Trends in Women's Wages, 1981–2015

Introduction

Every year, employers report their employees' wage and salary earnings to the Internal Revenue Service (IRS) and the Social Security Administration (SSA) on IRS Form W-2.¹ SSA stores those earnings records in its Master Earnings File (MEF), which it uses to administer the Old-Age, Survivors, and Disability Insurance (OASDI) programs.² For research and statistical purposes, SSA extracts data from the MEF and other administrative files each year to create the Continuous Work History Sample (CWHS). The CWHS contains earnings records for more than 3.7 million individuals, representing 1 percent of all Social Security numbers ever issued. For researchers, the large number of earnings records in the CWHS, its longitudinal structure, and its accuracy have advantages over household surveys, which consist of smaller samples, typically collect data for relatively short periods, and are subject to reporting and recording errors.

This article describes the trends in real annual wages and salaries recorded in the CWHS among women aged 25–59 from 1981 through 2015. It briefly describes the change in real annual wages and salaries for all women aged 25–59 during this period, then examines trends for individual birth cohorts in each of seven age groups: 25–29, 30–34, 35–39, 40–44, 45–49, 50–54, and 55–59. Using a series of charts, I show how women's real annual wages changed across age groups and birth cohorts within each age group.

Data and Methods

The CWHS is an analytical master file created from 1 percent samples of the Master Beneficiary Record (MBR) and the MEF, both of which SSA uses to administer the OASDI programs. To maintain the CWHS's 1 percent sample size, each year, SSA adds the earnings records associated with a random selection of newly issued Social Security numbers. The records of deceased workers remain in the CWHS, allowing researchers to study the annual wages of entire birth cohorts over time. When needed, SSA updates the CWHS earnings records for adjustments and corrections to the MEF.

The CWHS includes data on Social Security taxable wages in covered employment since 1951.³ Covered employment refers to jobs for which employers submit payroll-tax deductions to the IRS and report annual wages to SSA to determine a worker's eligibility for Social Security benefits and the amount of those benefits. Taxable wages are earnings in covered employment equal to or less than an annually adjusted threshold amount called the taxable maximum.⁴ Since 1978, the CWHS has included records on annual wages in noncovered employment and earnings exceeding the annual maximum taxable amount.

This article describes results derived from the 2015 CWHS file, the most recent available when the analysis was conducted. Following the methods of Leonesio and Del Bene (2011), the earnings analyzed in this article consist of annual wages and salaries since 1981 in both covered and noncovered employment, including wages and salaries exceeding the annual taxable maximum. Earnings from self-employment are not included.⁵ The analysis includes only women's earnings. An earlier Bulletin article described trends in men's wage and salary earnings from 1981 through 2014 (Purcell 2018). This article focuses on ages 25 to 59 because those are the ages with the highest employment rates.⁶ For brevity, I refer to wages and salaries hereafter simply as “wages.”

To focus on workers who had substantial wages, the analysis includes only individuals with annual wages equal to or greater than the amount needed to earn four quarters of coverage under Social Security.⁷ This amount ranged from $1,240 in 1981 ($2,835 in 2015 dollars) to $4,880 in 2015. Annual wages have been indexed to 2015 values by the personal consumption expenditure (PCE) index of the National Income and Product Accounts.⁸

In addition to excluding individuals with annual wages lower than the amount needed to earn four quarters of coverage, this analysis excludes the top 0.1 percent of earners each year. This reduces the effect of extreme outliers at the high end of the annual wage distribution on the measured mean and variance of wages. The 1981 sample was bounded at the high end by women earning $122,169, the amount of annual wages (in 2015 dollars) above which a woman would have been in the top 0.1 percent of female earners that year. The 2015 sample was bounded at the high end by women earning $588,766, the amount of annual wages above which a woman would have been in the top 0.1 percent of female earners that year.

