The gender pay gap is set to persist in the foreseeable future, contradicting trend-based forecasts that predict that incomes between men and women are converging, a recent study shows.

The narrowing of the pay gap between the mid-1970s and the early 2000s in most high-income economies was driven by lower earnings differentials between male and female labour market entrants, according to findings published by the Centre for Economic Policy Research. 

Focusing on the US, Italy, Canada and the UK, the four economists - Jaime Arellano-Bover, Nicola Bianchi, Matteo Paradisi and Salvatore Lattanzio - found that confluence halted at the start of the 2000s, and subsequent narrowing solely relied on the retirement of older cohorts with larger pay gaps.

“Even more disappointingly, the convergence of male and female entry outcomes that persisted until the mid-1990s was not due to improved prospects for younger women,” they said. “But rather to disproportionately poorer outcomes for younger men.”

Young men experienced significant “positional losses”, especially at higher-paying firms. The average wage for 25-year-old men in the US dropped to the 39th percentile of the wage distribution in 1995 from the 50th percentile in 1976. Women in that age bracket stalled around the 30th percentile.

A determining factor in the earnings differential continues to be the educational choices of men and women. Some 63% of the gender pay gap for US college graduates entering the job market can be traced back to the college major, and the disparity doesn’t decrease over the life cycle of any given age cohort, according to the study.

That’s a bad portent for future pay inequality. 

“At best, and in the absence of structural breaks in the labour market, the gender pay gap will converge to the level observed among recent labour market entrants, a differential that is still economically significant,” the authors said. “We project that the gender pay gap will not disappear in the high-income countries in our study.”

The study was conducted by three academics - Yale’s Arellano-Bover, Northwestern’s Bianchi, and Einaudi’s Paradisi - while Lattanzio is an economist at the Bank of Italy.

  - Bloomberg