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Recent Research: The paradox of progress: How narrowing pay gaps might perpetuate gender inequality

January 16, 2025
By: Jerry Coughter

A recent working paper from the Federal Reserve Bank of Boston, Self-reinforcing Glass Ceilings by Carlos F. Avenancio-León, Alessio Piccolo, and Leslie Sheng Shen delves into the complexities of the gender pay gap, even after it has narrowed. The authors challenge the conventional understanding that a shrinking gender pay gap automatically leads to greater gender equality. Instead, they argue that the labor market's response to a narrowing gap can paradoxically contribute to the persistence of gender inequities.

The authors employ a theoretical model to analyze the impact of compositional shifts in the labor market on the persistence of the gender pay gap. This model incorporates elements of labor economics, specifically focusing on job search and matching theory. To empirically validate their theoretical framework, the authors use a structural estimation approach with data from the Bureau of Labor Statistics’ Current Population Survey and Compustat to identify patterns and relationships between these variables.

Specifically, they estimated a discrete choice model of job search and matching. This model allowed them to analyze how individuals, both men and women, make decisions about which jobs to apply for and accept based on factors such as wages, working conditions, and industry characteristics. By comparing the choices made by men and women, the researchers could identify patterns in their job search behavior and assess the impact of compositional shifts on the gender pay gap. The empirical analysis is complemented by a dataset that includes information on wages, employment, and industry characteristics. This data allowed the researchers to test the robustness of their findings across different time periods and economic contexts.

The authors found that when the gender pay gap decreases in a specific sector, women are more likely to be attracted to that sector due to its improved relative attractiveness, even though it is lower paying than other sectors. This shift in labor supply can lead to a decrease in female participation in other sectors, particularly those that are less equitable but may offer higher wages. The authors state that this compositional shift, where women concentrate in more equitable sectors and men dominate less equitable ones, can reinforce gender stereotypes and social norms.

The paper highlights how this self-reinforcing cycle can perpetuate the glass ceiling. As women become more concentrated in lower-paying sectors, it reinforces the perception that these sectors are more suitable for women, limiting their career advancement opportunities. This, in turn, can discourage women from pursuing higher-paying, traditionally male-dominated fields.

The authors emphasize the need for comprehensive and cross-sectoral reforms to address gender inequities effectively. They suggest policymakers consider implementing targeted policies to improve working conditions, compensation, and advancement opportunities in sectors with persistent gender pay gaps. The targeted policies might include promoting flexible work arrangements to support women's career progression and work-life balance, particularly in male-dominated sectors, and encouraging mentorship and sponsorship programs to help women advance in their careers and break through the glass ceiling.

workforce, women