COUNCIL OF ECONOMIC ADVISERS ISSUE BRIEF

APRIL 2015

GENDER PAY GAP: RECENT TRENDS AND EXPLANATIONS

April 14 marks Equal Pay Day, the day that represents how far into 2015 the average American woman has to work, 

in addition to her work in 2014, in order to earn what the average man did in 2014. In recognition of Equal Pay Day, 

it’s instructive to take a step back and examine what we know about the pay gap. 

The Pay Gap

Over the past century, American women have made 

tremendous strides in increasing their labor market 

experience and their skills. Today, women account for 47 

percent of the labor force and they hold 49.3 percent of 

jobs (women are more likely to hold two or more jobs 

and they are less likely to be self-employed). Women’s 

share of the labor force has been rising for more than 50 

years and is continuing to increase. Today more 

households than ever have a woman as the primary or 

equal breadwinner in the household. 

On Equal Pay Day, however, we focus on a stubborn and 

troubling fact: Despite women’s gains a large gender pay 

gap still exists. In 2013, the median woman working fulltime all year earned 78 percent of what the median man 

working full-time all year earned. Phrased differently, 

she earned 78 cents for every dollar he did. Although this 

gap generally narrowed between the 1970s and 1990s, it 

has largely stopped narrowing and has remained 

between 76 and 78 cents since 2001.

The Compensation Gap

The pay gap goes beyond wages and is even greater 

when we look at workers’ full compensation packages. 

Compensation includes not just wages, but also

employer-sponsored health and retirement benefits, 

training opportunities, flexible work arrangements, and 

paid family and sick leave.

Women are less likely to have an offer of health

insurance from their employer. Overall, women are also 

less likely to have retirement savings plans, however this 

gender gap is concentrated among lower income 

women. Prime-age women with college degrees are 

about as likely as their male counterparts to be covered 

by their employer’s pension plan, while less-educated 

women are less likely to have an employer-based 

retirement plan.

Being offered a retirement plan is only the first step in 

retirement savings. The next step is accumulating 

retirement savings and even among those with a 

retirement account, women tend to have lower balances 

than men, which is partially driven by the pay gap.

50

60

70

80

90

1960 1970 1980 1990 2000 2010

Gender Pay Gap Among Full-Time, Year-Round Workers

Percent

Source: Bureau of Labor Statistics, Current Population Survey. 

Note :Earnings are based on median earnings for full-time, year-round workers.

0

10

20

30

40

50

60

70

Less Than High

School

High school Some College College

Percent of Individuals With a Pension Plan, 2013

Men Women

Percent

Source: Survey of Consumer Finances; CEA calculations.
2

Women are also slightly less likely than men to have 

access to paid leave and, perhaps as a result, are slightly 

more likely to take leave without pay. The gap in paid 

leave is particularly large among workers without a 

college education: among these workers, 52 percent of 

men, but only 44 percent of women, have access to paid 

leave.

These broader measures of compensation show that the 

pay gap is not just about differences in earnings or 

wages: on numerous dimensions – in access to 

employer-provided health insurance or pensions and 

paid leave, women’s compensation falls short of men’s.

But why do women earn less than men? Some people 

point to women’s choices, some people point to 

discrimination, and some people point to differences in 

men and women’s experience and education. There is no 

single answer, which is why we need to make progress 

on a number of dimensions. Let’s break it apart so we can 

better understand what is driving the pay gap. 

The Gap from Education and Experience

Both education and experience shape what economists 

call “human capital” – the skills and qualifications 

learned either through education or on the job that make 

workers productive employees. In the past, men had 

greater levels of both education and experience than 

women, but this has radically changed since the 1970s.

While men were more likely to graduate from college in 

the 1960s and 1970s, in recent decades women have 

responded with greater force than men to the rising 

demand for education. Since the 1990s, the majority of 

all undergraduate and graduate degrees have gone to 

women. If these trends continue, women will represent 

a growing majority of our skilled workforce in the years 

ahead. These gains in educational attainment are 

particularly important for women’s future earnings and 

employment. The wage difference between workers 

with a college and high school education has grown since 

the 1980s, and today, college graduates earn more than 

twice what high school graduates earn. And by some 

estimates, in just five years, two-thirds of all job openings 

will require at least some college education.

On-the-job experience is also an important determinant 

of wages, and in the past, women typically left the labor 

force after marrying or having children. Today, even 

though women are still more likely than men to 

temporarily exit the labor force, compared to previous 

decades, they are more likely to work throughout their 

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

<25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70+

Median Female IRA Balance As A Fraction of 

Median Male IRA Balance Percent

Age

Source: EBRI IRA database

0

10

20

30

40

50

60

70

80

Any Paid Leave Any unpaid leave Any flexibility

Access to Leave and Flexible Work Arrangements

Percent

Source: American Time Use Survey, CEA calculations.