The 2015 CWHS file consists of 3,786,066 individual person-records.⁹ Of these records, 53.1 percent are for men and 46.9 percent are for women. For this analysis, the sample was restricted to women aged 25–59 in the year observed. Thus, for 1981, the sample includes women born from 1922 through 1956. For 2015, the sample includes women born from 1956 through 1990. Overall, the sample consists of 15,892,104 person-year observations from 1981 through 2015, with an average of 454,060 unique individuals observed each year. The number of observations ranges from a low of 284,737 for 1981 to a high of 531,812 for 2015. There are an average of 12,973 records for each year observed for each single year of age.¹⁰ The fewest records observed in any year for a single year of age is 5,183, for women aged 59 in 1985 (born in 1926). The most records observed in any year for a single year of age is 17,366, for women aged 40 in 2000 (born in 1960).

In the next section, I summarize previous research based on the CWHS. I then describe broad trends in annual wages from 1981 through 2015 for women aged 25 through 59. A discussion of the main findings follows, in a section that describes the changes in median real annual wages from 1981 through 2015 for women in seven age groups: 25–29, 30–34, 35–39, 40–44, 45–49, 50–54, and 55–59. These age-earnings profiles show how women's real annual wages changed from 1981 through 2015, across age groups and birth cohorts within age groups.

Previous Research

Several analysts have used the CWHS to study the growth and variance of earnings over time. Kopczuk, Saez, and Song (2010) investigated trends in the variance of annual earnings from 1970 to 2004. They found that almost all of the increase in variance was “due to [an] increase in the variance of permanent earnings, as opposed to transitory earnings.” They also observed that a “decrease in the gender earnings gap and the resulting substantial increase in upward mobility over a lifetime for women are the driving force behind the increase in long-term mobility among all workers.”

Sabelhaus and Song (2010) found that between 1980 and the early 1990s, the variability of earnings growth rates across the working population declined significantly, and that the lower volatility continued through the early 2000s. They suggested that over that period, both permanent and transitory components of earnings shocks had become more moderate. They also noted that for both men and women, the annual variability of earnings growth rates declined significantly between ages 25 and 55.

Leonesio and Del Bene (2011) used the CWHS to study the distribution of men's and women's annual wages from 1981 through 2004. They observed that “among prime-aged men, real earnings have declined or stagnated for low-wage earners, have increased modestly in the middle of the distribution, and have risen substantially for high earners.” They also found among men “an increase in long-run earnings inequality of roughly the same magnitude as the trend seen in annual earnings dispersion.” They observed relatively little increase in the dispersion of long-run earnings among women. They concluded that the trends they observed were “consistent with the view that more highly skilled and educated workers have been paid higher premiums for their labor over time, while the productivity and earnings of lower-skilled workers have not similarly benefited from improvements in technology.”

Guvenen, Kaplan, and Song (2014) used the CWHS to measure the progress that women have made toward achieving earnings parity with men. They found that although the share of women in the top 1 percent of earners increased by a factor of more than three from the early 1980s to 2012, women's earnings constituted only 11 percent of the earnings of the top 1 percent of earners in 2012. Guvenen and others (2015) examined changes in men's annual earnings and found that in any given year, most male workers experience very small changes in earnings, but a small percentage experience very large shocks. They found that positive shocks to high-income individuals are transitory, but negative shocks are persistent. For low-income individuals, however, large earnings shocks are more common but less persistent. The authors concluded that in general, high-income individuals experience earnings shocks that are persistent but that their income shows lower volatility than that of lower-earning workers. Song and others (2015) matched CWHS records to employer data to compare the dispersion of earnings within firms to earnings dispersion across firms. They found an increase in earnings inequality among workers of different firms between 1978 and 2012, while differences in earnings within firms remained almost unchanged.

Purcell (2018) summarized trends in men's real annual wages from 1981 through 2014 using CWHS data. Over that period, the real median annual wages of men aged 25–59 rose 4.7 percent and their real mean annual wages rose 34.5 percent. The wage distribution became more unequal as wage growth for the top 10 percent of earners substantially outpaced the rate of growth for earners below the 90^th percentile. Although real median annual wages rose 4.7 percent in that period, real annual wages at the 90^th percentile rose 50.7 percent. Real wages declined 2.0 percent at the 25^th percentile and rose 3.8 percent at the 10^th percentile. Much of the increase in men's real median annual wages was attributable to an increase in the proportion of men in their peak earnings years. Other things being equal, the increase in the proportion of men who were in the age range of 40 to 54 would have caused the real median annual wages of all men aged 25–59 to rise even if median wages within each 5-year age interval from 25–29 through 55–59 had not risen between 1981 and 2014.

