The Gender Lifetime Earnings Gap: Exploring Gendered Pay from the Life Course Perspective

Andreas Lagemann, Hamburg Institute of International Economics (HWWI)
Malte Jahn, Hamburg Institute of International Economics (HWWI)
Christina Boll, Hamburg Institute of International Economics (HWWI)

Research on the gender earnings divide so far mostly focuses on the gender gap in hourly wages, which due to its snapshot nature is unable to capture the biographical dimension of gendered pay. With the ‘gender lifetime earnings gap’ (GLEG), we introduce a new measure that fills this gap. Based on a group of 72,085 German individuals born 1950-64 from the ‘Sample of Integrated Labour Market Biographies’ (SIAB 7510), we find that at the end of the employment career, women accumulate 46.6% less earnings than men. Thus, the GLEG is more than twice as high as the current German gender pay gap. The GLEG is higher at the bottom than at the top of the earnings distribution. It most prominently widens during the period of family formation (age 25-35). Relatedly, gender differences in endowments, mainly in terms of experience and hours, account for almost two-thirds of the GLEG. For younger cohorts, family breaks tend to lose importance, whereas the role of work hours remains unchanged. Moreover, women in younger cohorts approach men with respect to employment, education and sector premiums.

Research on the gender earnings divide so far mostly focuses on the gender gap in hourly wages,
which due to its snapshot nature is unable to capture the biographical dimension of gendered pay.
Taking the challenges of the gender pay gap to monitor the gender earnings divide
over the life course as a starting point, this study introduced a new indicator for
gender earnings inequality. The gender lifetime earnings gap (GLEG) measures
the difference in men’s and women’s accumulated earnings over at least 30 years of
their careers, with male earnings as a benchmark. To this end, we use information
from 72,085 German individuals of the SIAB 1975-2010 SUF, focusing on cohorts
born 1950-64, but additionally exploring cohorts 1970-79 (1980-89) up to the age
of 30 (35).
For cohorts 1950-64, the GLEG amounts to 46.6%, meaning that men accumulate
more than twice as much earnings as women over their career. The gender earnings
gap is above average between the 5%- and the 60%-quantile of the earnings
distribution and below average in the highest third. The gender earnings gap is remarkably
similar to the gender pension gap by age. Almost two-thirds of the overall
gap refer to different endowments of women and men in earnings-relevant characteristics,
whereas more than a third refers to the unexplained part. Women’s lower
labor market attachment in terms of years of employment and working hours are
the most prominent single endowments. Comparing the GLEG across age groups
reveals that women’s labor market attachment particularly worsens during the period
of family formation (age 25-35). The unexplained part of the gap is driven by
the constant throughout age groups, but different remunerations of genders for the
same characteristics also play a role. It cannot be ruled out that the constant contains
statistically unobserved pay-relevant factors like further endowments, gendered
preferences and (dis-)abilities, which might interact with gendered returns
to observed characteristics. Therefore, the unexplained lifetime earnings differential
must not be equated with gender discrimination in lifetime earnings. Analyses
for younger cohort groups show that both the explained and the unexplained
gap somewhat decrease across cohorts. Gender differences in human capital endowments
like employment experience and formal education diminish, whereas
females’ higher frequency in part-time work continues to mark a significant portion
of the explained gap, at least during the period of family formation. Still,
women benefit from lower part-time penalties across cohorts. Moreover, women in
younger cohorts approach men with respect to employment, education and sector
premiums.

Presented in Session 1139: Life Course