Earnings Gap Research Articles

Motherhood and the allocation of talent

ABSTRACT In this paper we show that motherhood triggers changes in the allocation of talent in the labour market beyond the well-known effects on gender gaps in employment and earnings. Based on an event study approach around the birth of the first child and retrospective panel data for 28 European countries and Israel, we assess the labour market responses to motherhood across ‘talent’ groups–i.e. groups with different educational attainment, Math performance at age 10, and personality traits associated to entrepreneurial ability. We show that even the most talented women–both in absolute terms and relative to their husbands–leave the labour market or uptake part-time jobs after the birth of the first child. We also find that motherhood induces a negative selection of female talents into self-employment. Overall, our results suggest relevant changes in the allocation of talent associated to gender differences in non-market responsibilities that can have sizable impacts on aggregate market productivity.

Decomposing the Gender Wage Gap in the Urban Labor Market in Kenya

Abstract Legislation and regulation have been effective in reducing the gender wage gap in developed countries; however, the gap still exists globally, and progress towards narrowing the gap has been unacceptably slow even in regions where it is improving. This study presents the analysis of gender wage gap in Kenya’s urban labor market by using the World Bank Skills Towards Employability and Productivity Survey (WBSTEPS). This study employed Mincer earnings regressions with Heckman selection correction and the Blinder-Oaxaca and Neumark decomposition procedures to answer the research questions. The results of the wage determination and participation in the labor market show that there is no selectivity-bias problem. Personal characteristics such as education and age, as well as work-related characteristics, are important factors in determining earnings. The magnitude of the gender wage gap varies across the wage distribution, and the results of the wage decomposition reveal that women in urban Kenya earn 84.5-to-86% of men’s earnings. The earnings gap is overwhelmingly due to differences in returns to endowments, which account for between 70% and 94.7% of the total earnings gap. Admittedly, the study found evidence of discrimination against women in the returns to endowments, but also observed pronounced favoritism towards men. However, discrimination against women is more pronounced than favoritism towards men. Addressing the gender wage gap in Kenya requires a multifaceted approach that tackles both systemic biases against women and structural barriers that hinder women from accessing equal opportunities in education, training, and career advancement and government policies that minimize favoritism towards men.

Motherhood penalty for female physicians in Japan: evidence from a medical school’s alumni data

BackgroundFemale physicians with children often work fewer hours and take fewer shifts due to additional family responsibilities. This can contribute to a gender pay gap in the medical profession. However, limited research in Japan has quantitatively examined the factors contributing to this gap. This study aims to address this gap in the literature.MethodsWe analyzed the alumni data from a medical school in Hokkaido, Japan, for 260 physicians (198 males and 62 females). We used multivariable regression models to identify factors influencing earnings from medical practice, with a focus on gender, work schedules, parenthood, and any career interruptions related to childcare.ResultsOur analysis revealed a 25.0% earnings gap between male and female physicians. Nearly all female physicians with children experienced career interruptions due to childcare, while this was uncommon for male physicians. When these childcare-related interruptions were factored in, the gender pay gap narrowed by 9.7%. After adjusting for work schedules and specialty choices, female physicians with children still earned 37.2% less than male physicians, while those without children earned only 4.4% less. This suggests that motherhood is a significant driver of the gender pay gap among physicians.ConclusionsThese findings highlight the negative impact of motherhood on female physicians’ earnings. This emphasizes the need for policy measures to mitigate the disadvantages faced by mothers in the medical profession.

Children and the Gender Earnings Gap: Evidence for Australia*

We estimate the impact of children on the gender earnings gap in Australia using an event study approach. We show that the arrival of children has a large and persistent impact on the gender earnings gap, reducing female annual earnings by 53 per cent, on average, in the first 5 years of parenthood. We attribute the gap in earnings to lower participation rates and reduced working hours among mothers, including a shift to part‐time work. Although the decline in earnings for women is similar regardless of their breadwinner status prior to children, women with greater access to workplace flexibility are more likely to remain employed after having children.

The collectivist and statist vocational training innovative institutions and self-employment earnings gaps

The entrepreneurship literature has long recognized the importance of education in fostering successful self-employment, yet a significant gap exists in our understanding of how the political economy of vocational education systems influences the financial success of self-employed graduates. We focus on vocational education systems that are collectivist—namely, collective decision making and stakeholder collaboration to align training with labor market needs and to promote social cohesion—and statist—a centrally controlled vocational education system directed by the state, aiming to align training with national development goals and to prioritize economic needs. Our study analyzed 6924 participants who received vocational education from collectivist systems (Czech Republic and Denmark) and statist systems (Finland and Norway). The findings show a significant earnings gap between employed and self-employed receiving vocational education in statist systems, and a non-significant difference in earnings between employed and self-employed in collectivist systems. The findings have implications for how the type of vocational training affects the earnings gaps among the employed and self-employed.