This study describes the change in women's real annual wages from 1981 through 2015. It exploits the large CWHS sample and its longitudinal structure to compare the real annual wages of women in seven age intervals over a period spanning 34 years. Charts show real median wages in each year for each age group, allowing us to observe trends in women's real median annual wages across age groups and birth cohorts within each age group. First, however, I summarize the broader trends in women's real annual wages in the study period.

Women's Annual Wages 1981–2015

Chart 1 shows the median and mean annual wages along with the standard deviation of annual wages for women aged 25–59 from 1981 through 2015. Women's real wages during that period had a rising median and mean and increasing variance. Real median annual wages were $22,693 in 1981 and $33,788 in 2015, an increase of $11,095 (48.9 percent) overall and an average annual increase of 1.2 percent. Median annual wages rose fairly consistently throughout the period, rising 14.6 percent from 1981 through 1990, 18.8 percent from 1990 through 2000, 6.3 percent from 2000 through 2010, and 2.8 percent from 2010 through 2015. The only span in which women's real median annual wages fell for more than a single year was from 2010 through 2012. From a level of $33,230 in 2009, real median annual wages fell each year until 2012, when they reached $32,322, a decline of 2.7 percent over those 3 years. Real median annual wages then began a slow rebound, rising less than 0.8 percent in both 2013 and 2014 before rising 3.3 percent in 2015.

Women's real mean annual wages rose from $25,264 in 1981 to $44,459 in 2015, an overall increase of $19,195 (76.0 percent) and an average annual increase of 1.7 percent. Real mean annual wages increased at varying rates throughout the period, rising 19.8 percent from 1981 through 1990, 25.5 percent from 1990 through 2000, 10.8 percent from 2000 through 2010, and 5.6 percent from 2010 through 2015. The only years in which women's real mean annual wages fell were 2010 and 2011; they fell from $42,195 in 2009 to $41,954 in 2011, a decline of less than 0.6 percent. Women's real mean annual wages rose 2.5 percent between 2011 and 2014, then rose 3.4 percent in 2015.

As women's real mean annual wages increased from 1981 to 2015, so did the standard deviation, a measure of how widely the values are distributed around the mean. In 1981, women's real mean annual wages were $25,264 and the standard deviation was $16,289. By 2015, the mean value of women's wages had risen 76.0 percent to $44,459, yet the standard deviation had more than doubled—to $42,162—indicating a substantial increase in the dispersion of annual wages around the mean. In both 1981 and 2015, the distribution of wages was skewed to the right: The highest values were much farther from the mean than the lowest values; recall that the latter are equivalent to the annual earnings needed to earn four quarters of coverage under Social Security.

Chart 2 shows the real annual wages of women aged 25–59 each year from 1981 through 2015 at the 10^th, 25^th, 50^th, 75^th, 90^th, and 99^th percentiles of the wage distribution. In 1981, a woman with annual wages at the 10^th percentile earned $6,608 in 2015 dollars. By 2015, real wages at the 10^th percentile were $10,932, or 65.4 percent higher than in 1981. Real annual wages at the 25^th percentile were $12,888 in 1981 and by 2015 they were $18,932, 46.9 percent higher. As noted earlier, median real annual wages among women aged 25 to 59 rose from $22,693 in 1981 to $33,788 in 2015, an increase of 48.9 percent. From 1981 through 2015, women's real wages at the 10^th percentile rose at an average annual rate of 1.5 percent, those at the 25^th percentile rose at an average annual rate of 1.1 percent, and those at the median rose at an average annual rate of 1.2 percent.

