This is Figure 2 in the paper, showing the evolution of the gender pay gap in the population and over the lifecycle of various cohorts

One Cohort at a Time: Young Workers’ Outcomes and the Declining Gender Pay Gap

April 5, 2024

This paper studies the interaction between the decrease in the gender pay gap and the stagna- tion in the careers of younger workers, analyzing data from Italy and the United States. Our findings highlight the importance of labor-market entry to understand the shrinking of the gender pay gap. The entire decline in the aggregate pay gap originates from (i) newer worker cohorts who enter the labor market with smaller-than-average gender pay gaps and (ii) older worker cohorts who exit with higher-than-average gender pay gaps. Among the factors driving convergence at labor-market entry, we document that younger men’s positional losses in firms’ hierarchies and the overall pay distribution have played an important role. We propose an explanation by which a larger supply of older workers can reduce opportunities for younger workers to move up firms’ ranks. These negative career spillovers disproportionately affect younger men because they were more likely than younger women to benefit from promotion opportunities at baseline. Consistent with this aging-driven crowd-out interpretation, younger men experience the largest positional losses within the hierarchies of firms that are more exposed to workforce aging. These findings hold after controlling for other factors that have contributed to progressively closing the gender pay gap at labor-market entry. Finally, we document that the retirement of older cohorts has been the sole contributor to the decline in the gender pay gap after the mid-1990s, indicating that without structural breaks, the closure of the gender pay gap is unlikely in the foreseeable future.