Nicola Bianchiassistant professor of strategy at Kellogg, had a feeling that a partial explanation for this mysterious slowdown could be found in a seemingly separate phenomenon: the increasing likelihood of older workers staying in higher-paying jobs.
In previous research, Bianchi has delved into how this trend for older workers affects younger ones. His research found that since the turn of the twenty-first century, the prospects of younger workers have faded compared to those of older workers, with younger cohorts less likely to get promotions and move into higher paying jobs, for example , of the older cohorts did at the same age.
“We suspected that the dynamics that reduce opportunities for younger workers could also explain a huge part of the trend in the gender pay gap,” says Bianchi.
But what does an aging workforce have to do with the gender pay gap?
Bianchi speculated that the push for more equal pay over the last forty years may not actually be a story of women’s gains, but more of a story of men’s losses. As older workers have held more of the highest-paid roles in the workforce over the past forty years, young men—who have always been more likely to be assigned high-paying roles than young women—have been displaced from the top of business ranks and thus gain less. This, in turn, narrowed the pay gap, albeit only to a point.
In a new paper, that’s exactly the story that emerges. Working with co-authors Jaime Arellano-Bover of Yale, Salvatore Lattanzio of the Bank of Italy, and Matteo Paradisi of the Einaudi Institute of Economics and Finance, Bianchi extended the theoretical labor market model used for his earlier work on age demographics . it also included gender. The researchers then compared the model’s results to patterns revealed in detailed labor market data from the United States, Italy, Canada and the United Kingdom.
The researchers show that as the gender pay gap has shrunk over the past generation of workers, it has shrunk in a specific way: mostly among younger workers entering the workforce, rather than over the course of a career. In other words, a young woman who entered the workforce in 1990 could have closer wage parity with her male peers than a young woman who started her first job in 1980—but for both women, the average difference between their wages and the wages of men. Age will not improve during their careers (in part, perhaps, because caregiving demands such as child rearing still fall disproportionately on women).
Moreover, Bianchi and colleagues show that since the turn of the new century, the most recent cohorts of entrants have not seen the gender pay gap narrow in this way. Since then, any narrowing of the gender pay gap has mainly been due to the retirement of older cohorts – whose pay gaps were even wider.
Pinpointing these real drivers of wage convergence leads to a prediction that Bianchi acknowledges is disappointing: “We can’t project that the gender gap will actually close if things don’t change,” she says.
Gender and age association
Previous research exploring the gender pay gap—mainly by award-winning economist Claudia Goldin 2023 Nobel Prize in Economic Sciences for her work in this area—highlights how the gap has narrowed over time primarily for new cohorts of workers rather than career lifespans.
Bianchi and colleagues, however, appear to be the first to link this pattern to the dynamics between older and younger workers.
Drawing on administrative and research data that included more than 376,000,000 observations of workers between the ages of 25 and 64 from four high-income countries, the researchers looked at how 25-year-old men and women ranked over time in terms of pay among all workers. . But contrary to the conventional wisdom that young women’s relative income rose toward that of young men in these distributions over time, they found that instead young men actually fell toward parity with young women. In the US, for example, the average ranking of 25-year-old men fell from the fiftieth percentile in the overall wage distribution in 1976 to the thirty-ninth percentile in 1995, while the position of 25-year-old women remained stable. around the thirtieth percentile during this period. Since the mid-1990s, these positions have remained fairly stable, with the average 25-year-old man still landing near the thirty-ninth percentile of the income distribution, and the average 25-year-old woman still landing around the thirtieth percentile.
“At this point, there’s not a lot of room [given the growing presence of older workers among the highest-paying ranks] for younger worker groups to bridge the gender gap,” Bianchi points out. “And what closes the gender gap after the mid-1990s is not really the entry of new cohorts with lower gaps, but simply the exit of older cohorts from the labor market, who tended to have much larger gaps.”
But why has the gap between men and women in younger groups of workers stagnated in its current state? Bianchi says the reason has to do with choices made before entering the workforce—specifically, choosing a specific college. For U.S. workers, Bianchi and colleagues analyzed data from the American Community Survey to predict average weekly earnings for college graduates by major and found that the major predicted entry fee accounted for about 80 percent of the pay gap between the two sexes that has remained from within. -1990s among college graduates.
In other words, young men and women are drawn to (or pushed into) different fields as they choose their areas of educational specialization, with men far more likely than women to go into lucrative STEM subjects such as natural sciences, physics, mathematics, computer science and engineering.
Reasons for optimism
Although the patterns the research team uncovered don’t show much of a benefit for women since the 1990s, Bianchi insists there’s an optimistic note to her findings.
A cursory look at the trend of the gender gap over the past forty years would suggest that policies that initially worked to close the gender gap suddenly stopped working. But maybe they never worked at all — and it’s time to accept that and look for new levers to pull. This may mean guiding women into higher-paying fields or increasing pay in the fields where they are most likely to work.
“There’s a lot of untapped potential to improve the situation for younger women—because what we’ve done so far doesn’t seem to have worked that well,” Bianchi says.
