Pay Differences Between Men and Women: Longitudinal Evidence from the 1946 Birth Cohort

The MRC National Survey of Health and Development provides data on the hourly pay of males and females at age 26 in 1972 and in 1977. These have been subjected to regression analysis to see how far the gap between men's and women's pay is statistically explicable by (a) a "human capital" model covering measures of ability, educational attainment and work experience, and (b) a model which also includes characteristics of the sector of employment. Our analysis indicates that the conventional indicator of pay discrimination - the residual differential ascribable only to gender - is smaller in 1977 than in 1972, after the introduction of equal pay legislation, though even in 1977 a considerable portion is still unexplained. Women's pay would have been 17 per cent to 32 per cent higher had they been remunerated at the rates estimated for males. The smaller estimate comes from a version of the human capital model which allows for unobserved heterogeneity by including pay in 1972 among the determinants of pay in 1977. For 1972, where no such allowance is possible, the human capital model leaves an unexplained pay gap of 51 per cent which narrows to 38 per cent when job characteristics are allowed for. All these estimates control for the possibility of selectivity bias among the subset of females observed working, but this bias is not found to be significant in this instance. The disadvantage of being female is greater for women with less advantaged backgrounds, and in job categories which tend to be lower paid.