Male

Female

Bachelor's

Master's

Doctor's

0

10

20

30

40

50

60

70

1970 1980 1990 2000 2010

Share of Post-Secondary Degrees Received by Women

Percent

Source: Department of Education, Integrated Post-Secondary Education Data System.

Note: Dashed line indicates 50 percent.
3

lifetimes. For example, economists Francine Blau and 

Lawrence Kahn found that one-third of the decline in the 

pay gap over the 1980s was due to women’s relative

gains in experience. Today, even the majority of mothers 

with an infant are in the labor force.

Much of the decline in the pay gap that occurred in 

recent decades has been because women have closed 

education and experience gaps. In fact, since women 

have increasingly become our most skilled workers, after 

accounting for education, even more of the pay gap is 

unexplained. In fact, once we hold differences in men’s 

and women’s education constant, the pay gap actually 

widens today; 20 years ago taking account of differences 

in education narrowed our estimates of the pay gap. The 

gender pay gap tends to rise with education, with the 

smallest differences between the earnings of men and 

women with less education and the biggest gaps among 

those with advanced degrees. The pay gap among 

women and men with professional degrees is currently 

about 67 cents.

The Gap from Occupation and Industry

As women’s labor market participation and education 

increased, so did their career opportunities. Women 

have made tremendous progress in entering occupations 

that were once heavily male-dominated, part of what 

Claudia Goldin has termed the “quiet revolution.”

Although occupational segregation has fallen, women 

are still more likely to work in lower-paying occupations 

and industries. Women remain underrepresented in the 

three industries with the highest average wages: 

information services, mining and logging, and utilities, 

but represent more than half of employees in the three 

industries with the lowest average wages: leisure and 

hospitality, retail trade, and other services.

Even when women and men are working side-by-side 

performing similar tasks, however, the pay gap does not 

fully disappear. Blau and Kahn decomposed the pay gap 

and concluded that differences in occupation and 

industry explain about 49 percent of the wage gap, but 

41 percent of the wage gap is not explained by 

differences in educational attainment, experience, 

demographic characteristics, job type, or union status, 

using the Panel Survey of Income Dynamics. Using a 

similar approach, but newer data from the Current 

Population Survey, the Council of Economic Advisers 

finds that industry and occupation can explain about 20 

percent of the wage gap, but about two-thirds of the gap 

is not explained by potential experience, age, race, 

education, industry, or occupation. 

The real question, though, is why men and women end 

up in different occupations in the first place. It’s not clear 

whether we should account for differences in industry 

and occupation in wage gap decompositions. If these 

differences stem from preferences, it is reasonable to 

account for them. On the other hand, if men and women 

choose different jobs because of discrimination, industry 

and occupation should not be included. In many 

situations, the line between discrimination and 

preference is ambiguous.

Take the example of computer science, where the share 

of women is lower today than it was in 1985. This gap 

doesn’t start when workers are making career choices; 

rather, it results from a series of events and decisions 

that begin at very young ages. A recent OECD report finds 

that even high school girls who score high on math and 

science tests report low levels of confidence and 

Leisure and 

Hospitality Other 

Services

Construction Mining and Logging

Manufacturing

Wholesale 

Trade

Retail Trade

Transportation 

and 

Warehousing Utilities

Financial 

Activities

Professional and 

Business Services

Education and 

Health Services

0

10

20

30

40

50

60

70

80

90

$300 $500 $700 $900 $1100 $1300 $1500 $1700

Female Share vs. Average Earnings by Industry

Average Weekly Earnings, March 2015

Female Share of Employees, 2014

InformationServices

Source: Current Employment Statistics, CEA calculations
4

proficiency in math and science. And once in college, 

women pursue science and math degrees at lower rates 

than men: in the 2013 school year, women received 57 

percent of all bachelor degrees, but only 35 percent in

STEM fields. Even among women who begin a sciencerelated career, more than half leave by mid-career, 

double the rate of men. Forty percent of those who leave 

cite a hostile or “macho” culture as the primary reason. 

Given why women leave these fields, at least some 

occupational differences appear to be driven by negative 

factors that prevent the full range of talented Americans 

from succeeding in the workplace.

The Gap from Family Responsibilities

At the early stages of their careers, each generation of 

young women has fared better than the previous 

generation. For example, in 1980, 18-34 year-old 

employed women earned about 74 cents for every dollar 

a man earned in an hour, but by 2013, this figure had 

increased to 87 cents. Reflecting increases in full-time 

work, the gap in annual earnings has narrowed even 

more. Some people point to this as evidence the pay gap 

reflects women’s different choices and priorities. 

One reason the gender wage gap has narrowed faster 

among younger women is that between 1980 and 2013, 

the median age of first birth rose from 22.6 to 26.0. 

