How to Make the Labor Market Work for Women

Today is Equal Pay Day, which means that policymakers, including the president, are talking about how to close the gender wage gap. In 2013, the typical female worker made $15.10 an hour, while the typical male worker made $18.11 an hour. And the gap in wages between women and men extends beyond those at the middle; it affects earners at all wage levels. High-wage women make less than high-wage men, and low-wage women make less than low-wage men.

A key backdrop to any discussion of how gender wage gaps have evolved is the fact that since the 1970s, the country has seen dramatically rising wage inequality among both men and women. Between 1979 and 2013, the median woman’s wages grew 21.7 percent, but the 95th percentile woman saw her wages grow more than three times that fast, while the 10th percentile woman saw her wages decline. Among men, high-wage workers also saw strong growth—the 95th percentile man saw his wages grow 40.1 percent over this period—but the entire bottom 60 percent of the male wage distribution saw wage losses. The forces holding back wage growth for low- and moderate-wage men—factors such as declining unionization, the erosion of other labor standards and institutions, the lack of full employment, trade agreements that eroded labor standards, and skyrocketing executive and finance professional pay that left less for everyone else—were also holding down the wage growth of low- and moderate-wage women. However, gains made by women over this period in educational attainment, work experience, and occupational upgrading (i.e., moving into higher-paying occupations) more than overcame these adverse forces (at least until the last decade, when the entire bottom 60 percent of female wage earners also saw wage losses).

How has the gender wage gap evolved over time? In short, while still large, it is smaller than it used to be. In the late 1970s, after a long period of holding fairly steady, the gap in wages between men and women began improving as women’s gains in education, work experience, and occupational upgrading, along with greater legal protections against discriminatory pay, began boosting their pay. Since the 1970s, the gender wage gap has improved at all parts of the wage distribution, meaning that low-wage, middle-wage, and high-wage women all saw stronger wage growth over this period their male counterparts.

But for the bottom 60 percent of wage earners, there was a troubling dynamic—a substantial portion of the improvement in the gender wage gap occurred because of men’s wage losses, rather than women’s wage gains. This phenomenon is the result of rising wage inequality for both men and women over this period—most of the wage gains were going to the already affluent, not to middle- or low-wage workers. At the median, nearly a third of the improvement in the gender wage gap since the 1970s was due to men’s wage losses, not women’s wage gains. This share increases further down the wage distribution. At the 20th percentile, nearly 80 percent of the improvement was due to men’s wage losses instead of women’s wage gains. And at the 10th percentile, women’s wages declined, so the entire improvement in the gender wage gap at the 10th percentile was due to men seeing greater wage losses than women. This is clearly not the kind of improvement in the gender wage gap that actually helps women.

So, what can we do?

In the short run, the urgent issue affecting women’s wages and job quality is the weak labor market, which is obviously a disaster for job seekers, but also holds down wage growth for people with jobs, since employers do not have to pay substantial increases to keep the workers they need when workers lack other options. We need 7.3 million jobs to get back to pre-recession labor market health (3.3 million jobs for women and 4.0 million jobs for men). The root of today’s labor market weakness is the simple fact that businesses have not seen demand for their goods and services pick up in a way that would require them to significantly increase hiring. This means that the most direct way to improve labor market health is to boost demand. A good start would be to reverse the savage austerity we’ve undertaken in recent years and reestablish the public services and public-sector jobs that were cut in the Great Recession and its aftermath.

But of course, it wasn’t just in the Great Recession and its aftermath that wage growth was blocked for most workers—rising inequality has blocked wage growth for low- and middle-wage workers for three and a half decades. The dramatic increase in inequality means that the best way to help the largest number of women is to enact policies that will halt or reverse rising inequality.

We could start by raising the minimum wage. The inflation-adjusted value of the minimum wage has eroded dramatically since its peak in the late 1960s. The Fair Minimum Wage Act, introduced by Sen. Tom Harkin and Rep. George Miller, would raise the minimum wage to $10.10 by 2016. Around 55 percent of the workers who would see a raise under this proposal are women. Furthermore, this bill will raise the minimum wage for workers who earn tips, which has been frozen at $2.13 per hour for more than 20 years, to 70 percent of the minimum wage. Around 75 percent of tipped workers are women, so increasing the tipped minimum is largely about increasing the paychecks of low-wage women.

We could also enact mandatory paid leave policies. An obvious place to start would be providing paid sick days to the almost 40 percent of private-sector workers who lack the right to even a single day of paid sick leave. And we should update labor law to keep pace with increased employer aggressiveness in fighting unions—the decline in unionization alone explains about a fifth of the rise in female wage inequality over this period.

There are other ways, too, that we can halt the growth of inequality and in so doing benefit millions of women. We could shore up the dramatically eroded enforcement of existing employment law. We could make the rules governing globalization fairer to workers. We could enact immigration reform with a path to citizenship for unauthorized workers, so we no longer have a large pool of easily exploitable workers who have little bargaining power, a dynamic that hurts not just their wages but also the wages of authorized immigrant or native-born workers who do similar work. The bottom line is that the dramatic rise in inequality that has impeded growth for most workers, including most women, for a generation does not have to continue. It has been driven by many policy choices that can be changed.