Gender pay gap narrower than expected

An analysis by the Cologne Institute for Economic Research suggests that the gender pay gap in Germany is narrower than expected. Using 2008 data from the Socio-Economic Panel, the analysts show that the gender pay gap shrinks considerably when other factors such as educational attainment, age, work experience and sector are taken into account, though the pay gap in rural areas is larger than in urban areas. Long periods of parental leave also have an impact on women’s pay.

About the study

The nature of the gender pay gap has been the subject of an intense debate in Germany. In November 2010, the Cologne Institute for Economic Research (IW Köln) published the results of its analysis of the gender pay gap in 2008 for employees aged 15–65 (in German). The calculations from IW Köln are based on data from the Socio-Economic Panel (SOEP), a study carried out by the German Institute for Economic Research (DIW Berlin). The SOEP survey covers private households in Germany and has been run annually since 1984 in western Germany and since 1990 throughout Germany, questioning the same households and members of the public on a wide range of topics.

Key findings

The IW Köln study shows that, in 2008, the gross hourly wages of employed men and women differed by 29.3%. However, this gap reduces if other characteristics of the surveyed population are considered. These factors include:

• level of educational attainment;

• place of residence (that is, in eastern or western Germany);

• age;

• job tenure;

• work experience;

• employee’s autonomy in the workplace;

• size of company and sector;

• how much of their career they have worked part time;

• periods of unemployment.

When these factors are taken into account, the gender pay gap decreases to 12.9%.

There are further differences among female employees. The gender pay gap is narrower for women without children (11.8%) than for those with children (13.8%). Long periods of leave for childcare have a particularly strong effect on women’s wage development and the gender pay gap shrinks to only 4% for mothers who return from parental leave within 1.5 years. However, this latter figure is not statistically significant (that is, the different in pay might just be a coincidence).

Another striking difference is the pay between urban and rural areas. Hourly wages for female employees are lower in rural areas than in the major cities. The gender pay gap amounts to 26% in major cities without taking the characteristics of the surveyed population into account and decreases to 12% when doing so. In rural areas, however, the unadjusted gender pay gap is 30.8% and the adjusted pay gap is 13.5%.

Commentary

The analysis by IW Köln found that the gender pay gap shrinks from 29.3% to 12.9% when the characteristics of the surveyed population are taken into account. The researchers therefore conclude that the wage differences between women and men are influenced more by factors such as their educational attainment, sector where employed, number of years worked, than by their sex.

However, the study does acknowledge that a gender pay gap remains. The researchers point to a multitude of possible influences such as gender stereotypes and traditions, which may be more prevalent in rural areas. Moreover, behavioural differences between women and men when negotiating their wages or in competitive or risk-taking situations might also lead to wage differences.

To counter these effects, the researchers suggest that women should be encouraged to choose professions and industries that offer better career prospects (for example, science, technology and IT) in areas where women are under-represented. Another way of reducing the gender pay gap is for mothers to keep their parental leave short and to return to work for as many working hours per week as possible (preferably full time).

To achieve these goals, some framework conditions will have to be adjusted. Above all, childcare facilities for under-three-year-olds and all-day childcare arrangements would need to be extended. A more even distribution of parental leave between women and men would also serve to reduce the gender pay gap, while a wider range of corporate measures to help employees to combine their family responsibilities with working life would be beneficial.

Reference

Anger, C. and Schmidt, J. (2010), Gender Pay Gap: Gesamtwirtschaftliche Evidenz und regionale Unterschiede [Gender pay gap: Macroeconomic evidence and regional disparities], IW Trends, No. 4, 2010.

Sandra Vogel, Cologne Institute for Economic Research (IW Köln)