We use data from the Michigan Panel Study of Income Dynamics (PSID) to study the slowdown in the convergence of female and male wages in the 1990s compared to the 1980s. After decades of near constancy, between 1979 and 1989, the female/male hourly pay ratio rose by 17.8 percent from 63.2 to 74.5 percent. However, convergence slowed in the 1990s, with the ratio increasing to 79.7 in 1998, an increase of 7.2 percent on a ten-year basis. We found that changes in human capital did not contribute to the trends, since women improved their relative human capital to a comparable extent in the 1980s and the 1990s. Occupational upgrading of women and deunionization explained a portion of the slower 1990s convergence since the positive effect of these factors on women's relative wage gains was larger in the 1980s. However, the largest factor accounting for the slowing of wage convergence was the trend in the unexplained gap,which was sufficient to more than fully account for the slowdown in wage convergence in the 1990s. Controlling for human capital, sector, and the prices of measured and unmeasured labor market skills, women made much larger gains in relative wages in the 1980s than in the 1990s. Factors that may have contributed to the slower narrowing of the unexplained gender pay gap include changes in labor force selectivity, changes in gender differences in unmeasured characteristics and labor market discrimination, and changes in the favorableness of supply and demand shifts. We find some evidence consistent with each of these factors suggesting that each may have played a role in explaining the observed trends.
(joint presentation with Lawrence M. Kahn)