Among college-educated women, increases in the age of 

first birth have been even greater. Among women with 

advanced degrees the median age of first birth rose to 

age 31 by 2012.

Because motherhood is associated with a wage penalty 

and lower wage gains later in a woman’s career these 

delays in childbirth have helped narrow the pay gap. 

Research has shown that delaying child birth for one year 

can increase a woman’s total career earnings and 

experience by 9 percent. Yet men continue to experience 

pay increases when they have children. While 

economists have long speculated that these different 

experiences reflect household decisions about 

specialization and women with children do work fewer 

hours and are more likely to take parental leave, more 

recent research has documented patterns of 

discrimination against women with children. 

In fact, once they have children, women do earn less and 

are more likely to leave the labor force. However, not all 

women who do so are doing it by choice. Research shows 

that when women have access to paid maternity leave, a 

year later they work more and have commensurately 

higher earnings. A lack of access to leave or affordable 

quality childcare prevents some women who would like 

to work from doing so.

This evidence all indicates that a lack of paid leave is 

particularly detrimental to women’s long-term salaries 

and careers. Women are more likely than men to take 

extended time away from their careers when they don’t 

have access paid leave that allows them to take 

temporary time off for the birth of a child. Research 

examining both maternity leave programs in other

countries and in California concludes that paid leave can 

help new mothers maintain a connection to the labor 

force, and increase the likelihood they return to their 

employer.

The Gap over Workers’ Careers

In general, the pay gap grows over workers careers.

Young people tend to start their careers with more 

similar levels of earnings, but over time, a gender gap 

emerges and grows.

This pattern exists across the spectrum of education and 

skills. For example, economists Marianne Bertrand, 

Claudia Goldin, and Lawrence Katz examined the salaries 

of MBA graduates from a top business school and found 

that although men and women had fairly similar earnings 

at graduation, after a decade, men earned approximately 

60 percent more than women.

In their research they found that much of the growth in 

the earnings gap in the first decade was due to women 

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Mean Hourly

Wage

Mean Earnings Labor Force

Participation

Employed

1980 1990 2013

Source: Current Population Survey March Supplement, 1981, 1991, 2013, 2014; CEA 

calculations.

Note: Earnings ratio is the ratio of mean wage and salary income of all workers. Hourly wage 

ratio is the ratio of mean hourly wages of all workers.

Ratio of Women's Labor Market Outcomes to Men's by 

Ratio Decade, Ages 18 to 34
5

being more likely to take time away from work –

associated with child birth – and working fewer hours –

also typically related to family and caregiving 

responsibilities. 

In another example, Goldin found that law school 

graduates had similar earnings upon graduation.

Although a small and insignificant pay gap opened after 

5 years, it was similar among people with the same level 

of experience and working the same hours. After 15 

years, however, male lawyers earned 55 percent more 

than female lawyers, and even after accounting for time 

out of work and job tenure, a 13 percent gap remained.

Therefore, even though gaps in work experience can 

account for some of the pay gap as women progress in 

their careers, a gap still remains between men and 

women with similar levels of experience, tenure, and 

credentials. 

The Gap Due to Differences in Negotiations

and Promotions

As the pay gap grows over time, even for workers who 

don’t have children, some have hypothesized that a 

growing gap is due to differences in negotiating salaries 

and receiving promotions.

In general, women, even highly-educated women, are 

less likely to negotiate their first job offer than men. But 

even when women do negotiate, if the norms of 

negotiation and salary expectations are not transparent, 

they are likely to receive less than men. While gaps in

negotiated salaries are small in “low-ambiguity

situations,” in “high-ambiguity situations”, women 

received about $10,000 less than similarly-qualified men.

Even though negotiation can lead to greater career 

prospects and higher wages, it can also be detrimental, 

particularly for women. Hannah Riley Bowles, Linda 

Babcock, and Lei Lai found that women were more often 

penalized for initiating negotiations, largely because 

female negotiators, while perceived as technically 

competent, were also viewed as socially incompetent. 

While pay transparency can help reduce the ambiguity of 

negotiating situations, it cannot by itself eliminate the 

social penalties women face for initiating negotiations. 

Underlying all of the possible explanations for the gender 

pay gap is the potential for discrimination. This 

discrimination doesn’t need to be overt: some work has 

suggested that implicit biases are more common. If 

implicit, or subconscious, biases are at play, a pay gap 

stemming from discrimination will be more difficult to 

overcome. 

The Role of Discrimination

It is difficult to isolate how much of the pay gap is due to 

discrimination. As this issue brief has discussed 

throughout, discrimination and implicit bias can impact 

the pay gap through many channels. It can influence 

what women choose to study in school, the industry or 

occupation that they choose to work in, the likelihood of 

a promotion or a raise, and even the chances that they 

stay working in their chosen profession.

