How Long Do Early Career Decisions Follow Women? The Impact of Employer History on the Gender Wage Gap

We add to the gender wage gap literature by considering how characteristics of past employers are correlated with current wages and whether differences between the work histories of men and women are related to the persistent gender wage gap. Our hypothesis is that women have less exposure to higher paying industries and firms and more exposure to lower paying ones over the course of their careers and this history is correlated with male-female earnings differences in middle age. We use unique administrative employer history data to conduct a decomposition exercise to determine the impact of past employer characteristics relative to current employer characteristics, both at the mean and across the wage distribution. Consistent with past literature, we find that women in their forties work for lower paying firms than men, even within the same industry, and this difference accounts for almost a quarter of the wage gap observed at this point in time. In addition, we find that length and magnitude of past exposure to high and low paying industries and firms continues to exert influence on the wages observed in middle age. If women spent similar amounts of career time as men at employers with pay premiums similar to those of the employers of men, the gender wage gap would be 5% - 8% lower. The largest effects are found at the median, where differences in pay levels between men and women’s past employers explain approximately 8% of the gender wage gap. At the 90th percentile, differences in field of college degree are a more important predictor of the wage gap than work history.