On SAGE Insight: Gender gaps in long-term earnings and retirement wealth: The effects of education and parenthood

From Journal of Industrial Relations

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Estimates of long-term earnings commonly use cross-sectional data to measure the average earnings of given groups of employees at different ages and so construct age earnings profiles for different groups of individuals. The approach has been used extensively to explore rates of return to education. It has also been used to measure differences in the relationship between earnings and age across different groups of men and women, with the results sometimes extrapolated to form an analysis of the consequences of the gender distribution of paid and unpaid work for retirement savings. This studymeasures gender gaps in long-term earnings and retirement wealth over the 15-year period from 2001 to 2015.

The HILDA survey began in 2001 as a large nationally representative panel survey. Each year it collects data on the sociodemographic characteristics, education, labour market history, income and geographic location of its participants. However, special modules of the survey collect additional data on a less frequent basis. Every 4 years, starting in 2002, the survey collects self-reported data on wealth, including superannuation. The basic sample for the current study is individuals who were aged under 65 in 2015, were included in each year’s data collection, and provided 15 years’ data on their employment status and other characteristics. This article addresses some important limitations in cross-sectional studies of the effects on lifetime earnings of education and the gender distribution of paid and unpaid work roles. The data show larger effects of education on earnings than those measured in studies of the rate of return to education. The results of this study also cast light on the large differences in long-term earnings between men and women in each educational category. Whilst Bachelor’s degree qualifications improve women’s earnings, they do not on average lift women’s long-term earnings above those attained by men with a high school qualification. This article confirms the empirical case for using longitudinal data and is of particular significance given the range of important policy-related research topics that rely on estimates of lifetime earnings.

Abstract

We measure gender gaps in long-term earnings and retirement wealth over the 15-year period from 2001 to 2015. Our analysis of data from the Housing, Income, and Labour Dynamics in Australia survey generates new estimates of the effects of education on men’s and women’s long-term earnings. These show that whilst university qualifications improve women’s long-term earnings, university education does not, on average, lift women’s earnings above those attained by men with a high school qualification. The increment in long-term earnings associated with parenthood also shows a large gender gap favouring men. Parenthood is associated with higher long-term earnings for men but on average this factor has a strong negative association with women’s earnings. The article also maps the consequences of the gender gap in long-term earnings for retirement wealth in the form of superannuation. The results show how the large gender gaps in retirement wealth reflect in large part the economic costs arising from the gendered division of roles associated with parenthood in many Australian households.

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Article details

Gender gaps in long-term earnings and retirement wealth: The effects of education and parenthood
Siobhan Austen, Astghik Mavisakalyan
First Published May 1, 2018 Research Article
DOI: 10.1177/0022185618767474
Journal of Industrial Relations


     
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