Other studies, however, have found that human capital differences increase the pay differential (Lang and Manove (2011)). Wage differentials between black and white women have historically been considerably lower than between men (Lang (2007)) and at times have even reversed. However, Neal (2004) demonstrates that this finding partially reflects the differential selection of black and white women into the labour force. For example, black women face a lower household income than white women, which provides a stronger incentive for them to enter the workforce in the first place. For the UK, although evidence is more partial, it suggests that both gender and ethnicity pay gaps have fallen over time (ONS (2018), ONS (2019)). For gender, the factors determining these gaps include age, educational background, sector, occupation and part time work (Olsen and Walby (2004), Manning and Swaffield (2005), Brynin (2017), ONS (2018)). For ethnicity, it includes occupation, being born in the UK and education (ONS (2019), Brynin and Guveli (2012)). As in the US, the UK ethnicity gap appears to be larger for males than females (Longhi and Brynin (2017)). When it comes to explaining the sources of pay gaps, three main approaches have typically been used. Regression techniques estimate pay gaps controlling for various characteristics of the individual or job (Goldin (2014), Brynin and Guveli (2012)). Oaxaca-Blinder decompositions account for differences in pay between two groups using an independent set of factors. This is useful for capturing the effects of compositional differences in the characteristics of groups (O’Donnell et al (2008)).
If we assess by qualification, the largest gender pay gaps are observed for people with GCSE or no qualifications, while the lowest gaps are for workers with a degree or equivalent (Chart 8). Generally speaking, the higher the qualifications, the lower the gender pay gap. Location also appears to play an important role. The gender pay gap outside London is consistently higher than in London, across all levels of qualification. The largest gap between London and the rest of the UK is among workers who have no or “other” qualifications. This might be explained by the fact that “other” qualifications includes degrees from outside the UK which may get less recognition. 9 Olivetti, C and Petrongolo, B (2016) show that structural change of the economy becoming more service based, can explain at least half of the overall variation in female hours, both over time and across countries. 11  All speeches are available online at www.bankofengland.co.uk/speeches  11  Chart 8: Median gender pay gap by qualification, sample average  Gender pay gap, per cent London  25  Other 20  15  10  5  0 Degree or equivalent  Higher educ  GCE A Level or equiv  GCSE grades A‐C or Other qualifications No qualification equiv  1 Male  2 Female  Source: ONS Labour Force Survey and Bank of England calculations. Note: A positive gender pay gap in this chart indicates that women earn less than men.