Women's real annual wages rose more rapidly in the upper half of the earnings distribution than in the lower half. Real annual wages at the 75^th percentile were $34,114 in 1981 and rose 63.1 percent to $55,626 in 2015. Real annual wages at the 90^th percentile rose from $46,646 in 1981 to $86,502 in 2015, an increase of 85.4 percent. The most striking feature of Chart 2 is the steep increase in annual wages at the 99^th percentile. From 1981 to 2015, women's real annual wages at the 99^th percentile almost tripled, rising from $75,565 to $210,500—an increase of 178.6 percent. Women's real annual wages rose at average annual rates of 1.4 percent and 1.8 percent at the 75^th and 90^th percentiles, respectively; those at the 99^th percentile rose at an average annual rate of 3.1 percent.

An individual's lifetime path of annual wages depends on a number of factors, including personal traits, education, occupation, industry, and economic conditions. For many workers, annual wages are relatively low when they are in their 20s, rise rapidly in their 30s as they develop skills and gain experience, and then increase more slowly as they enter their 40s. Annual wages typically peak between ages 45 and 55. By the time they reach their late 50s, many workers' annual wages begin to decline. Some workers choose to work fewer hours as they get older, while some move to lower-paying jobs, either voluntarily or involuntarily, depending on their circumstances (Sonnega, McFall, and Willis 2016). For example, some workers are unable to continue in their career occupation because of chronic illness or work-limiting disabilities. Nevertheless, throughout the period from 1981 through 2015, the median annual wages of women aged 55–59 were higher than those of women younger than 30; and since the mid-1990s, the median annual wages of women aged 55–59 have been higher than those of women younger than 40.

Chart 3 shows real median annual wages for 1981–2015 among women aged 25–29, 30–34, 35–39, 40–44, 45–49, 50–54, and 55–59. In 1981, women's median annual wages differed little by age. Women aged 25–29 had the lowest median annual wages at $22,021, while at the high end, women aged 30–34 had median annual wages of $23,385—a difference of $1,364, or about 6 percent. Over time, real median wages rose for all seven age groups, but the rate of growth was faster for the older groups, expanding a gap in annual wages between women aged 35 or older and those younger than 35. By 2015, the real median annual wages of women aged 25–29 were $26,243, an average annual increase from 1981 of 0.5 percent. The real median annual wages of women aged 30–34 were $32,295 in 2015, having risen since 1981 at an average annual rate of 1.0 percent. By contrast, among all women aged 35 to 59, real median annual wages rose at an average annual rate of 1.4 percent. Because of these differing rates of growth, by 2015, the real median annual wages of women aged 45–49 ($37,003) exceeded those of women aged 25–29 ($26,243) by $10,760, or 41.0 percent.

Changes in the age distribution of workers can affect the growth rate of annual wages. For example, if the proportion of female workers who were in their peak earnings years (ages 40–59) had risen, the median annual wages of all women aged 25–59 might have risen even if median annual wages within each age group remained flat. Chart 4 shows that from 1981 to 2015, the proportion of working women aged 25–59 who were 25 to 39 years old fell from 57.0 percent to 44.1 percent and the proportion who were 40 to 54 years old rose from 33.9 percent to 42.3 percent. As illustrated in Chart 3, real median annual wages rose in each of the seven 5-year age groups from 25–29 through 55–59. The increase in real median annual wages among all working women aged 25–59 was the result of both the increase in real annual wages within each age group and an increase in the proportion of working women in the age groups that experienced the greatest increases in real median earnings.¹¹

We can estimate the effect of the change in the age distribution of working women on their median annual wages by reweighting the records from the CWHS so that the age distribution is constant each year, and then recalculating the annual median wage. Of course, if the distribution of workers by age had not changed over time, the static distribution of workers by age itself would likely have had some effect on annual wages. Nevertheless, estimating a “fixed population weight” median wage gives us an idea how much of the increase in women's real median annual wages during 1981–2015 was due to the growth in the proportion of workers who were in their prime earning years. All other things being equal, if the age distribution of women in 1981 had remained static through 2015, their estimated real median annual wages in 2015 would have been $32,709, or 3.2 percent lower than the actual median of $33,788. In other words, even if the proportion of women in their prime earning years had not increased during 1981–2015, the real median annual wages of all women aged 25–59 likely would have risen $10,016 in that period, or 90.3 percent of the observed increase of $11,095, all else being equal. The observed increase in women's real median annual wages was therefore attributable more to the increase in real annual wages within each age group than to the increase in the proportion of women in the age groups in which annual wage and salary earnings usually peak.

