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Gender differences in earnings over the lifecourse
• Heather Joshi,
• Centre for Longitudinal Studies, Institute of Education, University of London
• GeNet seminar on Gender and Ageing
• Cambridge October 4 2005
Individual Incomes of men and women, by age 2003-4
Family Resources Survey
Differences between men’s and women’s incomes to be unpacked
Vary by sourceEarnings, benefits, savings
Differ by age Cohort and LifecourseDiffer by level of initial human capital
Education ( here)This talk focuses on earnings, likely to affect
pension and savings and particularly hourly pay as the driver of other
differences, though itself affected by previous experience
Overview across cohorts
• Simulations of lifetime incomes, partly projected, up to retirement age cohorts entering the labour market in post-war Britain
• Averaged over 3 levels of education and three family sizes
• Men assumed to work continuous full-time• Women to have interruptions and part-time work
for children, and to be paid less on that account, and for a pure gender penalty
Cohort difference in relative earnings
Lifetime earnings: ratio of women to men by year of birth
21%
39%
62%
0%
10%
20%
30%
40%
50%
60%
70%
1940 1955 1970YEAR OF BIRTH
wo
mn
/men
ap
pro
x
VERY STYLIZED FACTS
• Women of the generation newly retired have only about one fifth the earnings record behind them of their male contemporaries
• Increased employment participation and higher relative wages projected to raise this proportion, but only to 62% by the time the 1970 cohort retires in 2035
• Current and future women pensioners cannot rely on equal pay to produce equal pensions
Cohort differences in family and education: women now aged 35-85
At least one child
Ever Married
Ever Divorced by 50
No qualifications: Women
No qualifications:Men
Higher Quals: Women
Higher Quals Men
0
10
20
30
40
50
60
70
80
90
100
1910 1922 1934 1946 1958 1970
year of birth (approx)
%
Cohort effects: participation
Years between first birth and next job at the median
13
12
9
6
2
1
13
12
10
6
5
4
14
13
8
6
0 00
2
4
6
8
10
12
14
16
1910 1922 1934 1946 1958 1970
mother's year of birth
year
s AllNo qualificationsHigher qualifications
Simulated relative lifetime earnings by cohort, children and education
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%,No Quals Mid quals High quals
Differentials with Cohort
• The higher labour labour force participation of the higher educated amplifies their higher pay to generate much higher lifetime income than less educated women, but still not as much as educated men
• Low educated women with large families particularly likely to face dependence on men and/or state
Within lifecourse developments
• How and when are these differences in earnings generated?
• Focus on hourly pay, though hours of work also then to fall over some parts of the lifecourse
Age profile in pay per hour
• Pay gaps between men and women increase as age increases.
Cohort effect?
Is this just because the older people missed out on Equal pay opportunities,
or Lifecourse effect?
Is there a widening pay gap over the lifecourse of a given cohort?
Age Profile of Relative Pay
Hourly Earnings Women relative to men: NES cross sections
50%
60%
70%
80%
90%
100%
110%
<18 18-20 21-24 25-29 30-39 40-49 50-59 60-64
1976
1986
1996
2000
Age and Cohort: New Earnings Survey
Relative hourly earings of men and women full-timers, by age and cohort
0.5
0.6
0.7
0.8
0.9
1
21-24 25-29 30-39 40-49 50-59 60-64
late 70s
early 70s
late 60s
early 60s
early 50s
early 40s
early 30s
early 20s
The Evolution of the Gender Pay Gap for Different Birth Cohorts
Source: Manning and Swaffield (2005), from New Earnings Survey, includes part-timers
Gender Differences in Wage Growth:
Source: Manning and Swaffield-’M&S’(2005) New Earnings Survey
Widening gender wage gap
• Faster growth for men at least early on • Does it merely reflect divergence in
experience on the labour market • Or does the underlying degree of unequal
treatment of also increase with age?• M&S find that most of the growth in men’s
relative pay over 1st 10 years reflects unequal treatment. How does this tally with our findings?
Potential components of the pay gap
Pre-entry discrimination
Non-discriminated differences in
education, training and work
experience
Unobserved systematic differences
Compensating for different conditions
BargainingPower
Labour market segmentation
Job search
Statisticaldiscrimination
Taste-baseddiscrimination
EXPLAINED BY DIFFERENCES IN HUMAN CAPITAL
NOT ACCOUNTED FOR BY HUMAN CAPITAL
Some analyses of wage gaps, in terms of human capital
Sources of gender wage gap, selected
analyses 1978 to 1994
0.00
0.10
0.20
0.30
0.40
0.50
0.60
age 32 age 33 married partnered all
1978 1991 1980 1994 1994
log
wag
e ga
p
women ft-pt:
human capital
women ft-pt:
remuneration
men-women,
full-time:
human capital
men-women
fulltime:
remuneration
Sources for previous slide
Cohort Studies: Joshi and Paci (1998). Sample contains workers of the specified ages only.
