Earnings Inequality and the Gender Wage Gap in U.S. Metropolitan Areas

Zsuzsa Daczo, University of Maryland

The gender wage gap has been narrowing since the late 1970s while earnings inequality has been growing over this same period. Thus, there is negative correlation between the two and the question is whether there is a causal relation. Some argued that income inequality and the gender wage gap should be positively correlated, and that in the last decades when women narrowed the gender wage gap in an environment of growing inequality they in fact swam against the inequality tide. Using data on individuals and on metropolitan areas in a multilevel model I show that there is an inverse relationship between labor market earnings inequality and the gender wage gap. Women do better relative to men where there is greater overall earnings inequality because high inequality decreases the wages of both men and women, but decreases men's wages more.