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Gender and economic outcomes.

The past 20 years have seen decreasing gender differences in occupations and industries and, particularly in the 1980s, increasing relative earnings for women. Women's participation in the labor force also has continued to increase, as they have become more likely to work over most of their adult lives.(1) My research attempts to help us understand the sources of, and recent trends in, gender differences in economic outcomes. I also hope to shed light on the social consequences of the changes in gender roles that underlie these developments.

Overview of Trends

In recent years, both white and black women have narrowed the earnings gap relative to men of the same race. For white women, the annual earnings ratio adjusted for hours and weeks worked rose from 60 percent in 1971 to 74 percent in 1988. For black women relative to black men, the same ratio rose from 68 percent in 1971 to 86 percent in 1988. White women made slow progress relative to white men in the 1970s, and considerably more rapid progress in the 1980s. The pace of change for black women was more similar over the course of the two decades, but their earnings ratio did increase at a higher annual rate in the 1980s.(2) In addition, although the earnings of black men and women stagnated relative to whites of the same sex during the 1980s, black women continued to narrow the gap with white men over this period.(3) Occupational differences between males and females also narrowed over the 1970s and 1980s. The index of segregation, a measure of the proportion of women (or men) who would have to change jobs for the occupational distribution of the two sexes to be the same, fell from 67 to 57 percent between 1970 and 1987.(4) However, in this case, the pace of change was faster in the 1970s than in the 1980s. Women made particular progress in entering traditionally male managerial and professional jobs, and the fraction of older black women in private household occupations fell sharply.(5) Gender differences in industrial distribution also narrowed over the 1970s and 1980s, for both black and white women.(6)

Determinants of the Gender Earnings Gap

Traditionally there have been two primary explanations for the gender gap. First, women suffer from discrimination in the labor market. Second, because many women work part time, or drop out of and then reenter the work force, they have less human capital and are less productive than men of similar age and education. Both discrimination and differences in human capital affect the pay gap, although precisely determining the relative importance of each is difficult.(7)

Analyses of trends over time in the gender differential, as well as intercountry comparisons of the gender earnings ratio, have tended to emphasize these factors. But my current work with Lawrence M. Kahn on international comparisons of the gender gap suggests that an additional factor, wage structure, is of considerable importance in explaining differences across countries, and perhaps in explaining trends over time within the United States as well.(8) Wage structure describes the array of prices set for various labor market skills (measured and unmeasured) and the rents received for employment in particular sectors of the economy. The impact of wage structure on intercountry differentials in the gender gap can be illustrated by the following examples: suppose that in two countries women have lower levels of skills than men, but that this difference in skills is the same in the two countries. If the return to skill is higher in one country, then it will have a higher gender pay gap. Or, suppose that the extent of occupational segregation by sex is the same in two countries, but that the wage premium associated with working in a predominantly male occupation is higher in one country. Then, again, that country will have a higher pay gap.

Using microdata from nine industrialized countries, we find that wage structure is an important determinant of cross-country differences in the gender earnings ratio. Specifically, the higher level of wage inequality in the United States increases the gender differential in the United States relative to all other countries in our sample.(9) Most strikingly, wage structure fully accounts for the lower gender earnings ratio in the United States compared to the Scandinavian countries and Australia (the countries with the smallest gaps). This explains the seemingly paradoxical position of U.S. women compared to women elsewhere. U.S. women compare favorably to women in other countries on several measures of skills relative to men. Moreover, the United States has had a longer commitment to equal pay and equal employment opportunity policies than the other countries in our sample. Yet the gender pay gap in the United States is considerably larger than in the other countries in our sample.

A variety of factors may explain the higher level of wage inequality in the United States, but we see the wage-setting institutions of each country as being particularly important. Centralized wage-setting institutions, which tend to reduce interfirm and interindustry wage variation and often are associated with conscious policies to raise the relative pay of low-wage workers (regardless of gender), may reduce the gender pay gap indirectly. U.S. pay-setting is far less centralized than that of virtually all of the countries in our study, with the possible exception of Switzerland.

Understanding the Trends

Why did the gender earnings gap begin to close in the 1980s after relatively little progress during the 1970s? Wage inequality in the United States was increasing over both decades, principally because of rising returns to skill.(10) During the 1970s, there was little to counter-balance this adverse trend. However, in the 1980s, a number of positive developments more than offset the negative impact of rising inequality.

In the 1970s, the potentially positive effect of the increasing representation of women in traditionally male occupations and industries was offset by adverse (for women) changes in occupational and industrial wage premiums.(11) That is, increasing earnings associated with working in disproportionately male sectors lowered the relative earnings of women who were still underrepresented in those sectors. Shifts in returns, particularly rising returns to employment in male occupations, may reflect the impact of the increasing returns to skill that I noted earlier. In addition, increases in female labor force participation, especially by mothers of young children, tended to reduce the average age and experience of women relative to men during the 1970s.(12)

That women's relative earnings did not decline in spite of all these adverse changes, but rather increased somewhat during this period, may reflect a reduction in labor market discrimination. This, in turn, may be a result of the government's antidiscrimination efforts, which may have been more successful than generally recognized.(13) In addition, education differences between men and women declined over the decade as an increasing percentage of women enrolled in college and professional schools, especially in traditionally male fields of specialization.(14)

During the 1980s, while returns to employment in male occupations continued to rise,(15) changes in industry wage coefficients favored women.(16) This development most likely reflects shifts in industry demand, particularly a decline in the manufacturing sector and an increase in services.(17) At the same time, the women who entered the labor force during the 1970s did not stay home to raise their children, as their mothers did. As a result, women's average experience levels began to rise relative to men's during the 1980s.(18) Gender differences in level and type of education continued to narrow.

A Look at the Future

Recent increases in the labor force participation of women, and a growing tendency of women to remain employed more continuously over the life cycle, have meant that a rising percentage of young children have mothers who work outside the home. There is every indication that this pattern will persist into the future and that younger women will be more firmly attached to the labor force than their predecessors were.(19) Adam J. Grossberg and I have examined the impact on the child's cognitive development of maternal employment during the first three or four years of a child's life, as measured by standardized test scores.(20) We find that a mother's working throughout the child's first three or four years of life has little or no net effect on the child's cognitive development. This finding was the result of two offsetting effects: children whose mothers worked throughout their first year scored lower than otherwise similar children, while children whose mothers worked during the second and subsequent years scored higher, all else equal.

Our study suggests that the employment of mothers of young children has little effect on their cognitive development. If, however, maternal employment has any deleterious effects, they are most likely centered on the first year of life. Public policies designed to improve the quality of alternative care during this time, and/or to encourage greater opportunities for parental leaves during this period, might offset these effects. With or without government mandates, however, as more women with young children work and as men play a greater role within the family, an increasing number of employers are finding it profitable to develop benefits and policies that assist workers in balancing job and family responsibilities.
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Title Annotation:Research Summaries
Author:Blau, Francine D.
Publication:NBER Reporter
Date:Mar 22, 1992
Words:1545
Previous Article:The development of the American economy.
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