Study: Why has the gender wage gap narrowed?

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During the past two decades, the gap in average hourly wages between men and women has narrowed steadily. In 1988, women earned 75.7 cents in wages for every $1 earned by men. By, 2008, they were earning 83.3 cents on the dollar.

The wage gap converged in all age groups during this period, although older workers experienced the largest change. The gap among workers age 25 to 29 narrowed by 5.6 percentage points, while among older workers age 50 to 54, it converged by 16.2 percentage points.

A key factor in the convergence was that the growth in relative wages of women outpaced the gains of men.

On average, real wages for women increased by 11.6% between 1988 and 2008. While growth occurred in all age and wage groups, the most dramatic improvement was among women age 45 to 49 (+17.8%) and those at the higher end of the wage distribution (+16.0%).

The situation among men was quite different. Overall, the real wages of men edged up by 1.3% between 1988 and 2008. However, changes were not consistent across age and wage groups. On average, men age 35 and over and those at the lower end of the wage distribution saw their real wages decline between 1988 and 2008.

This suggests that the changing composition of the labour force and changes in how the labour market compensates workers played a role in reducing the pay gap between men and women.

In fact, compositional changes accounted for roughly two-thirds of the narrowing of the wage gap. For example, older men were less likely to hold management jobs in 2008 than their counterparts in 1988. Also, younger women were more likely to hold a university degree in 2008, and they were moving from low-paying clerical and sales jobs into higher-paying occupations in health and education.

Such compositional changes mean that men and women entering today's labour market are more alike in terms of characteristics and wages than they were in the past. So as younger cohorts replace older ones, the overall gap declines simply because the difference in wages is smaller in new cohorts than in those that preceded them.

This "cohort replacement" effect was strongest among younger cohorts prior to 1998 but continued throughout the period for women 40 and over.

While the wage gap increased with age, this correlation became smaller in each successive year. In 1988, the gender wage gap was 20.1 percentage points smaller among workers age 25 to 29 than among those age 50 to 54. By 2008, the difference between these groups had narrowed to 9.4 percentage points.

The study also observed that, for some cohorts, the gender wage gap remained stagnant as they aged. For example, among workers age 30 to 34, the gender wage gap was 20.6 percentage points in 1988 and 19.3 points in 2008. For other cohorts, changes over time showed no clear pattern.

Note: The article "Why has the gender wage gap narrowed?" is based on the Labour Market Activity Survey, the Survey of Labour and Income Dynamics and the Labour Force Survey. It analyses the narrowing of the wage gap according to the changing characteristics of men and women in paid work, the changes in pay received for those characteristics, and the extent to which who works in each period affects the results.

The wage gap is calculated on an hourly wage basis, which differs from measures of the earnings gap based on full-time, full-year workers. The wage gap is smaller since full-time, full-year men work, on average, more hours than full-time, full-year women.

Definitions, data sources and methods: survey numbers, including related surveys, 3701, 3853 and 3889.

The article "Why has the gender wage gap narrowed?" is now available in the online edition of Perspectives on Labour and Income, Spring 2011, Vol. 23, no. 1 (75-001-X, free), from the Key resource module of our website choose Publications.

For more information or to enquire about the concepts, methods or data quality of this release, contact Marie Drolet (613-951-5691; marie.drolet@statcan.gc.ca), Social Analysis Division.