Yet even when we ignore these forms of discrimination 

and hold education, experience, employment gaps due 

to children, occupation, industry, and job title constant, 

there is a pay gap. This “unexplained” pay gap leaves 

little beyond discrimination to explain it. Some research 

has found that this unexplained portion is a sizeable 

share of the total gap – 41 percent.

While it is difficult to get a measure of discrimination

from data sets, more experimental research is starting to 

show evidence of discrimination in hiring, pay, and 

advancement. Resume studies have shown that, among 

identical resumes where only the name differs, gender 

affects whether the candidate is hired, the starting salary 

offered, and the employer’s overall assessment of the 

candidate’s quality. These findings echo the conclusions 

of earlier audit studies. And even when women succeed 

in traditionally-male roles, studies find that women are 

perceived as less competent and likable than men. 

More practically, the need for enforcement against 

gender discrimination in hiring, pay, and advancement is 

clear by the number of discrimination cases still being 

pursued and won. 
6

The Gap and Policy Implications

The President’s proposals to ensure that all workers 

receive fair pay for a day’s work do not hinge on the 

existence, or the magnitude, of a gender pay gap. These 

are common-sense policies that ensure all workers are 

treated fairly in the workplace and are able to select jobs 

that best match their skills, not their family obligations.

Since the beginning of the Administration, the President 

has prioritized eliminating workforce discrimination and 

enforcing anti-discrimination policy. The first piece of 

legislation he signed into law, the Lilly Ledbetter Act, 

empowers workers to recover wages lost due to 

discrimination by extending the time period in which an 

employee can file a claim. Many workers, however, are 

unaware whether they face wage discrimination. For 

example, a 2010 survey found that 19 percent of 

employees reported their employer formally prohibits 

discussing salaries and another 31 percent are 

discouraged from discussing pay. 

A pay gap stemming from discrimination is particularly 

likely to exist under conditions of pay secrecy, where 

workers do not know whether they are being 

discriminated against. In order to improve pay 

transparency and ensure fair pay, the President

continues to call on Congress to pass the Paycheck 

Fairness Act, which would enable millions of workers to 

discuss compensation without fear of retaliation. Last 

year, the President signed an Executive Order prohibiting 

federal contractors from retaliating against employees 

who choose to discuss their compensation.

Government agencies are also increasing collaboration 

and making interagency collaboration a regular

component of their agencies’ enforcement work. 

Agencies are also addressing the implications of pay 

secrecy norms and policies by focusing on how better 

data on pay can improve enforcement. The President 

signed a Presidential Memorandum last year instructing 

the Secretary of Labor to establish new regulations 

requiring federal contractors to submit to the 

Department of Labor summary data on compensation 

paid to their employees, including data by sex and race.

The Department of Labor will use the data to encourage 

compliance with equal pay laws and to target 

enforcement more effectively by focusing efforts where 

there are discrepancies and reducing burdens on other 

employers.

Other policies that can help ensure fair pay include 

modernizing outdated overtime regulations and raising 

the minimum wage. When employers are requiring 

people to work long, unpredictable hours this can be 

particularly challenging for those who need to plan for 

childcare and other family responsibilities. Fair 

compensation for hours worked, access to workplace 

flexibility to shift either time or place of work, and 

advanced notice of work schedules can go a long way to 

making it easier for workers to balance their work and 

family responsibilities. Raising the minimum wage and 

the tipped minimum is particularly important for women 

since women are disproportionately represented in 

lower-wage sectors. Although women are 47 percent of 

the labor force, they represent about 56 percent of 

workers who would benefit from increasing the 

minimum wage to $10.10 and indexing it to inflation.

Family-friendly workplace policies can also better enable 

workers to choose jobs in which they will be most 

productive. Increasingly, mothers and fathers are sharing 

caregiving and family obligations, but many workplaces 

have been slower to adapt, and as a result, both men and 

women are voting with their feet. For example, work by 

Claudia Goldin shows that women are particularly likely 

to select careers that offer flexibility, like pharmacy or 

obstetrics. The demand for family-friendly workplace 

policies, however, is not limited to women. For example, 

nearly half of all working parents have reported rejecting 

a job because they felt the position would interfere with 

their family responsibilities. 

Individual businesses and the economy as a whole 

benefit when workers are in jobs that are well-suited to 

their skills and qualifications. From a business’s 

perspective, these policies can also increase worker 

productivity and worker retention. For example, in a

study of over 700 firms, work-life balance policies were 

associated with higher productivity, and a survey of 

California employers found that 90 percent reported that 

paid leave did not harm productivity, profitability, 

turnover, or morale.

Moving forward on policies that ensure fair pay for all 

Americans and help workers find jobs that best suit their 

talents are key aspects of the President’s middle class 

economics agenda. While these policies can help narrow 

the pay gap, they also allow businesses to attract and 

retain the strongest talent, which benefits the economy 

as a whole.
7

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