Australian women earn on average 15% less per hour than men. But what drives this pay gap? Is it rooted in different occupational choices between men and women? Or does it reflect differences in pay across genders for identical occupations? The authors of this paper answer these questions using population-wide taxation data covering the Australian workforce.

The authors find that occupational choices—where men and women diverge in their career paths—account for only one-fifth of the gender wage gap. The bulk of the disparity, about 80%, arises from variations in pay within the same occupations.

Next, they ask if worker attributes can shed light on why men and women choose different occupations and why they get paid differently in the same occupation.

The authors find that differences in individual attributes, such as job tenure or full-time status between men and women do not explain occupational sorting or the gender pay gap within occupations. Gender differences in cognitive skills (via the proxy of Australian Tertiary Admissions Rank scores) offer some explanation for why men and women select different occupations. Nevertheless, differences in ATARs between men and women do not contribute to the gender differences in pay within occupations. The majority of the wage gap within the same occupation is largely due to how being married and having dependent children affects hourly wages more for women than men.