Age-Earnings Profiles

The large number of records in the CWHS and the file's longitudinal structure allow the construction of age-earnings profiles that show the median annual wages of workers from many birth cohorts over long periods. This section contains charts showing real median annual wages of women in seven age intervals over a 34-year period, allowing us to compare real annual wages across age groups and birth cohorts within age groups. The period 1981–2015 included four recessions and four expansions, and the charts illustrate the effects of the business cycle on the age-earnings profiles.¹² Specifically, the charts show women's real median annual wages from 1981 through 2015 for each of the following seven age intervals:

• 25–29, comprising the 1956–1986 birth cohorts;
• 30–34, comprising the 1951–1981 birth cohorts;
• 35–39, comprising the 1946–1976 birth cohorts;
• 40–44, comprising the 1941–1971 birth cohorts;
• 45–49, comprising the 1936–1966 birth cohorts;
• 50–54, comprising the 1931–1961 birth cohorts; and
• 55–59, comprising the 1926–1956 birth cohorts.

The oldest women in the sample, the members of the 1926 birth cohort, attained age 55 in 1981. Because they (as well as women born 1927–1930) were older than 59 for all but the first few years of the observation period, I track their annual wages only in the 55–59 age interval. The youngest women in the sample were born in 1986; they attained age 25 in 2011. Because they (as well as women born 1982–1985) were younger than 25 in all but the final few years of the observation period, I track their annual wages only in the 25–29 age interval. Only women in the 1956 birth cohort can be tracked through each of the seven age intervals in the 1981–2015 span. Women born 1951–1955 and women born 1957–1961 are fully tracked in six of the seven charts below. In total, I track the annual wages in 1981–2015 of women representing 61 birth cohorts (1926 through 1986).¹³

Appendix A contains tables that correspond with Charts 5–11. The tables show the real median annual wages for each year and cohort covered in each chart.¹⁴

Chart 5 tracks the real median annual wages of women born 1956–1986 in the years when they were aged 25–29. For women in the 1956 birth cohort, real annual wages rose from $21,117 at age 25 to $24,335 at age 29, or by 15.2 percent. For women in the 1986 birth cohort, annual wages rose from $21,620 at age 25 to $29,398 at age 29, or by 36.0 percent. Thus, real annual wages at age 25 were $503 (2.4 percent) higher for women born in 1986 than those of women born in 1956, and at age 29 the real annual wages of women born in 1986 were $5,063 (20.8 percent) higher than those of women born in 1956. On average, real median annual wages for all members of the 1956–1986 cohorts increased by 21.9 percent from age 25 to age 29.

Women in the 1961 birth cohort experienced the slowest annual wage growth from age 25 to 29. Their real median annual wages rose 13.0 percent from 1986 to 1990. Women in the 1972 birth cohort experienced the fastest annual wage growth from age 25 to 29. Their real median annual wages rose 36.9 percent from 1997 to 2001.

Chart 6 tracks the real median annual wages of women born 1951–1981 in the years when they were aged 30–34. For women in the 1951 birth cohort, real annual wages rose from $23,537 at age 30 to $25,680 at age 34, or by 9.1 percent. For women in the 1981 birth cohort, real annual wages rose from $29,787 at age 30 to $33,957 at age 34, or by 14.0 percent. At age 30, the real annual wages of women born in 1981 were 26.6 percent higher than the wages of women born in 1951. At age 34, the annual wages of women born in 1981 were 32.2 percent higher than the wages of women born in 1951. On average, across all cohorts, real median annual wages increased by 8.1 percent from age 30 to age 34.

Women in the 1957 birth cohort experienced the slowest annual wage growth from age 30 to 34. Their real median annual wages rose 2.2 percent from 1987 to 1991. Women in the 1966 birth cohort experienced the fastest annual wage growth from age 30 to 34. Their real median annual wages rose 16.1 percent from 1996 to 2000.

