Gender Wage Gap Narrows for New Women College Grads: Fed Research

Martha C. White

The wage gap between recent male and female college graduates is narrowing and, in some cases, even reversing, but that those earnings gains by women dissipate the longer they remain in the workforce, according to a new analysis by Federal Reserve economists.

While studies have long shown the gender pay gap to be a stubbornly persistent phenomenon—with women earning somewhere between 77 and 78 cents for every dollar earned by men, according to recent studies—a new analysis by two researchers at the Federal Reserve Bank of New York indicates that it has substantially narrowed for young college graduates.

In a post published on Liberty Street Economics, the blog of the Federal Reserve Bank of New York, the researchers said that a regression analysis of data from the American Community Survey found that, among recent college graduates aged 22 through 27 near-parity in pay is the new norm. The data from 2009-2013 on education and earnings together with a number of demographic characteristics showed women earning an average of 97 cents for every dollar earned by men with the same degrees in the same jobs, it said.

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Of the 73 majors examined, young women actually earned as much or more than their male counterparts in 29 of them, including an 11 percent wage premium for treatment therapy majors and a 16 percent wage premium for recent female grads with social services degrees.

"We were somewhat surprised, too, when we first saw this," said Richard Deitz, an assistant vice president in the bank's research and statistics group and one of the study's authors.

The problem is that this pay parity doesn't hold, the research found. By the time these women reach mid-career, every one of the occupational wage advantages will have vanished, the Fed researchers projected, with men commanding an average 15 percent wage premium for workers 35 to 45 years old.

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The Fed researchers didn't look at the non-college-educated workforce, so it's not clear whether the wage gap also has narrowed there. But their projection of a widening gap over time matches findings from previous studies of women's earnings in the labor force.

The shift in favor of women's earning power has been especially pronounced in so-called STEM majorsscience, technology, engineering, and mathematics, according to the Fed researchers' analysis. Young women with degrees in chemical engineering, electrical engineering, civil engineering, aerospace engineering, mechanical engineering and industrial engineering all had discernible wage premiums over men.

Dietz said a relative scarcity of women appears to be contributing to the wage-gap reversal in engineering.

Explaining the gender wage gap
Explaining the gender wage gap

"It seems to be in some of these STEM fields, one of the things that may be contributing to this is if there are fields where women are underrepresented, they may get a wage premium," he said.

Harry Holzer, professor of public policy at Georgetown University who was not involved in the research, agreed. "There are a lot fewer women in STEM fields and I think the STEM companies feel some pressure now to increase their diversity, so they might actually value those female employees a little more now," he said.

Holzer said another factor could be the academic credentials of entry-level STEM employees.

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"Women on average do better than men in college," he said. "Their grades are better, their graduation rates are higher. It's not a surprise that, coming out of the starting gate, they do well compared to their male counterparts."

But the Fed researchers said that the relatively even starting point in wages doesn't last.

Among social service majors, for example, "The 16 percent female wage premium among recent grads turns into a 10 percent male wage premium at mid-career, a whopping change of more than 25 percentage points," it said.

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The analysis did not pinpoint a cause for the earnings slide among women, but speculated that discrimination against women in the workplace, time missed by women to start a family and the lack of flexibility in some jobs that make it difficult to raise children all could play a role.

The diminishing earning power of women as their careers progress also was documented in a 2013 Pew Research study.

"The findings are very much in line with what we found," Pew's director of research Rakesh Kochhar said of the Fed researchers' analysis. For workers under the age of 35, women earned 93 cents for each dollar captured by a man in the same age bracket, but when the wage gap across all age groups was measured, women's hourly wages were only 84 percent of men's.

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Kochhar said that each successive generation of women started out better than the last, but the inability to hold those gains has persisted. "You're still left with this gap. It's unquantifiable."

Ariane Hegewisch, study director at the Institute for Women's Policy Research, said a higher academic threshold could be giving recent female college grads an edge when it comes to wages, but that a combination of inflexible hours and discrimination are likely to drag on their earnings potential over the longer term.

"It's both, 'Do you have kids?' or people assume you will have kids and therefore you don't get the best opportunities," she said, adding that the wage gains enjoyed by today's young women could in part be because millennials, as a group, are having kids later than their parents did.

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When they do start families, though, Hegewisch said young women today could lose that ground, as previous generations did. "In some of these fields, even if you come back after a year you kind of never catch up," she said.

Nicole Woon, a 23-year-old who graduated last December with a double undergraduate major in business and bioengineering, and a master's degree in mechanical engineering, said she's concerned about the prospect of a growing pay gap as she advances in her career. But she also said she's encouraged by diversity initiatives she sees companies taking today, and hopes that more flexible work arrangements will help her balance professional, personal and family obligations.

"I think down the road it will be a concern to more strongly consider," she said. "It's going to be your job and your life at the end of the day."

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