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The Lifecycle Wage Growth of Men and Women: Explaining Gender Differences in Wage Trajectories

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Abstract

Why do women's wages grow more slowly than men's? Theory indicates that wages grow over the lifecycle as workers progress up an internal "career ladder," and as they switch firms and move up the "job ladder" to higher-paying firms. In this paper, we use employer-employee linked data from Sweden to decompose cumulative wage growth of men and women at each age into wage gains associated with (1) firm changes, (2) large discrete wage gains relative to one's co-workers -- which we call promotions -- and (3) interim (non-promotion) growth. While women switch firms at almost identical rates as men over the lifecycle, they have substantially lower promotion rates at all ages. Though relatively rare, promotions are the largest driver of wage growth by 45 for both men and women. Gender differences in promotion-related growth account for around 73 to 83% of the differences in lifecycle wage growth of college-educated men and women from ages 25 to 45. Differences in wage growth associated with firm changes account for 28%, while interim, non-promotion growth is slightly higher for women. Gender differences in sorting across firms with steeper vs. flatter wage structures explain only about 10% of differences in promotion probability. Lastly, we study hours worked and the evolution of the promotion gap with time to first birth. We use our findings to explain why childbirth penalties for women are so large, immediate and persistent; why gender wage differentials vary across professions; and what contributes to gender differences in estimated firm wage premiums.

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  • Mary Ann Bronson & Peter Skogman Thoursie, 2017. "The Lifecycle Wage Growth of Men and Women: Explaining Gender Differences in Wage Trajectories," Working Papers gueconwpa~17-17-06, Georgetown University, Department of Economics.
  • Handle: RePEc:geo:guwopa:gueconwpa~17-17-06
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    Cited by:

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    2. Danielle Sandler & Nichole Szembrot, 2019. "Maternal Labor Dynamics: Participation, Earnings, and Employer Changes," Working Papers 19-33, Center for Economic Studies, U.S. Census Bureau.

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    More about this item

    Keywords

    Gender Wage Differentials; Job Ladders; Career Ladders; Promotions.;
    All these keywords.

    JEL classification:

    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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