Chart 7 tracks the real median annual wages of women born 1946–1976 in the years when they were aged 35–39. For women in the 1946 birth cohort, real annual wages rose from $23,042 at age 35 to $25,811 at age 39, or by 12.0 percent. For women in the 1976 birth cohort, real annual wages rose from $33,041 at age 35 to $36,166 at age 39, or by 9.5 percent. The annual wages of women born in 1976 were 43.4 percent higher than those of women born in 1946 at age 35 and were 40.1 percent higher at age 39. On average, across all birth cohorts from 1946 through 1976, real median annual wages increased by 7.4 percent from age 35 to age 39.

Women in the 1974 birth cohort experienced the slowest annual wage growth from age 35 to 39. Their real median annual wages rose 1.9 percent from 2009 to 2013. Women in the 1961 birth cohort experienced the fastest annual wage growth from age 35 to 39. Their real median annual wages rose 13.8 percent from 1996 to 2000.

Chart 8 tracks the real median annual wages of women born 1941–1971 in the years when they were aged 40–44. For women in the 1941 birth cohort, real annual wages rose from $22,515 at age 40 to $24,544 at age 44, or by 9.0 percent. For women in the 1971 birth cohort, real annual wages rose from $34,248 at age 40 to $37,070 at age 44, or by 8.2 percent. The annual wages of women born in 1971 were 52.1 percent higher than the wages of women born in 1941 at age 40 and were 51.0 percent higher at age 44. On average, across all cohorts from 1941 through 1971, real median annual wages increased by 7.8 percent from age 40 to age 44.

Women in the 1969 birth cohort experienced the slowest annual wage growth from age 40 to 44. Their real median annual wages rose 0.7 percent from 2009 to 2013. Women in the 1942 birth cohort experienced the fastest annual wage growth from age 40 to 44. Their real median annual wages rose 14.8 percent from 1982 to 1986.

Chart 9 tracks the real median annual wages of women born 1936–1966 in the years when they were aged 45–49. For women in the 1936 birth cohort, real annual wages rose from $22,619 at age 45 to $24,527 at age 49, or by 8.4 percent. For women in the 1966 birth cohort, real annual wages rose from $34,429 at age 45 to $36,952 at age 49, or by 7.3 percent. The annual wages of women born in 1966 were 52.2 percent higher than those of women born in 1936 at age 45 and were 50.7 percent higher at age 49. On average, across all cohorts from 1936 through 1966, real median annual wages increased by 6.5 percent from age 45 to age 49.

Women in the 1962 birth cohort experienced the slowest annual wage growth from age 45 to 49. Their real median annual wages rose 0.9 percent from 2007 to 2011. Women in the 1951 birth cohort experienced the fastest annual wage growth from age 45 to 49. Their real median annual wages rose 13.5 percent from 1996 to 2000.

Chart 10 tracks the real median annual wages of women born 1931–1961 in the years when they were aged 50–54. For women in the 1931 birth cohort, real annual wages rose from $22,976 at age 50 to $24,314 at age 54, an increase of 5.8 percent. For women in the 1961 birth cohort, real annual wages rose from $34,852 at age 50 to $37,111 at age 54, or by 6.5 percent. The annual wages of women born in 1961 were 51.7 percent higher than the wages of women born in 1931 at age 50 and were 52.6 percent higher at age 54. In every birth cohort except one (1958), women experienced an increase in real median annual wages between ages 50 and 54. On average, across all cohorts from 1931 through 1961, real median annual wages rose by 3.9 percent from age 50 to age 54.

Women in the 1958 birth cohort experienced a decline in median annual wages from age 50 to 54. Their real median annual wages fell 0.4 percent from 2008 to 2012. Women in the 1932 birth cohort experienced the fastest annual wage growth from age 50 to 54. Their real median annual wages rose 9.9 percent from 1982 to 1986.

Chart 11 tracks the real median annual wages of women born 1926–1956 in the years when they were aged 55–59. For women in the 1926 birth cohort, real annual wages rose slightly, from $23,179 at age 55 to $23,338 at age 59, or by 0.7 percent. For women in the 1956 birth cohort, real annual wages rose from $36,054 at age 55 to $36,844 at age 59, or by 2.2 percent. The real annual wages of women born in 1956 were 55.5 percent higher than the wages of women born in 1926 at age 55 and were 57.9 percent higher at age 59. Women in the 1928 birth cohort experienced the fastest annual wage growth from age 55 to 59. Their real median annual wages rose by 3.6 percent from 1983 to 1987.

