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