Above Photo: Oli Scarff/Getty Images
Progress on closing the gap between men’s and women’s wages in the U.S. economy has been glacially slow in recent decades—and gender wage parity has become a top priority for those committed to ensuring the economic security of American women. This priority is absolutely essential. No matter how you cut it, the gender wage gap is real and it matters (link to paper). That said, pay parity cannot be the only goal for those looking to improve the economic lot of American women. In recent decades, the hourly pay of typical male workers has essentially stagnated even as the economy has grown. Closing only the gap between typical female and typical male workers threatens to ensure parity in this stagnation, not parity in progress. To achieve parity in progress, gains in reducing gender wage gaps must be paired with gains in closing another gap: the gap between economy-wide productivity and the wages of all typical workers. This is an ambitious goal, but it’s the only one that ensures genuine economic security for American women and the families that rely on them.
Here, I hope to draw out the importance of taking a holistic approach to improving the lot of women, men, and families across society. I can summarize my argument in three major points:
- The gender wage gap exists and progress closing it has been agonizingly slow, particularly in recent years. And, when combined with wage penalties faced by workers of color, it leads to wages for women of color being drastically lower than for white men.
- Rising inequality has kept the vast majority of men’s and women’s wages from rising as fast as gains in economy-wide productivity over the last four decades.
- Solutions need to close both the gender and inequality wage gaps and invest in a policy infrastructure to support all workers’ efforts to balance demands of work and home.
The gender wage gap
The last several decades have seen disproportionate increases in women’s education and labor force participation and a slow narrowing of the gender wage gap. The gender wage gap persists, however, across all levels of educational attainment, and particularly at the middle and top of the wage distribution. At the median, women are paid 82.7 percent of men on an hourly basis. This $3.27, or 17.3 percent, penalty looms large in the pockets of women and families trying to make ends meet. As Figure A shows, working women of color face even greater wage penalties in the labor market. Typical black and Hispanic women are paid 65.3 percent and 57.6 percent of white men’s hourly wages, respectively. (A must read on racial wage gaps is my colleague Valerie Wilson’s mind-opening paper, co-authored with Rutgers professor William Rodgers III.)
No matter how it’s measured, the gender wage gap exists and has real consequences for the economic security of workers across the country. Policies should be pursued to end discrimination in hiring, pay setting, and promotions. Further, both public and employer policies should attack other factors that harm women’s labor market opportunities—from differences in cultural educational messaging, to constrained occupational choices, to unequal division of labor at home, to unnecessary employer demands for excessive and irregular hours. (For more on these so called “choices,” please check out my paper with Jessica Schieder: “Women’s Work” and the gender pay gap.) Closing the gender wage is vital for women and the economy. However, if we stop there, we will be limiting the extent to which families can succeed.
The inequality gap
At the same time the gender wage gap has persisted, another gap has formed: that between typical workers’ compensation and economy-wide productivity growth. The wedge between compensation and productivity has manifested itself in near-stagnant wages for low- and middle-wage earners and a rapid increase in inequality since 1979. While the gender wage gap is a serious economic challenge, it exists within a larger problem of a growing gap between economy-wide productivity and wages for typical workers. One example of how these larger wage trends can inform our thinking on progress in closing gender pay gaps is the fact that roughly a third of the progress made in closing the median gender wage gap since 1979 was due to men’s wages actually declining in an era of increasing inequality. Remedying unfairness of pay for women is necessary, but wage parity gained simply because male wages dropped is no cause for celebration.
The fact is our economy has generated ample income in recent decades to deliver very substantial wage gains for all workers—both men and women. Figure B shows how large the stakes are. It shows how high median wages for women could be if gender wage disparities had been closed between 1979 and today and if the economy had generated wage growth for all workers that matched economy-wide productivity growth. If the gender wage gap were closed and the economy’s gains broadly shared, women’s median hourly wages would be 69 percent higher today ($26.47 instead of $15.67). Notably, men’s median hourly wages would also be 40 percent higher. (To see how these differences compare for age and education cohorts, check out EPI’s new gender wage calculator.) Getting the overall context on wage growth correct in this debate is crucial for avoiding misleading zero-sum thinking when envisioning a world with gender pay equity.
