Academic Literature

Gender Wage Gap in Developed countries – Considerable heterogeneity and differences in wages remain quite large

Despite the increased attachment of women to the labour force in nearly all developed countries, a stubborn gender pay gap remains. This chapter provides a review of the economics literature on the gender wage gap, with an emphasis on developed countries. We begin with an overview of the trends in the gender differences in wages and employment rates. We then review methods used to decompose the gender wage gap and the results from such decompositions. We discuss how trends and differences in the gender wage gap across countries can be understood in light of non-random selection and human capital differences. We then review the evidence on demand-side factors used to explain the existing gender wage gap and then discuss occupational segregation. The chapter concludes with suggestions for further research.

The statistical data demonstrate considerable heterogeneity across developed coun- tries in the convergence of the wages of men and women. While we know from the literature many factors that are driving the gender wage gap, we still lack quantitatively hard facts about what factors are most important beyond the classic supply-side factors. Gender differences in human capital have fallen in importance as women’s human capital investments more closely align with those of men. Given this trend, it seems almost disappointing that differences in wages remain quite large. We know that parental status matters much more and that within-occupation differences matter more than any between-occupation differences. More recent research has identified several factors related to the workplace, in terms of both firm and occupation characteristics, that are also driving gender wage differences. This literature has so far only partly addressed the trends in the gender wage gap and the unexplained gap. Notably, the quantitative impact of specific explanatory factors also seems to vary considerably across countries and time. This may indicate a potential contribution and need for (replication) studies that test existing economic explanations across a wide range of countries and periods. Policy design of efficient equality policies hinges on generalizable and quantitative evidence.

The interesting question that arises is what to expect for the future. Will the gender wage gap decline in the near future or increase? It seems that one core question is and remains ‘Can women have it all?’ The decades from the 1960s to the 1990s were periods where in many European countries diverse sets of policies were introduced with the intention of assisting mothers to combine family and work, and of protecting women against labour market discrimination. Research can contribute to answering questions as to what extent such policies have worked in favour of reducing the gender wage gap. Areas that remain highly relevant relate to the career paths of men and women in firms and why women do not perform as well as men on the career ladder.

Chosen excerpts by Job Market Monitor. Read the whole story at IZA – Institute of Labor Economics


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