Two sides of the same coin?

Two of the stylised facts of the US labour market (and many other OECD countries) are a narrowing of the gender earnings gap, and widening wage inequality. Are these two trends connected? Marigee Bacolod from University of California-Irvine and Bernardo S. Blum at the University of Toronto argue that they are, in a recent paper, Sides of the Same Coin: U.S. “Residual” Inequality and the Gender Gap (PDF):

In this paper, we show that the two major developments experienced by the US labor market - rising inequality and narrowing of the male-female wage gap - can be explained by a common source: the increase in price of cognitive skills and the decrease in price of motor skills. We obtain the implicit price of a multidimensional vector of skills by combining a hedonic price framework with data on the skill requirements of jobs from the Dictionary of Occupational Titles and workers’ wages from the CPS.

We find that in the 1968-1990 period the returns to cognitive skills increase four-fold and the returns to motor skills decline by 30%. Given that the top of the wage distribution of college and high school graduates is relatively well endowed with cognitive skills, these changes in skill prices explain up to 40% of the rise in inequality among college graduates and about 20% among high school graduates. In a similar way, because women were in occupations intensive in cognitive skills while men were in motor-intensive occupations, these skill-price changes explain over 80% of the observed narrowing of the male-female wage gap.

It's an interesting thesis. I'd like to see if this skills-based analysis holds up in other OECD countries too.

Comments

[A. PERLA]

NE: "I'd like to see if this skills-based analysis holds up in other OECD countries too."

I doubt it, except perhaps for the UK, which undertook early on a commitment to developing the services sector.

The rest of Europe has been in a deep slide and most graduates, male or female, are looking for jobs and not benefiting from any "cognitive skills" factor wage enhancement.

Still, when the EU finally does gets working again, that factor could nonetheless give a real push to womens' careers in management, which has been much too long overdue. (About 2000 years ... ? ; ^ )

The transition from Industrial to Information Ages is well underway. Women can only benefit.

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The rest of Europe has been in a deep slide and most graduates, male or female, are looking for jobs and not benefiting from any "cognitive skills" factor wage enhancement.

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