Gender Wage Gap
Difference in median earnings between men and women as % of male earnings
Historical Data
What Is the Gender Wage Gap?
The gender wage gap measures the difference in median earnings between men and women, expressed as a percentage of men's median earnings. It is one of the most widely cited indicators of economic inequality between the sexes and serves as a summary measure of the cumulative disadvantages that women face in the labour market—from occupational segregation and differences in hours worked to disparities in promotion rates and outright pay discrimination.
The gap is typically calculated using gross earnings from all sources of employment income, though the precise definition varies by country and by the agency producing the estimate. Some measures focus on hourly earnings, which control for differences in working hours between men and women. Others use weekly or annual earnings, which capture the effect of women's greater propensity to work part-time or to take career breaks for caregiving. The hourly measure isolates the "price" of an hour of female labour relative to male labour, while the annual measure captures the broader economic consequence of gender-based differences in labour-market participation patterns.
There is an important distinction between the unadjusted (or raw) gender wage gap and the adjusted gap. The unadjusted gap compares median earnings without controlling for any factors that might explain part of the difference—such as occupation, industry, education, experience, or hours worked. The adjusted gap attempts to isolate the portion of the difference that remains after accounting for these observable characteristics. The unadjusted gap is the more commonly reported figure and is the better measure of the overall economic inequality experienced by women, even though it does not claim to measure discrimination directly.
How It Is Calculated
The unadjusted gender wage gap is calculated as the difference between male and female median earnings, divided by male median earnings, expressed as a percentage.
where is the median earnings of male workers and is the median earnings of female workers. A positive value indicates that women earn less than men on average; a value of zero would indicate parity.
For example, if men's median hourly earnings are 30 dollars and women's median hourly earnings are 25.50 dollars, the gender wage gap is:
This means that women earn 15 percent less than men at the median.
Some analysts prefer to express the gap as a ratio rather than a difference:
In the example above, the earnings ratio would be 85 percent, meaning women earn 85 cents for every dollar earned by men. The two formulations convey the same information but frame it differently—one emphasises the shortfall, the other emphasises the relative level.
The adjusted gender wage gap is more complex to calculate and typically requires regression analysis. Researchers estimate a wage equation that includes controls for education, experience, occupation, industry, hours worked, and other observable characteristics, along with a gender indicator variable. The coefficient on the gender variable represents the adjusted gap—the portion of the earnings difference that cannot be explained by differences in observable productivity-related characteristics. This residual is often interpreted as an upper bound on the effect of discrimination, though it may also reflect unmeasured differences in preferences, bargaining behaviour, or other factors.
How to Read the Numbers
Gender wage gaps in advanced economies typically range from about 5 to 20 percent on an unadjusted basis, depending on the measure used and the country in question. Countries with high rates of female labour-force participation, strong pay-equity legislation, and generous parental-leave policies tend to have smaller gaps, though no country has fully closed the gap. Countries with more traditional gender roles, weaker labour-market institutions, or large informal sectors tend to have wider gaps.
Trends in the gender wage gap are as important as the level. In most advanced economies, the gap has been narrowing over the past several decades, driven by women's rising educational attainment, increasing labour-force participation, and gradual shifts in occupational segregation. However, the pace of convergence has slowed markedly in recent years, and in some countries the gap has plateaued or even widened slightly. This stalling of progress has prompted renewed attention from researchers and policymakers.
The gap varies significantly across the earnings distribution. In many countries, the gender wage gap is relatively small at the bottom of the distribution—where minimum wages and collective agreements compress pay differences—and widens considerably at the top, a phenomenon known as the glass ceiling. Women's underrepresentation in senior management, executive, and board-level positions contributes to a particularly wide gap among the highest earners. Some countries also exhibit a sticky floor pattern, where the gap is especially large at the bottom, reflecting the concentration of women in low-wage occupations.
Lifecycle effects are critical to understanding the gender wage gap. The gap tends to be relatively small among young workers entering the labour market but widens sharply around the age of 30 to 35, coinciding with the period when many women reduce their working hours or exit the labour force temporarily for childbearing and childrearing. This motherhood penalty—the earnings disadvantage experienced by women with children relative to childless women and to men—is one of the single largest contributors to the overall gender wage gap in most countries.
Economic Significance
The gender wage gap is far more than a statistical curiosity. It has profound implications for economic efficiency, fiscal sustainability, household welfare, and social equity. Each of these dimensions warrants careful consideration.
From an efficiency standpoint, a persistent gender wage gap suggests that the labour market is not allocating talent optimally. If equally qualified women are systematically paid less than men, or if they are channelled into lower-paying occupations, the economy is not making full use of its human capital. Closing the gender wage gap would not only benefit women individually but would also raise aggregate productivity and output. Research estimates that reducing gender-based labour-market barriers could increase GDP by several percentage points in many advanced economies—a substantial prize that rivals the gains from major structural reforms.
The fiscal implications are also significant. Women who earn less accumulate less in pension savings, pay less in income tax, and are more likely to require income support in retirement. The gender wage gap therefore translates into a gender pension gap that is typically even wider, because pension systems amplify the effects of lower lifetime earnings. Addressing the wage gap would strengthen the fiscal position by broadening the tax base and reducing future pension liabilities.
At the household level, the gender wage gap affects families' economic security and bargaining dynamics. When women earn substantially less than their male partners, they may have less influence over financial decisions and fewer resources to fall back on in the event of separation or divorce. The wage gap is therefore intertwined with broader questions of economic independence and gender equality within households.
Central banks and macroeconomic policymakers have traditionally paid less attention to the gender wage gap than to aggregate wage measures. However, there is growing recognition that gender-based segmentation of the labour market can affect the transmission of monetary policy, the responsiveness of labour supply to economic conditions, and the aggregate level of consumer spending. An economy in which a large share of the workforce is systematically underpaid may exhibit weaker consumption growth, less responsive labour supply, and a different inflation dynamic than one in which earnings are more equitably distributed.
Policy approaches to narrowing the gender wage gap span multiple domains. Pay-transparency legislation, which requires employers to disclose wage data by gender, has been adopted in several countries and has shown promise in reducing unjustified pay differences. Parental-leave policies that encourage fathers to take time off—often through use-it-or-lose-it provisions—can reduce the motherhood penalty by normalising caregiving for both sexes. Investments in affordable, high-quality childcare allow women to maintain stronger labour-force attachment during the childrearing years. Anti-discrimination enforcement, pay-equity audits, and targets for female representation in leadership positions address the demand side of the equation.
The interaction between the gender wage gap and educational attainment is noteworthy. In most advanced economies, women now surpass men in tertiary educational attainment, yet the wage gap persists. This paradox underscores that the gap is driven not by differences in human capital but by the way that human capital is rewarded—differently across occupations, industries, and career trajectories that remain heavily gendered.
Related Indicators
Why it matters
Persistent gaps signal structural labour market issues.