The Black–white lifetime earnings gap

The average white male born in 1900 earned 2.6 times more labor income over their lifetime than the average Black male. This gap is nearly twice as large as the more commonly studied cross-sectional Black–white earnings gap because 48% of Black males born in 1900 died before the age of 30 as compared to just 26% of white males. We calibrate a model of optimal consumption in a world with mortality risk to data describing the life-cycle earnings and survival probabilities of Black and white males born between 1900 and 1970. We find that convergence in Black and white mortality rates led to a 50% reduction in Black–white welfare gaps between the 1900 and 1920 birth cohorts, even as cross-sectional Black–white income gaps for those cohorts remained relatively constant. However, the Black–white welfare gap stagnated for the 1920 to 1970 birth cohorts as gaps in Black–white life expectancy and income remained stable and large.

The gender gap in fair earnings increases with age due to higher age premium for men.

This study explores how gender and age interact in shaping beliefs about fair pay through a factorial survey experiment conducted with German employees. Respondents evaluated hypothetical worker descriptions varying in age, gender, and earnings. While no gender gap in fair earnings was found for the youngest hypothetical workers, a significant gap favoring men emerged with increasing age. This suggests that male workers receive a higher age premium on fair earnings than female workers. The findings highlight the need to understand how gender interacts with other characteristics to legitimize workplace inequalities.

Gendered Relationship of Childbearing with Earnings Accumulated by Midlife in Two Nordic Welfare States

AbstractThe Nordic welfare states are considered advanced in terms of gender equality, but even in these countries women still take longer family leave and have lower earnings than men. This study provides new insights by assessing the differences in accumulated midlife earnings associated with childbearing between women and men in Finland and Sweden. We pay particular attention to the size of the gender gap in accumulated earnings across groups. We hypothesize that the gender gap will be larger among those with a larger number of children, among those with a lower level of education, and overall in Finland. The study is based on complete population register data, with highly accurate measures of earnings over decades. Our results show that by the age of 44, women born in 1974–1975 in Finland and Sweden had earned on average 32% and 29% less than men, respectively. Childbearing strongly modifies the gender gap, especially in Finland, and the highly educated have moderately smaller gaps in both countries. Our results show that, even the Nordic welfare states, despite their strong policy emphasis on gender equality and their success in achieving high levels of female labor force participation, are far from closing the gender gap in earnings accumulated over the first half of the life course. Our results also suggest that governments seeking to achieve gender equality should be cautious about providing long family-related leave with flat-rate compensation.

The parental pay gap over the life cycle: Children, jobs, and labor supply

Women earn less than men, and that is especially true of mothers relative to fathers. Much of the widening occurs after family formation when mothers reduce their hours of work. But what happens when the kids grow up? To answer that question, we estimate three earning gaps: the “motherhood penalty,” the “price of being female,” and the “fatherhood premium.” When added together these three produce the “parental gender gap,” defined as the difference in earnings between mothers and fathers. We estimate (log) earnings gaps for college graduates born around 1960 using longitudinal data from the NLSY79 and from the LEHD-Census that track respondents from their twenties to their fifties. As the children grow up and as women work more hours, the motherhood penalty is greatly reduced. But women, especially mothers, seem willing throughout their working lives to trade lower pay for various amenities, such as working in firms with management practices that are less penalizing of career interruptions or of shorter work schedules. Fathers, however, manage to expand their relative earnings gains as their children age, particularly among those working in time-intensive jobs, irrespective of work hours or firm fixed effects. The parental gender gap in earnings remains substantial over the family lifecycle.

Human capital and black-white earnings gaps, 1966–2019

This paper estimates the contribution of human capital, measured using educational attainment and standardized test scores, to Black-white gaps in labor market outcomes in three separate samples of both men and women spanning the period from 1966 through 2019. There are three main findings. First, the magnitude of the reduction in the earnings gap that occurs after controlling for education and test scores has become much larger over time, suggesting a growing contribution of these traits to Black-white earnings disparities. Second, growth in the explanatory power of education and test scores has been primarily due to increases in the association between these traits and the likelihood of non-work, with no clear increases for hourly wages or other intensive earnings margins. Third, in most cases these trends are due to changes in the returns to the human capital traits, rather than changing racial gaps in the human capital traits themselves. These main findings apply qualitatively to both men and women. However, the magnitude of attenuation is much larger for women than for men, and conditional racial gaps in labor market outcome among women are often close to zero. Evidence suggests that this parity between Black and white women conditional on education and test scores is not primarily due to sample selection. Overall, the paper’s findings highlight how structural developments in the US labor market, such as increasing returns to skill and changing labor force participation rates by skill level and gender, have had disparate impacts across racial groups despite being race-neutral on their face.

