Earnings Inequality and Working Hours Mismatch

38 Pages Posted: 22 May 2020

See all articles by Mattis Beckmannshagen

Mattis Beckmannshagen

Free University of Berlin (FUB) - Department of Business and Economics

Carsten Schroeder

German Institute for Economic Research (DIW Berlin)

Date Written: April 27, 2020

Abstract

Using data from the German Socio-Economic Panel, we show that changes in working hours, not changes in wages, are the major driver of rising earnings inequalities in Germany since the early 1990s. Next, we analyze whether changes in working hours are in line with employee preferences by comparing mismatches between desired and actual hours. We find that underemployment among low-wage earners increased, pointing at involuntary part-time work as a source of earnings inequality. In addition, for females, the presence of children in the household is associated with underemployment. Simultaneously, the desire for a reduction of working hours is more pronounced at the upper part of the hourly wage distribution. A counterfactual earnings distribution based on desired working hours and actual hourly wages exhibits significantly less inequality than the actual earnings distribution.

Keywords: Earnings inequality, Working hours, Hours mismatch, Part-time work

JEL Classification: D63, J22, J31

Suggested Citation

Beckmannshagen, Mattis and Schroeder, Carsten, Earnings Inequality and Working Hours Mismatch (April 27, 2020). Available at SSRN: https://ssrn.com/abstract=3584328 or http://dx.doi.org/10.2139/ssrn.3584328

Mattis Beckmannshagen (Contact Author)

Free University of Berlin (FUB) - Department of Business and Economics ( email )

Boltzmannstrasse 20
D-14195 Berlin, 14195
Germany

Carsten Schroeder

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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