Providence, RI, USA. There is an increasing perception that working women are treated more fairly in today’s labor market than they were 30 years ago. However, the apparent closing of the wage gap between men and women may be a “statistical illusion,” creating the impression that pay scales have become more equitable.

 

Disputing decades of economic literature, two economists show that the apparent narrowing of the wage gap between working men and women is actually due to the type of women who are now working. Pay is not the primary factor in any perceived improvements. The findings are published in The Quarterly Journal of Economics.

 

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Selection, Investment, and Women's Relative Wages Over Time. Casey B. Mulligan and Yona Rubinstein. Quarterly Journal of Economics 123(3) 1061-1110. doi: 10.1162 / qjec.2008.123.3.1061

Brown University economist Yona Rubinstein and Casey Mulligan of the University of Chicago points to “statistical illusion.” as the source of misperceptions. “Though decades of economic research suggest men and women are equalizing in the labor market, the notion that today’s working women are being paid more and treated better than ever before is simply wrong,” said Rubinstein, assistant professor of economics.

 

“The growing equality between genders reflects the entry of the most able women to the workforce rather than better pay. While there may be more women holding high-power positions today, they are still being paid as their counterparts were three decades ago.”

Although previous economic observers have called these simultaneous growths “curiously coincidental,” Rubinstein and Mulligan connect these two phenomena and show that growing wage inequality within gender groups was actually a catalyst for bringing “highly able” women into the labor market.

The authors show that this wage growth for women might not have happened if the workforce composition had been held constant.

 

The authors suggest that growing inequality within gender, through its effect on women’s selection into the labor force, their labor force attachment, and their human capital investment, is a major reason why the wages of the female workforce have grown relative to men’s. This goves the impression that they are being treated more fairly than they were 30 years ago.

 

Using data from the Current Population Survey (CPS) and IQ data taken from the National Longitudinal Surveys (NLS), the authors used three different empirical approaches to measure the existence and importance of these effects.

 

The US National Science Foundation (NSF) and the Alfred P. Sloan Foundation funded this research.

 

Selection, Investment, and Women's Relative Wages Over Time. Casey B. Mulligan and Yona Rubinstein. Quarterly Journal of Economics 123(3) 1061-1110. doi: 10.1162 / qjec.2008.123.3.1061

Abstract

In theory, growing wage inequality within gender should cause women to invest more in their market productivity and should differentially pull able women into the workforce. Our paper uses Heckman's two-step estimator and identification at infinity on repeated Current Population Survey cross sections to calculate relative wage series for women since 1970 that hold constant the composition of skills. We find that selection into the female full-time full-year workforce shifted from negative in the 1970s to positive in the 1990s, and that the majority of the apparent narrowing of the gender wage gap reflects changes in female workforce composition. We find the same types of composition changes by measuring husbands' wages and National Longitudinal Survey IQ data as proxies for unobserved skills. Our findings help to explain why growing wage equality between genders coincided with growing inequality within gender.

 

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