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This paper investigates to what extent changes in the returns to occupational skill and declining occupational segregation have reduced wage inequality between men and women. As a first pass, I find that roughly 65 per cent of the decline in the gender wage gap between 1985 and 2010 can be explained by a reduction in occupational segregation between the genders. The remaining 35 per cent are explained by shifts in occupational wages which increased within occupations important for female employment, and declined in many occupations important for male employment such as producing occupations. Motivated by the central of Bohm et al. (2019) that average wages do not move as much as skill prices, I re-estimate the part of the declining wage gap attributed to changes in (selection corrected) skill prices. The impact of movements in skill prices on the reduction in gender wage inequality was roughly 13 percentage points larger than the impact of changes in average wages alone. Similar findings hold when decomposing the rise in the proportion of women at higher percentiles of the wage distribution and vice versa for lower percentiles. This underscores the importance of accounting for selection effects in decompositions.

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This paper studies the relationship between changes in occupational employment, occupational wages, and rising overall wage inequality. Using long-running administrative panel data with detailed occupation codes, we first document that in all occupations, entrants and leavers earn lower wages than stayers. This empirical fact suggests substantial skill selection effects that are negative for growing occupations and positive for shrinking ones. We develop and estimate a model for prices paid per unit of skill in occupations, which incorporates occupation-specific skill accumulation over the career and endogenous switching across many occupations. Our results shed light on two important puzzles in prior literature. First, consistent with leading explanations for occupational employment changes, price and employment growth are positively related. Strong counteracting skill changes along the lines of our new empirical fact explain why occupational wages are unrelated to employment growth. Second, skill prices establish a long-suspected quantitative connection between occupational changes and the surge in wage inequality.

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