The Average Mid-Forties Male College Graduate Earns 55% More Than His Female Counterparts

The existence of gender pay gap in the U.S. and other countries is clear. Most studies show that women earn roughly 20% less than comparable men.

But there is far less agreement on why this happens and how the gap can be closed. Is the gender pay gap due to more valuable (but hard to measure) labor market skills that men have or is it due to different “choices” regarding career-versus-family tradeoffs? And what about labor market discrimination against women? We may never fully understand the various drivers behind the gender pay gap, but it is nevertheless instructive to learn how men and women’s earnings evolve during the first 20 years of their careers.

Using enormous Census Bureau databases that allow researchers to track individual firms and their workers over time, we study the gender gap in average quarterly earnings from 1995 to 2008. We find that the earnings gap between college-educated men and women at the start of their careers is small, but by the time these individuals reach their career peak the gender pay gap is very large. The average male college graduate by his early forties earns roughly 55% percent more than the average college graduate female.

The data allow us to follow individuals within their existing jobs, as well as when they switch jobs. We show that most of the earnings divergence happens within firms: when men and women both stay with the same company, men enjoy much faster earnings growth. We also found that the pay gap widened when men and women switched jobs — as they age, college educated men shift to higher paying firms more than do women – but this difference was much smaller than the difference occurring between people who stayed in the same firm.

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