June 1, 2010
The purpose of this paper is to examine what factors might help to further reduce the gender pay gap in the UK. Data for the paper are from the 2004-07 British Household Panel Survey, including information on work histories from 1991 onwards. The structural model is cross-sectional. Employer-funded training was more common among women than men during 2004-07 and was associated with 6% higher wage rates. Wages were 11% lower if there is overqualification, i.e. formal education higher than the average in one’s job. Having a work history of family care or part-time work has a significant negative effect on current hourly wages. This is a cumulative effect. The negative effect of years spent doing family care work was about twice as large (pushing the wage downwards) as the effect of the years of part-time work. The respondent’s gender in itself became a much smaller factor in the improved model that allows for overqualification and training. The level of formal education is shown to be a primary factor for the gender pay gap working through several pathways. High formal education has tended to inhibit women from doing family care work, and thus maintain women’s wages. However, overqualification is much stronger among highly educated adults and causes a lower wage compared with workers in the same job. We include in this study other direct and indirect causes of the pay gap, broadly called institutional factors.