The members of more than half of the birth cohorts from 1926 through 1956 experienced declines in real median annual wages between the ages of 55 and 59, including women in eight of the fifteen cohorts from 1926 through 1940 and in twelve of the sixteen cohorts from 1941 through 1956. Women in the 1947 birth cohort experienced the steepest decline. Their real median annual wages fell 5.9 percent from 2002 to 2006. Declining median wages could have resulted from women working fewer hours as they neared retirement, or moving from higher-paying to lower-paying jobs, or a combination of both. On average, real median annual wages across all of the 1926–1956 birth cohorts fell by 2.1 percent from age 55 to age 59.

Discussion

Several patterns emerge in Charts 5–11. First and foremost, the charts show substantial gains in women's real annual wages from 1981 through 2015 in every age group except ages 25–29. In 2015, women's real median annual wages at age 34 were 32.2 percent higher than the wages of women the same age in 1985, and their median annual wages at age 39 were 40.1 percent higher than the wages of women the same age in 1985. At ages 44, 49, 54, and 59, women's real median annual wages in 2015 were more than 50 percent higher than the real median wages of women the same respective ages in 1985. Although the real median annual wages of women aged 25–29 also rose during this period, their gains were smaller than those of women aged 30 or older. In 2015, the real median annual wages of women aged 25 were only 2.4 percent higher than the wages of women the same age in 1981, and median annual wages at age 29 were 20.8 percent higher than those of women the same age in 1985.

A second pattern illustrated in the charts is the relationship between median annual wages and age. Median annual wages rise rapidly when workers are young, as they gain skills and experience. It is not age itself that influences wage growth, but rather the increase in a worker's “human capital”—her skills and experience—that leads to the rise in earnings with age, especially in the first 10 to 20 years of a worker's career. From 1981 through 2015, women's real median annual wages at age 29 were, on average, 21.9 percent higher than their median wages at age 25. The rate of growth of annual wages slows in middle age. Women's real median annual wages at age 49 were, on average, just 6.5 percent higher than their median wages at age 45. Finally, real median annual wages fall in the later years of workers' careers. From age 55 to 59, women's real median annual wages fell by an average of 2.1 percent, likely through a combination of reduced hours of work and movement to lower-paying jobs before retirement.

Finally, the relationship between real median annual wages and economic expansions and contractions is evident. Each of the four age groups from 35–39 through 50–54 experienced its lowest rate of growth in median annual wages during one of three overlapping periods: 2007–2011, 2008–2012, or 2009–2013. Each of those three periods coincided in part with the Great Recession of 2007–2009. The fastest rate of wage growth for four of the seven age intervals—25–29 through 35–39 and 45–49—occurred either from 1996 through 2000 or from 1997 through 2001. Economic growth was robust in that period. From 1995 through 2000, real median household income increased at an average annual rate of 2.1 percent (Federal Reserve Bank of St. Louis 2017). The rapid growth of women's median annual wages from 1996 through 2001 and the relatively slow growth from 2007 through 2013 illustrate the strong effect of the business cycle on annual wage and salary earnings.

Summary and Conclusion

This article has summarized trends in women's real annual wages from 1981 through 2015 using CWHS data. Over that period, the wage distribution among women aged 25 to 59 became more unequal as wage growth for the top 10 percent of earners outpaced the rate of growth for earners near the middle of the distribution. Annual wages at the 99^th percentile rose from $75,565 in 1981 to $210,500 in 2015, an increase of 178.6 percent. Annual wages at the 90^th percentile rose from $46,646 to $86,502, an increase of 85.4 percent. By contrast, women's real median annual wages rose from $22,693 in 1981 to $33,788 in 2015, an increase of 48.9 percent. Mean real annual wages rose from $25,264 to $44,459 during that span, an increase of 76.0 percent. As the mean of women's wages increased, so did the standard deviation—from $16,289 in 1981 to $42,162 in 2015—indicating a wider dispersion of annual wages around the mean.

