Intertemporal market effect on gender earnings differentials: lawyers in Canada, 1970-80

The conventional methodology for decomposition of cross-sectional earnings differentials is extended to include a 'market effect' on intertemporal changes in earnings and to analyse the changes in gender differentials over time. The integrated cross-sectional and intertemporal methodology is illustrated by a decomposition of the change in the earnings differential that occurred during the 1970s between male and female lawyers in Canada. An unprecedented rate of growth in the supply of lawyers during the 1970s in Canada was associated with changes in the gender earnings differential in the legal profession. This rapid supply growth had an almost negligible net impact on female earnings, but a negative impact of 15% on the male earnings. This explains the narrowing of the earnings differential by almost 30% over the decade. Although three-fifths of the gender differential in 1970, and half of the differential in 1980, were attributable to the differences in the characteristics of the two groups, these changes in composition and an interaction effect had much smaller and offsetting impacts on changes in the gender differential.