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Incentive Pay Is Key Factor In Gender Pay Gap

An August 25th post in the Liberty Street Economics blog of the Federal Reserve Bank of New York focuses on the issue of the gender pay gap in the U.S. New York Fed analysts Stefania Albanesi, Claudia Olivetti and Maria Prados undertake a research project that suggests that incentive pay is the key factor that represents most of the gender pay gap.

The authors explain the crux of their argument about the cause of the gender gap in the introduction to the blog. "While the disparity affects females at all income levels, women in professional and managerial occupations tend to experience greater gender-pay differences than those in working-class jobs. The rise in the use of incentive pay, which has been linked to the growth of income inequality (Lemieux, MacLeod, and Parent), might have contributed to the gender gap in earnings (Albanesi and Olivetti)."

Female execs getting a smaller share of incentive pay leads to gender pay gap

The research of Albanesi, Olivetti and Prados shows that female executives receive a lower share of incentive pay relative to total compensation than male execs do. In fact, the data shows that this difference accounts for a solid 93% of the unconditional gender pay gap.

The chart above shows the average components of...