OE1_rocio_sanchez

Sánchez-Mangas, Rocío and Sánchez-Marcos, Virginia

Gender wage growth gap in young college graduates in Europe: heterogeneity across fields of study

Gender differences in labour market outcomes have declined markedly the last few decades in developed countries. However, a substantial gender gap persists, and is more pronounced at the top of the wage distribution.

what is known about this topic?

Labor Economics / Economics of EducationEmployability Observatory UAM

Divulgación OE nº1

why should we study it?

Although there is a large literature documenting gender gaps in entry wages and wage trajectories for the US, evidence for the case of Europe is scarce.

results achieved

We document substantial heterogeneity across fields of education in the gender wage gap at the entrance to the labour market. The gap evolves against women over the five years after graduation in most of the fields, but after controlling for individual characteristics, a female wage growth penalty is only found in Economics, Business and Law, with important differences in terms of parenthood status.

how have we worked?

ContactRocío Sánchez-Mangasrocio.sanchez@uam.esPublication date26 february 2021Financing sourceFundación Ramón Areces (XIII Ayudas Investigación en Economía), Spanish Government (Grants ECO2015-64l467-R, PID2019-108079GBC22 and ECO2015-70331-C2-1-R) and Comunidad de Madrid (Project S2015/HUM-3444).

Academic paper

Vice-Rectorate for Students and Employability

main findings

Linkhttps://doi.org/10.1093/cesifo/ifaa021

References

References Albrecht, J, M A Bronson, P S Thoursie and S Vroman (2018), “The Career Dynamics of High-Skilled Women and Men: Evidence from Sweden”, European Economic Review 105: 83–102. Angelov, N, P Johansson and E Lindahl (2016), “Parenthood and the Gender Gap in Pay”, Journal of Labor Economics 34(3): 545–579. Arrow, K (1973), “The Theory of Discrimination”, Discrimination in Labor Markets 3(10): 3–33. Azmat, G and R Ferrer (2017), “Gender Gaps in Performance: Evidence from Young Lawyers”, Journal of Political Economy 125(5): 1306–1355. Becker, G S (1957), The Economics of Discrimination, Chicago: University of Chicago Press. Becker, G S (1993), Human Capital: a Theoretical and Empirical Analysis, with Special Reference to Education, Chicago: University of Chicago Press. Bertrand, M (2011), “New Perspectives on Gender”, Handbook of Labor Economics, Elsevier. Bertrand, M, C Goldin and L F Katz (2010), “Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors”, American Economic Journal: Applied Economics 2(3): 228–255. Bütikofer, A, S Jensen and K G Salvanes (2018), “The Role of Parenthood on the Gender Gap among Top Earners”, European Economic Review 109: 103–123. Erosa, A, L Fuster and D Restuccia (2016), “A quantitative theory of the gender gap in wages”, European Economic Review 85: 165–187. Fortin, N M (2008), “The Gender Wage Gap among Young Adults in the United States”, The Journal of Human Resources 43(4): 884–918. Francesconi, M and M Parey (2018), “Early gender gaps among university graduates”, European Economic Review 109: 63–82. Goldin, C (2014), “A Grand Gender Convergence: Its Last Chapter”, American Economic Review 104(4): 1091–1119. Goldin, C, S P Kerr, C Olivetti and E Barth (2017), “The Expanding Gender Earnings Gap: Evidence from the LEHD-2000 Census”, American Economic Review: Papers and Proceedings 107(5): 110–114. Kleven, H., Landais, C., Posch, J., Steinhauer, A., & Zweimuller, J. (2019), “Child penalties across countries: Evidence and explanations”. In AEA Papers and Proceedings, 109, 122-26. Manning, A and J Swafield (2008), “The gender gap in early-career wage growth”, The Economic Journal 118: 983–1024. Mincer, J (1974), “Schooling, Experience and Earnings”, New York: National Bureau of Economic Research. Petit, P (2007), “The Effects of Age and Family Constraints on Gender Hiring Discrimination: A Field Experiment in the French Financial Sector”, Labour Economics 14(3): 371–391. Phelps, E S (1972), “The Statistical Theory of Racism and Sexism”, American Economic Review 62(4): 659–661. Topel, R H and M P Ward (1992), “Job mobility and the careers of young men”, Quarterly Journal of Economics 107: 439–479.

Main findings Our results, that are in line with the recent literature on the evolution of gender gaps at the top of the wage distribution, can be summarized as follows. There is an overall gender gap at the entrance to the labour market, but it is heterogeneous across fields of education, being only significant in STEM and Health. In the job held five years after graduation, the gap widens in Social Sciences and in Economics Business and Law. But it is only in the latter where the gap remains signficant after controlling for differences in the subfield of study, occupation, industry, job mobility and human capital. Parenthood plays an important role in the female annual wage growth penalty, specially marked in Economics, Business and Law.