Teaching gender issues: a comparative overview on (in)equality in academia in Southeastern Europe

This study aims to examine gender issues within the framework of the European Union’s primary strategies in its external relations. The European approach, shaped by the multicultural and diverse consortium of member states, emphasizes equality between women and men. It considers factors such as the gender earnings gap in EU countries, job satisfaction, race, immigration, religion, inclusion policies, the feminization of work, work qualifications, and work context. The case studies explore gender topics across various social, political, and religious environments, with a particular focus on former communist countries within the European context. These studies analyze gender misconceptions and prejudices, women’s empowerment, and social constructs in academia.

The Decline and Levelling Off of Earnings Inequality: Boon or Bane for a Growing Economy?

AbstractThis paper investigates evidence on deficits in economic inclusion, focussing on the labour market in Indonesia. Increasing job polarization and an accompanying rise in earnings inequality on account of technological development and globalisation over the past few decades have augmented concerns about the attainability of governments’ perennial objective of inclusive growth. However, there are circumstances in which declining or levelling earnings gaps may be more of a bane than a boon for a country’s long-term economic health. Using the particularly interesting case of Indonesia, which has reduced and subsequently levelled off its earnings inequality in the midst of impressive growth, this paper studies how structural factors and labour market policies influence dynamics of inequality. The study finds evidence of a strong role of structural characteristics, which appears to indicate that reductions in earnings inequality may be more of a bane than a boon for Indonesia’s long-term prosperity. The paper concludes with broader insights and a discussion on policy implications that extend beyond the Indonesian context.

The Hollywood gender gap: the role of action films

AbstractWe estimate gender earnings differentials among Hollywood stars. While this market should be particularly efficient in translating productivity into earnings, we demonstrate an unexplained female earnings gap of over two million dollars a film. Critically, we show that action films drive this gap. Our movie fixed effects estimate a much larger-million-dollar gap among action movies and a smaller statistically insignificant gap among other genres. Within the other genres, the one significant earnings gap is among stars older than 50. We argue that these patterns could reflect “consumer discrimination” but also raise other possibilities.

Gender, Race and Sectoral Inequality in Megacities: Case Study of Banking and Financial Services Industry

This article explores the issue of inequality by using the example of the banking and financial services industry workers’ wages in 2022 in the most famous American metropolitan areas, focusing on 3 of its dimensions: gender inequality, racial inequality, and pay gaps in this sector compared to others. The study is based on data from the American Community Survey (ACS) conducted by the Census Bureau. Population-level figures are derived using the replicate weights calculated in the article using STATA 16.1 software (the information in the ACS is contained in raw microdata form, the ACS is a probability sample, so the sampling weights derived by factoring in the non-response bias are essential to arrive at the population-level estimates). The financial services sector plays a significant role in the economies of these metropolitan areas, employing an average of 7.77% of adult workers (the highest in Phoenix (10.41%) and Dallas (9.77%)). The study showed that in these megacities, financial services workers earned 64.77% more in 2022 than workers in other sectors of the local economy, with the highest gap in New York (111.24%) and Boston (80.81%). Women in the financial sector of these cities earn, on average, 65.59% less than men, with the largest gender gap in Chicago (71.84%) and Dallas (71.26%). The earnings gap for black and non-white workers compared to their white counterparts in the cities studied averaged 36.16%, with the largest sectoral gaps in Houston (60.14%) and Riverside (55.06%). The findings can inform the development of policies that promote equitable pay practices, enforce stronger anti-discrimination laws, and support diversity and inclusion initiatives within the industry.

Gender earning gap on digital platforms: The Airbnb case

Contrary to initial expectations derived from traditional labor market theories, which predicted digital platforms would narrow the gender earnings gap, recent studies suggest this gap remains persistent. This research focuses on Airbnb, where trust and hospitality, often perceived as favoring female hosts, play a critical role. Using data from Airbnb in Tel-Aviv and supported by experimental evidence, we find a surprising result: the gender earnings gap is not merely reduced on Airbnb but is reversed, with female hosts earning more than their male counterparts. This reversal is attributed to the market mechanism of Airbnb, combined with a guest preference for female hosts. These findings offer a crucial insight: the influence of information and communication technology (ICT) on women’s empowerment is not straightforward or universal. Instead, it is influenced by the specific characteristics and mechanisms of each digital platform.

