women relative to employed men, where skill is measured by years of schooling and job tenure. More recently the work experience of employed women has been increasing, which helps account for the recent narrowing trend in the wage gap. During the 1970s the wage gap probably woul have narrowed more significantly had it not been for high levels of unemployment combined with the downward pressure on wages of less skilled workers arising from rapid increases in the supply of young workers and women. Gains by younger women in work expectations, work experience, and college enrollment and other work-related investments point to a further narrowing of the wage gap in the next decade.

Affirmative Action in the Labor Market

One of the most controversial tools of federal antidiscrimination policy in the employment area is the affirmative action program conducted by the Office of Federal Contract Compliance Programs (OFCCP). The OFCCP requires firms holding federal government contracts to set numerical hiring goals for minorities and women. Firms that fail to meet their targets face the threat of contract cancellation. The setting of hiring goals requires estimation of available pools of qualified minorities and women, which in practice cannot be done with any precision. Studies show no clear positive link between gains in minority earnings and the affirmative action efforts of the OFCCP. Current earnings differentials between blacks and whites appear to be more closely tied to differences in work-related skills than to labor market discrimination. The growing premium on skill in our economy underscores the need for improvement in the schooling of blacks and other minorities suffering educational deficiencies.

Discrimination and Income Inequality

Discrimination against particular groups has existed throughout history and in all types of societies. Few would challenge the idea that inequality of income based on discrimination is unjust. The more problematic issues are the extent to which discrimination is in fact a significant source of inequality and whether such discrimination-based inequality is inherent in a capitalist system. There is little doubt that discrimination can affect a groups income. But the link is by no means automatic or certain. Thus, the incomes of blacks, particularly in past decades, seem surely to have been lowered by discrimination. Yet other examples are less clear. Jewish and Japanese Americans, for instance, have had incomes substantially above those of white non-Jewish groups, despite evidence of discrimination against them.