The menu of policies that can reduce wage inequality and boost wages of typical workers ranges from bolstering the wage floor and reducing labor standards violations to strengthening the ability of workers to collectively bargain and making sure the economy gets back to full employment. Both EPI’s Raising America’s Pay initiative and Women’s Economic Agenda foundational paper list in detail, with much supporting evidence, the importance of these policies to workers across the country.
Better infrastructure to support workers and their families
Reducing gender and inequality wage gaps is absolutely essential to restore economic security to millions of working families. But, a working labor market requires more than just jobs and wages. It means a policy infrastructure that enables workers to be productive at work while also supporting their ability to achieve economic security and peace of mind. Employers and the economy reap the benefit of better workers when they can focus at the job at hand, knowing that they not only have job security but also family security.
A better workplace infrastructure means stronger labor standards that not only provide decent wages, but also let workers take care of themselves or family members when they are sick. Research has shown that policies such as paid family leave and subsidized child care increase parental labor force participation. Many of our peer nations have such policies, and, not surprisingly, their women’s labor force participation rates are much higher than ours. Figure C illustrates just how far U.S. women have fallen behind some of our international peers. The graph shows the share of women age 25–54 with a job between 1995 and 2014 in Germany, Canada, Japan, and the United States. While the share of prime-age women with a job rose in those peer nations, in the United States it actually fell. Policies that help workers, particularly women, balance work and family could meaningfully improve their ability to participate in the labor force. And, this increase in labor force participation would mean more earnings for families and more economic activity for the country. (See EPI’s latest investigation into child care for how progressive child care policy, in particular, can benefit families, reduce inequality, and increase economic growth.)
As with more jobs and higher wages, a better infrastructure will benefit men as well. Men, who have caretaking responsibilities, whether caring for themselves, a child, a parent, or other family member, will benefit. Men who have to provide for or share the responsibilities of paying for child care would benefit. And, it’s not just workers who are currently working that need a better safety net. The infrastructure that supports workers should also be available to those engaged in further education and training or those temporarily sidelined by the labor market (who need strong unemployment insurance as well).
The policy need is great
While there is no silver bullet to solve the problems of the labor market for the vast majority, there is a menu of policies that will help put women on even footing with men, give typical workers more leverage to increase their wages, and improve work-life balance. Real solutions require real investments in the infrastructure that supports workers, helping them secure a good job and balance their work responsibilities with their commitments at home. Here’s what that means:
- A good job for everyone who wants one
- Enough hours, and predictable ones, to make ends meet and manage needs outside of work
- Decent wages, ensuring all workers are paid fairly regardless of race, ethnicity, gender, or origin of birth
- Labor standards that provide a wage floor, protect against wage theft and provide job security and pay for sick days and family leave and policies that enable all families to afford high quality child care
- Supporting workers right to collectively bargain, which gives workers more leverage to increase their wages, protect their jobs, and provide fair compensation regardless of race and gender
- Fiscal and monetary policy that support full employment, aiding in both job growth and broad based wage growth
- Strong social safety net to support families in need and workers when they lose their job or retire
These aren’t unachievable goals. These principles have concrete solutions behind them. For instance, labor standards such as the federal minimum wage can be increased, given the political will, as states and localities have been doing across the country. Policy can make a difference in making it easier for workers to form unions and collectively bargain. Lately, Federal Reserve policymakers have kept their foot off the brakes on economic progress, resisting pressure to raise rates. This deliberate action allows low- and moderate-wage workers to see the gains to economic growth. The growing inequality of the last four decades didn’t happen in a vacuum. Policy created it and policy can change it. We just need to get started.