Research Update: Earnings Inequality and the Gender Pay Gap in Canada

Note: this is excerpted from the May 2020 edition of our “Research Update” publication. The Edmonton Social Planning Council, in collaboration with our volunteers, strives to provide stakeholders and community members with up-to-date reviews, prepared by our volunteers, on recently published social research reports and publications.

Reviewed by Jenna Horning

Earnings inequality between men and women has been a long-held issue in society. While there are many social and cultural elements at work, Earnings Inequality and the Gender Pay Gap in Canada: The Role of Women’s Under-representation Among Top Earners by Aneta Bonikowska, Marie Drolet, and Nicole M. Fortin, attempts to understand the gap strictly through economics and accounting exercises. Using the Longitudinal Work File, “a 10% random sample of Canadians who file a T1 tax return or receive a T4 Statement of Remuneration from an employer” (p. 1), the researchers analyze trends and explore “the role that gender differences in industry of employment play in the gender earnings gap” (p. 1).

Firstly, a discussion of trends in annual earnings and female shares by selected percentiles is presented. Annual earnings are grouped into four different categories, the “bottom 90%, next 9%, next 0.9% and top 0.1%” (p. 2), to understand how earnings have changed over time. The overall trend for each group is discussed but the one observation that stands out the most is that “earnings gains in Canada have been the largest among individuals at the top of the distribution” (p. 2). Corresponding numbers prove this to be true. From 1978-2015, “the next 0.9% average annual gains were twice that of the previous group—at 1.9%” (p. 3), while “the top 0.1% gains were larger still—at 4.2% per year” (p. 3). Ultimately, the researchers discover that the higher within the earnings group, the higher the income gains will be over time.

Secondly, what can be considered the most important aspect to this research study is how the trends in earnings gains impact the overall gender earnings gap. Two factors play a part: “the representation of women within each earnings group, and the earnings of women relative to those of men within each group” (p. 3). What the researchers find is that the “share of women in the top earnings groups increased” (p. 3) but women still “remained significantly under-represented in each group” (p. 3). The article then discusses the “annual earnings of women relative to those of men varied across the top earnings groups” (p. 3). Within two earnings groups, the next 9% and the next 0.9%, “the average annual earnings of women corresponded to more than 95% of the average earnings of men over most of the reference period” (p. 3). While the researchers do note that estimates for the 0.1% are “sensitive to the business cycle and are more unstable given the smaller underlying sample size” (p. 3), they do observe that women’s earnings relative to men’s were falling over time until the late 1990s when the trends appeared to reverse. The data shows that while the number of women within each earnings group is increasing, they are still under-represented.

Thirdly, an element that could provide further explanation towards the researchers’ findings would be an exploration of “occupations or educational attainment” (p. 7). The data sample used within the research, however, did not record this information, leading to a potential downfall. While not as specific, “information on the industry sector and . . . industry classification” (p. 7) could be considered, providing some insight into the differences between men and women among earnings groups, as large shares of men and women are employed within different sectors. For example, more men are employed in “mining, oil and gas, [and] utilities” (p. 7), while more women are employed in “educational services and health care” (p. 7). However, within the next 0.9% and top 0.1%, “the top three industrial sectors . . . are the same for women and men” (p. 8). While looking at industry as opposed to occupation doesn’t provide as much detail, it does provide a general trend that could be used towards further discussion.

Overall, the research study provides a look at the differences in earnings between men and women among earnings groups, and then further through industrial distribution. Those present within the top earnings groups tend to earn more over time, more men are present within higher earnings groups than women, and within the top two earnings groups industrial sectors are the same for men and women. By strictly presenting the evidence through statistical and hypothetical exercises, the study fails to provide an explanation as to why these differences exist. For someone not familiar with these principles, elements of the discussion can also be difficult to understand. Ultimately, women have made gains to limit the gender earnings gap, but the gap still exists and the question of why is left unanswered. To benefit further sociological study surrounding the gender pay gap, the overall observed trends could be used. In the end, there is still work to be done to understand income inequality among men and women and thus, work to eliminate it.

Publication Source: Statistics Canada. (2019). Earnings Inequality and the Gender Pay Gap in Canada: The Role of Women’s Under-representation Among Top Earners. Retrieved from: https://www150.statcan.gc.ca/n1/en/catalogue/11-626-X2019002

Volunteer Research Reviewer: Jenna Horning holds a Bachelor of Communication Studies degree and currently works for an association representing Alberta’s water and wastewater operators. She is an active volunteer for several Edmonton festivals. She loves research and writing and is using these skills to learn more about social policy issues.