Earnings Inequality and Working Hours Mismatch

51 Pages Posted: 22 May 2020 Last revised: 26 May 2022

See all articles by Mattis Beckmannshagen

Mattis Beckmannshagen

German Institute for Economic Research (DIW Berlin) - German Socio Economic Panel

Carsten Schroeder

German Institute for Economic Research (DIW Berlin); Free University of Berlin (FUB) - Department of Business and Economics

Date Written: May 1, 2022

Abstract

Based on data from the German Socio-Economic Panel, we document a significant rise in monthly earnings inequality between 1993 and 2018. The main contributors are inter-temporal increases in working hours inequality and increases in the covariance between working hours and hourly wages, while changes in the distribution of hourly wages play a minor role. Applying a novel double decomposition technique reveals that these results are particularly pronounced in the growing groups of female employees and service sector employees. If employees had been able to realize their desired working hours, the increase in inequality would have been more moderate. This is mainly due to the fact that employees with low hourly wages work less than desired, a finding that
is reinforced over time—even after controlling for various covariates.

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

JEL Classification: D63, J22, J31

Suggested Citation

Beckmannshagen, Mattis and Schroeder, Carsten, Earnings Inequality and Working Hours Mismatch (May 1, 2022). Available at SSRN: https://ssrn.com/abstract=3584328 or http://dx.doi.org/10.2139/ssrn.3584328

Mattis Beckmannshagen (Contact Author)

German Institute for Economic Research (DIW Berlin) - German Socio Economic Panel ( email )

DIW Berlin
Berlin, Berlin 14191
Germany

Carsten Schroeder

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

Mohrenstraße 58
Berlin, 10117
Germany

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

Boltzmannstrasse 20
D-14195 Berlin, 14195
Germany

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