Women and Employment Survey: Ermisch and Wright ( 1992).
Sample of married women under 60 and their spouses.
British Household Panel Study: Davies et al. (1997) Appendix 1 of Rake ed2000)
Samples covers all working ages, and not just those with partners.
Findings on cohort members employed full-time, 1991-2000
• Unequal treatment varies across individuals not necessarily systematically with the level of wages,
• Average unequal treatment fell from 16% to 12% during the 90s for women around the age of 30.
• But 32% of women aged 30 in 2000 were treated no better than if they had been paid at the rates received by the previous cohort.
• The position of women born in 1958 deteriorated between age 33 and 42. The index of unequal treatment increased from 12% to 21%.- more or less across the board.
Makepeace et al (2004)
Relative hourly pay of women fulltimers over time for full-timers in the 1958 cohort , adjusted for human capital by
quintile of original wage
72
74
76
78
80
82
84
86
88
Aged 33 in 1991 Aged 42 in 2000
ratio
n of
wom
en's
pay
to m
en's
pos
t adj
ustm
ent
Top
Second
Middle
Fourth
Bottom
Source Makepeace et al 2004 using NCDS
Analysis of fulltimers in BCS70 and NCDS
Mean of index of unequal treatment by earnings quintile
0
5
10
15
20
25
Bottom Second Middle Fourth Top
earnings quintile
per
cen
t
BCS 2000
NCDS 1991
NCDS 2000
Source Makepeace et al 2004 using NCDS and BCS70
Wage ratios fitted for fulltime continuous worker in WOMU model
Rake (ed) 2000
Fitted ratios of women's to mens' hourly wages, full-timers with uninterrupted employment: based on 1994 BHPS
70%
80%
90%
100%
18 28 38 48 58
Age
fem
ale
as
% m
ale
low skill mid skill high skill
Validation?
• Rising profile for graduates not supported by M&S work on 11 years observations of BHPS
• Or the NCDS estimates for 33-42• Small nos of graduates in the 1994 BHPS• Otherwise simulated pattern fits cohort estimates
reasonably well• Lifetime equality for highly educated likely to
have been overestimated.• More support for age than education
differnences in gender premium
Estimated gender premia by age and education: BHPS 1994 and cohort studies
Fitted ratio of female to male wages for hypothetical continuous full-time employee
mid skill NCDSmid skill NCDS
low skill NCDS
low skill NCDS
high skill NCDS
high skill NCDS
BCS, Makepeace et al
BCS M&S
BHPS Growth M&S
BHPS Growth M&S
75%
80%
85%
90%
95%
100%
20 25 30 35 40 45 50Age
low skill bhps 1994mid skill bhps 1994mid skill NCDSlow skill NCDShigh skill NCDSBCS, Makepeace et alBCS M&S
BHPS Growth M&S
Conclusions
• Gender penalites increase over the lifecourse even without taking into account interuptions, part-time hours and part-time pay
• For those who are already old this means a substantial legacy of unequal earnings
• For those who are young do not assume wage parity will be sustained even for women pursuing an uninterrupted career
Further Research
• Our project will use longitudinal data on pay and occupations to investigate the role of occupational mobility in the evolution of the relative fortunes of men and women as they get older.
• Our main evidence will come from the 1946, 1958 and 1970 birth cohorts
• Team members: Shirley Dex, Diana Kuh, Peter Dolton, Kelly Ward,Jenny Neuburger,
References• Unequal Pay for Women and Men: Evidence from the British Birth Cohort Studies.
Joshi and Paci MIT Press 1998
• Gender earnings differentials over time, across and within cohorts: unequal pay among individuals in British Cohort Studies,1991 and 2000, Makepeace, Dolton and Joshi, International Journal of Manpower Aug 2004
• Women’s Lifetime Earnings . Rake (ed) Cabinet Office, 2000, Section 3.4, Appendix1 and Appendix 5
• Gender and Pay: some more equal than others: H. Joshi in A Heath, J Ermisch and D Gallie (eds.) Understanding social Change. OUp for British Academy 2005
• The Gender Gap in Early Career Wage Growth, Alan Manning and Joanna Swaffield, LSE , May 2005
• Evidence to House of Lords Select Committee on Economic Affairs: Economics of Ageing, Heather Joshi 2004