How have we worked?

The literature has pointed out different reasons why men’s and women’s wages may diverge over their careers. First, according to the human capital theory pioneered by Mincer (1974) and Becker (1993), if the burden of raising children is borne primarily by mothers, women may be less attached to the labour market than men, which may erode their future wages. Second, according to Topel and Ward (1992), job mobility is responsible for one-third of wage growth in the first ten years after labour market entry among US men. If women are more constrained than men in opportunities to change jobs, this may widen the gender wage gap over the lifecycle. Third, as found by Fortin (2008), gender differences in preferences for money/work versus people/family played a significant role when accounting for the gender wage gap among young adults during the mid-1980s in the US. Fourth, individual attitudes such as willingness to compete, risk preference, and negotiation behaviour may be responsible for gender differences in the evolution of wages. As argued by Bertrand (2011) and Goldin (2014), the extent to which psychological perspectives on gender can account for gender gaps in the labour market remains an open question. Finally, discrimination may lie behind gender differences in wages, based either on the taste-based discrimination theory pioneered by Becker (1957), or the statistical discrimination theory formulated by Arrow (1973) and Phelps (1972). It is of course important to know the extent to which a bias exists against women with children, or against young women who may have children in the future. Regarding this question, Petit (2007) finds evidence of discrimination against women among young workers in higher-skilled positions in the French finance industry, but not among prime-age workers.

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Empirical evidence of a widening overall gender gap after several years in the labour market has been found, to cite some examples, in the UK (Manning and Swafield 2008) and the US (Goldin 2014, Erosa et al. 2016). Interestingly, similar findings are reported among more homogenous sub-samples of the population, such as university graduates, MBAs from top business schools, or associate lawyers (Goldin 2014, Goldin et al. 2017, Azmat and Ferrer 2017). Bertrand et al. (2010) document a male earnings advantage reaching almost 60 log points a decade after MBA completion from a top US business school. Other examples are of widening gender gaps are Francesconi and Parey (2018) for Germany, Albrecht et al. (2018) for Sweden or Bütikofer et al. (2018) for Norway. Our analysis examines the dynamics of wages for a broad set of fields of college education and a wide set of European countries. To do so, we use the Flexible Professional in the Knowledge Society (REFLEX). This is a a retrospective data set that collects the results of a survey of graduates from education level ISCED 5A who were interviewed approximately five years after their graduation in 1999-2000. Our sample of 7,429 observations includes individuals from Austria, Belgium (only Flanders), Finland, France, Germany, Italy, the Netherlands, Spain, the UK, Portugal, and Norway.

Labor Economics / Economics of EducationEmployability Observatory UAM

Vice-Rectorate for Students and Employability

Results achieved

In Figure 1, we report the gender wage gap at the entrance to the labour market in the first job after graduation, and in the job five years after graduation. This is the gap after we control for differences in subfield of study, occupation, and industry. In the full sample, we find a gap in the first job of four log points, but there is substantial heterogeneity across fields of education, being the gap only significant in STEM and in Health. Over the early career (five years after graduation), there is a substantial increase in the gender wage gap. In the full sample, the gap increases up to seven log points. It is larger than in the first job in most categories; exceptions are STEM and Education, Humanities and Arts. There is a remarkable increase of eight and nine log points in Economics, Business and Law, and in the Social Sciences, respectively.

Inspired by recent literature on the wage dynamics of men and women (Angelov et al., 2016; Kleven et al., 2019), we pay attention to the divergence in wages depending on the arrival of children between the first job and the job held five years after graduation. In Figure 2, we report the female (annual) wage growth penalty after we control for differences in subfield of study, occupation, and industry, but also for differences in job mobility and human capital. We estimate a significant gap of 1.0 percentage points for the full sample among those who became parents, but an insignificant gap for those who remained childless.

There are striking differences across fields of study. In particular, only within Economics, Business, and Law a significant female penalty is estimated. In these fields, women who became mothers during the period of analysis exhibit a wage growth penalty of 2.5 percentage points compared to fathers, remarkably higher than the female wage growth penalty of 1.1 percentage points found among childless individuals. Importantly, variables capturing individual differences in job mobility and human capital play a modest role in accounting for gender differences in wage growth (this is not surprising since differences between men and women in these regards are small in our sample). By contrast, in other fields of study, the female wage growth gap either is not significant or becomes insignificant after we control for education subfields or industry and occupation.

Labor Economics / Economics of EducationEmployability Observatory UAM

Vice-Rectorate for Students and Employability

Figure 1 Female coefficient of log wage regression

Figure 2 Female penalty in annual wage growth (percentage points)