A new study of the gender dimension of income inequality finds that while the income gap between genders is slowly decreasing in the Nordic countries, women still earn less than men at all levels of the income distribution. Women also struggle reaching the top-income groups. Of the top one per cent of income earners in the five countries, 81 per cent or more are men, while the share of women in the top-ten group is between 22-31 per cent. The findings have just been published in the Nordic Economy Policy Review 2018.
How does gender equality translate into overall income inequality?
The theme of this year’s edition of the Nordic Economy Policy Review (NEPR), published by Nordregio, is the international trend toward increasing income inequality. Gendered Trends in Income Inequality, an article by Anne Boschini, Associate Professor of Economics at Stockholm University, and Kristin Gunnarsson, Licentiate in Economics from Uppsala University, takes an in-depth look at the gender dimension of income inequality in Denmark, Norway, Finland and Sweden.
“Nordic countries are renowned for their high levels of gender equality and always perform well in international rankings such as the World Economic Forum’s annual Global Gender Gap Index,” says Boschini. “Female labour force participation is high, more women than men attend tertiary education, and all Nordic welfare states provide generous parental leave schemes and subsidized high-quality childcare. We’ve studied how these achievements translate into income inequality.”
Boschini and Gunnarsson have compared labour income inequality and disposable income inequality, first within each gender and then between genders. Labour income is defined as the income received by an individual from employment, before taxes and transfer payments, while disposable income is the sum of labour income and transfer income after tax. Capital income is not included in the study.
Women earn less across the income distribution
The study shows that the within-gender income inequality, i.e. the difference between the lowest and highest incomes within each gender, is increasing, while inequality between genders is slowly decreasing. Men’s income distribution is generally more unequal then women’s, and income inequality has increased more among men.
Comparing the genders shows that women earn less across all levels of the income distribution. The study compares women and men’s income at four percentile levels of their respective income distributions, thus providing an insight into the differences at the lower end of the distribution (P20), between median incomes (P50) and between the top-income groups (P90 and P99).
“For labour income, the difference between the genders is largest at the higher end of the distribution, but also at the bottom,” says Gunnarsson. “The gap is smallest at median income, where women in the Nordic countries earn around 70-80 per cent of men’s labour incomes.”
Larger differences in labour incomes than in disposable incomes
Looking at disposable income shows a similar trend, although the difference between the genders is slightly less pronounced. The gender gap is smallest between the low-income groups but increases when moving higher up in the income distribution.
“Our analysis shows larger differences in labour income than in disposable income, especially in the lower-income groups,” says Boschini. “This indicates that the Nordic welfare states successfully redistribute resources toward the lower end of the distribution. But it also conceals some of the problems of the labour market, e.g. that women with lower incomes also tend to work less.”
“On average, women work fewer hours than men,” she explains. “The gender differences are therefore more accentuated in the labour income distribution than in the wage distribution.”
The study shows that the median gender wage gap among full-time employed has changed only marginally since 1991 in all four countries. Recent numbers show that this gap is now around 7 per cent in Norway, 8 per cent in Denmark, 15 per cent in Sweden and 19 per cent in Finland.
Not many women in top-income groups
Boschini and Gunnarsson’s research shows that the gender wage gap increases with higher wages. Women only represent a small share of the top-income groups in the Nordic countries, and, in addition, the women in these groups earn less than the men. As an example, the women in top-ten only earn 75-80 per cent of men’s disposable income and even less in the top-one.
Recent studies show that the share of women in the top-ten group is around 31 per cent in Denmark, 28 per cent in Finland, 27 per cent in Sweden and 22 per cent in Norway. In the top one per cent, Finland has the highest share of women, 19 per cent, whereas Sweden has 18, Denmark 16 and Norway around 14 per cent.
“Looking at the development over the last decades, we see that the share of women in the top income-groups, especially the top one per cent, has increased considerably,” says Gunnarsson. “But why the difference is still this big is an interesting question. Especially as we know that women’s educational levels are slightly higher than men’s and that the labour participation gap in Denmark, Finland, Norway and Sweden is currently below five per cent.”
“Considering that the Nordic countries have had progressive gender policies in place for decades, it’s quite surprising to see that women are this poorly represented at the top of the distribution,” says Boschini.
“This shows that the well-documented glass ceiling is still there, preventing women from reaching the top-income levels.”
Household measures must be complemented with data on individual income
One of the main messages from the authors is that the gendered trends of income inequality cannot be adequately investigated by studying only disposable household income, which is the most commonly used measure of income inequality.
“Analysing household level inequality overlooks the trends of inequality within households,” says Gunnarsson. “This skews the overall picture, as it doesn’t reveal each individual’s earnings capacity or spending power.”
“Household level analysis must be complemented with individual income analysis to capture gendered trends and mechanisms,” Boschini agrees. “Otherwise, we will continue to miss out on important driving forces of income inequality, especially concerning the gender dimension.”
