From Gender Equality to Household Earnings Equality: the role of Women's Labour Market Outcomes across OECD Countries

How does gender equality in the labour market decrease household earnings inequality? Despite being prominent in the research literature on economic inequality, there is no consensus about the mechanisms underlying this relationship. In this paper, we assess the impact that full gender equality in the labour market would have on earnings inequality, and then decompose that impact by closing separately the gender gaps in employment, hours, and pay. We do so by applying a novel approach that combines reweighting and counterfactual analyses to LIS and OECD data for 26 OECD countries, across North America, Europe, and Australia. We find that full equality in earnings and employment between women and men would decrease household earnings inequality considerably. The most substantial decreases come from closing the gender employment gap, as opposed to gender gaps in pay and hours worked. A 10% counterfactual decrease in the gender employment gap (relative to the country baseline) is associated with an average 1.2% decrease in household earnings inequality. This points to reducing the gender employment gap as the pathway through which greater gender equality may most strongly mitigate overall earnings inequality, with the significant implication that two key goals for contemporary societies can be pursued simultaneously.