Commentary – Earnings Inequality

On the 90/50 measure earnings inequality has increased over the last 30 years in all the countries for which we present data. Again the 1980s seems to be a turning point for most countries, though in the USA this particular measure has increased steadily over the whole period shown, giving it the highest level of earnings inequality. In Japan, by contrast, earnings inequality fell considerably during the 1960s and 1970s, and has risen only slightly since 1980.

Looking at the distribution of earned incomes across all employees conceals the considerable gap between male and female earnings. At any point of the distribution, e.g. the mean, earnings of men are higher than those for women. The size of this gap can be measured by working out female mean earnings as a percentage of the male mean earnings, but is more commonly measured by the ‘gender pay gap’ defined as 100% minus this ratio. If the gender pay gap falls, this means women’s earnings are catching up with men’s and, since women have lower earnings overall, this will tend to reduce earnings inequality. Over the last 40 years in the UK this gap has narrowed considerably though it is still the case that female mean earnings are around 15% less than male mean earnings.