How much does an hour cost? Nonlinear wage growth as a persisting source of the gender wage gap

Abstract

Conventional theories previously used to explain the gap between male and female wages are growing less relevant over time as women's productive human capital levels catch up to men's. In 2014, economist Claudia Goldin created a new model of nonlinear wage growth to explain the current earnings di erential. She theorizes that in \greedy" occupations that require higher hours and commitment, earnings tend to increase nonlinearly with respect to hours. Thus working a reduced amount of hours or needing a exible schedule comes at a high price|one that women must pay if they want to start a family. The higher hours men work earn them disproportionately higher wages than women, resulting in the gender gap. This paper tests the relationship of this theory against the shrinkage of the gender earnings gap over time. Unfortunately, like many other explanations, the model of nonlinear wage returns explains more about the past's gender gap than it does of today's. My analysis of U.S. Census and Ameri- can Community Survey data reveal that women are not deterred, but rather continue to move into \greedy" occupations over time. Another explanation is that greedy oc- cupations are reforming themselves over time in a way that create a more amenable environment for working mothers. I also test and develop another measure of nonlinear wage growth based on Cha and Weeden's theory of \overwork," namely that the extra earnings premium of working long hours account for the di erence in male and female wages. However, tests of the overwork premium indicate that nonlinear wage growth ac- tually shrinks the gender gap in large-gap occupations. While the overall relationship of an occupation's gender earnings gap and nonlinear wage growth in the last few decades is muddled, there is growing evidence that rms' compensation practices at higher hours is a source of the current gender gap, but also a potential way for women's wages to catch up to men's in the future.