Gender differences in earnings over the lifecourse

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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

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Individual Incomes of men and women, by age 2003-4

Family Resources Survey
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Differences between mens and womens incomes to
be unpacked

• Vary by source
• Earnings, benefits, savings
• Differ by age
• Cohort and Lifecourse
• Differ 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

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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

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Cohort difference in relative earnings
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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

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Cohort differences in family and education women
now aged 35-85
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Cohort effects participation
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Simulated relative lifetime earnings by cohort,
children and education
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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

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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

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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?

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Age Profile of Relative Pay
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Age and Cohort New Earnings Survey
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The Evolution of the Gender Pay Gap for Different
Birth Cohorts
Source Manning and Swaffield (2005), from New
Earnings Survey, includes part-timers
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Gender Differences in Wage Growth
Source Manning and Swaffield-MS(2005) New
Earnings Survey
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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?
• MS find that most of the growth in mens
  relative pay over 1st 10 years reflects unequal
  treatment. How does this tally with our findings?

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Potential components of the pay gap
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Some analyses of wage gaps, in terms of human
capital
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Sources for previous slide
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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)

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Relative hourly pay of women fulltimers over time
for full-timers in the 1958 cohort , adjusted for
human capital by quintile of original wage
Source Makepeace et al 2004 using NCDS
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Analysis of fulltimers in BCS70 and NCDS
Source Makepeace et al 2004 using NCDS and BCS70
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Wage ratios fitted for fulltime continuous worker
in WOMU model
Rake (ed) 2000
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Validation?

• Rising profile for graduates not supported by
  MS 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

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Estimated gender premia by age and education
BHPS 1994 and cohort studies
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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

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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,

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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
• Womens 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