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Movement in U.S. wage gap comes from top, not bottom

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By Elise Burton – Moody’s Analytics

Since the 1980s, wage equality as measured by median usual weekly earnings has been on the rise. The women-to-men’s earnings ratio has moved up steadily from just about 0.64 to its most recent level of .84, meaning that, on average, a woman earns around 84 cents on the dollar of what her male counterpart earns.

In the 1980s, the ratio increased at a steady and quick pace, up from around 0.64 at the beginning of the decade to around 0.74 at the end of it. Since then, progress has been significantly slower.

Of late, however, moderate progress has been driven by a new dynamic. The ratio among workers in the top 10% of earners has started to creep up and has been at or just below 0.80 for the past six quarters. In general, the wage gap tends to widen as earnings increase.

Earnings between women and men have long been more equal at the lower end of the income distribution, rangebound between 0.85 and 0.90 for the past decade within the bottom 10% of earners.

Lower-income workers, of either gender, tend to be younger and/or in industries such as leisure and hospitality or other services. Some of the dynamics that put women at a wage disadvantage—resume gaps due to child-rearing that lessen their work experience when compared to male counterparts or perceptions of marginal labour force attachment—are less present for these groups as they are at the beginning of their careers when the gaps are smallest or are in positions in which the returns to tenure are not as dramatic.

Cause of narrowing

It is difficult to determine the cause of the current narrowing. Post-pandemic wage growth has been strong thanks to a tight labour market, but that strength has disproportionately been at the bottom of the spectrum with jobs in service industries such as leisure and hospitality seeing the most dramatic increases.

But when looking at industries that have seen continual increases in female workers, management, professional and related occupations—the highest-wage occupation group for both men and women—stand out. More women are coming into the industry, and into the higher-paying subsector within it, while the number of men is growing more slowly.

Since a decade ago, the wage ratio in this industry has moved up from around 0.73 to its most recent level of 0.78. This is a far cry from the 1980s when the wage ratio across industries grew at a headier pace, but is notable, nonetheless.

As policies aimed at narrowing the gap, such as paid parental leave for all parents, continue to become more commonplace, the gender gap may continue to narrow— and, as such policies will disproportionately affect workers in higher-wage fields, it will do so from the top.