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Changes in Working Hours Are Driving Earnings Inequality

DIW Weekly Report 32/33/34 / 2022, S. 195

Mattis Beckmannshagen, Carsten Schröder

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According to Socio-Economic Panel (SOEP) data, inequality in gross monthly earnings in Germany increased significantly between 1993 and 2003 and has been stagnating at a high level since 2008. As this Weekly Report shows, the increase is not being driven by higher hourly wage inequality, but rather by working hours: In recent years, employees with a high hourly wage work more than previously compared to employees with a low hourly wage. In particular, this applies to two groups whose share of the workforce has increased significantly in recent years: employed women and service sector employees. Had employees been able to work their desired number of hours, the rise in inequality would have been more moderate. A better work-life balance and more opportunities to increase working hours in the low-wage sector could counteract this trend.

Carsten Schröder

Board of Directors SOEP and Division Head Applied Panel Analysis in the German Socio-Economic Panel study Department

JEL-Classification: D63;J22;J31
Keywords: Earnings inequality, Working hours, Hours mismatch, Part-time work, Decomposition analysis