Earnings trajectories of individuals in same-sex and different-sex couples: Evidence from administrative data

We unite two interrelated bodies of work – a growing literature on sexual orientation earnings gaps and a rich tradition of research on intragenerational career trajectories – to examine how labor markets and life courses interact to produce gender and sexual orientation inequalities over time. We use the 1982–2019 Canadian Longitudinal Administrative Databank, a unique longitudinal database constructed from tax records, to answer core questions about the mechanisms that underlie sexual orientation earnings inequality. Growth curve models reveal how sexual orientation earnings gaps evolve over time spent in the workforce, and how they relate to differences in demographic and work characteristics for those in same- and different-sex couples at various points in the life course. We find that sexual orientation earnings gaps converge and diverge at unique career stages for men and women, and at each stage relate to unique mechanisms, especially work characteristics and family status. We find little significant variation in average earnings trajectories by sexual orientation across cohorts who were subject to differing legal and social environments surrounding sexual orientation.

Earnings assimilation of post‐reunification East German migrants in West Germany

AbstractWe investigate the wage assimilation of East Germans who migrated to West Germany after reunification (1990–99). We compare their wage assimilation to that of ethnic German immigrants from Eastern Bloc countries and international immigrants to West Germany who arrived at the same time. The analysis uses administrative as well as survey data. The results suggest that East Germans faced significant initial earnings disadvantages in West Germany, even conditional on age and education. However, these disadvantages were smaller than those of international immigrants, supporting the beneficial role of cultural similarity. The earnings gap relative to West German natives narrowed over time for all immigrants. These findings are robust to controlling for potentially endogenous return migration and labor force participation. Controls for fixed effects reveal that positive assimilation for East German and international immigrants was concentrated among highly educated immigrants.

Wealth and the nativity earnings gap

I document that differences in wealth between natives and immigrants contribute to the nativity wage gap. The evidence suggests that the non-earnings determinants of wealth, such as institutional barriers that prevent immigrants from accessing financial markets, and idiosyncratic preferences that affect immigrants’ willingness to use financial instruments, play a particularly important role.

The gender gap in lifetime earnings: A microsimulation approach

AbstractTo obtain a more complete understanding of the persisting gender earnings gap in Germany, this paper investigates both the cross‐sectional and lifetime dimension of gender inequalities. Based on a dynamic microsimulation model, we analyse how gender differences accumulate over work lives to examine the lifetime dimension of the gender gap. We estimate an average gender gap in lifetime earnings of 51.5 per cent for birth cohorts 1964–72. We show that this unadjusted gender lifetime earnings gap increases strongly with the number of children, ranging from 17.3 per cent for childless women to 68.0 per cent for women with three or more children. Results from a counterfactual analysis approach show an adjusted gender gap in lifetime earnings of around 10 per cent, suggesting that the gender gap in lifetime earnings is rather driven by gender differences in observable characteristics than by differences in rewards.

Marriage, cohabitation, and institutional context: Household specialization among same‐sex and different‐sex couples

AbstractObjectiveThis study examines how marriage‐cohabitation gaps in household specialization (labor supply and earnings) vary across institutional contexts for same‐sex couples (SSCs) and different‐sex couples (DSCs) in Canada.BackgroundPrior research suggests that marriage‐cohabitation gaps are smaller in contexts where cohabitation is more prevalent, but it has overlooked how legal protections (at the contextual level) and gender composition (at the couple level) moderate this association. As a result, little is known about whether differences in household specialization stem from heightened gendered expectations attached to marriage or stronger legal protections for married couples. This study posits that marriage‐cohabitation gaps will be larger in contexts where legal protections for cohabitors are less marriage‐like.MethodsUsing the 2006 and 2016 Canadian Census and the 2011 National Household Survey, I estimate ordinal and fractional logit models to examine marriage‐cohabitation gaps in specialization among all couples (N = 2,788,055) and couples with young children (N = 826,305).ResultsAmong DSCs, marriage‐cohabitation gaps were larger in Québec than in English Canada vis‐à‐vis earnings but not labor supply. Patterns among SSCs were more heterogeneous: gaps in labor supply were larger in English Canada for female couples but larger in Québec for male couples. Gaps in earnings were generally larger in Québec, with few exceptions. However, DSCs consistently specialized more than SSCs.ConclusionWhile existing research suggests marriage‐cohabitation gaps in household specialization are largely explained by the prevalence of cohabitation, my results indicate that legal protections (at the contextual level) and gender composition (at the couple level) play a more decisive role.