Although the proportion of women who were in their peak earnings years of ages 40–54 rose from 33.9 percent in 1981 to 42.3 percent in 2015, this contributed relatively little to the overall increase in real median annual wages among women aged 25–59. Real median annual wages rose in each of the seven 5-year age groups from 25–29 through 55–59. Reweighting the sample records from the CWHS indicates that, with all other things being equal, if the age distribution of women in 2015 had been the same as in 1981, their estimated real median annual wages in 2015 would have been $32,709, or just 3.2 percent lower than the actual median of $33,788. In other words, even if the proportion of working women in their prime earning years had not risen, the real median annual wages of all women aged 25–59 in 2015 likely would have equaled about 97 percent of the observed median wage. The increase in women's real median annual wages was attributable more to the increase in real annual wages within each age group than to the increase in the proportion of women who were in their peak earning years.

In four of the seven 5-year age intervals, the lowest rate of growth in median annual wages occurred during one of three overlapping periods: 2007–2011, 2008–2012, or 2009–2013. Each of these three periods coincided in part with the Great Recession of 2007–2009. Likewise, the fastest rate of wage growth for four of the seven age intervals occurred either from 1996 through 2000 or from 1997 through 2001. The late 1990s featured a business cycle peak which began to give way to recession in 2001. The rapid growth of real annual wages from 1996 through 2001 and their slow growth from 2007 through 2013 show the effect of business cycles on annual earnings.

This article complements a previous article (Purcell 2018) that examined men's annual wages from 1981 through 2014. To compare the trends for women with those for men over an identical period, I revised and updated the men's wage calculations presented in that article using data from the 2015 CWHS. In general, women's annual wages rose more rapidly than men's wages. From 1981 through 2015, men's real median annual wages rose from $43,087 to $46,150, an increase of 7.1 percent, or 0.2 percent per year on average; and women's real median annual wages rose from $22,693 to $33,788, an increase of 48.9 percent, or about 1.2 percent per year on average. Women's real median annual wages, as a percentage of men's, rose from 52.7 percent in 1981 to 73.2 percent in 2015. Real mean annual wages rose by 38.1 percent for men, from $47,779 to $65,980, while the standard deviation rose from $34,480 to $83,467, an increase of 142.1 percent. For women, real mean annual wages rose by 76.0 percent, from $25,264 to $44,459, and the standard deviation rose from $16,289 to $42,162, an increase of 158.8 percent. Among both men and women, real annual wages at the 90^th percentile rose more rapidly than median wages did. Men's 90^th percentile annual wages rose from $80,976 in 1981 to $125,117 in 2015, an increase of 54.5 percent, or 1.3 percent per year on average. Women's 90^th percentile annual wages rose from $46,646 in 1981 to $86,502 in 2015, an increase of 85.4 percent, or 1.8 percent per year on average.

One limitation of this study is that the CWHS accounts for cash compensation only. Many workers receive additional compensation in the form of employer payments for health insurance and contributions to retirement accounts. During the period from 1981 to 2015, health insurance premiums rose more rapidly than wages, and the proportion of total compensation that was devoted to health insurance coverage therefore rose as well.¹⁵ Consequently, inequality in the distribution of total compensation rose less than inequality in the distribution of wage and salary earnings.

Another limitation of this study is that the CWHS includes no information about the number of hours worked per year. Annual wage and salary earnings are the product of the hourly wage rate and the hours worked that year. Thus, changes over time in hours worked and hourly wage rates affect the distribution of annual wages. The public policy implications of increasing wage inequality caused by changes in the distribution of hours worked could differ from those caused by changes in the distribution of the hourly wage.

Government officials at the federal, state, and local levels recognize the importance of identifying and pursuing economic policies that promote employment and wage growth. To evaluate the effectiveness of economic policies, officials need detailed, accurate, and representative long-term data on workers' annual wages. The wage data recorded in the CWHS are ideal for this type of research and can contribute much to our knowledge of trends in the growth and distribution of annual wages.

Appendix A