Thursday, April 30, 2015

The Share of Women and Other Patterns in the 1%

What's the share of women in the top 1% of the earnings distribution? How has it been changing over time? Fatih Guvenen, Greg Kaplan, and Jae Song tackle this question in "The Glass Ceiling and The Paper Floor: Gender Differences among Top Earners, 1981–2012," published as NBER Working Paper No. 20560 in October 2014. (NBER working papers are not freely available online, but many readers will have access through library subscriptions.)

Here's a figure showing the share of women in the top 0.1% and the next 0.9% of the earnings distribution from 1981-2012. The dashed lines show the data for a given one-year period, with the darker line showing the 0,1% and the lighter line showing the next 0.9%. The solid lines show the data if you average over a five-year period. The darker lines fall below the dashed lines, which suggests that women are less likely than men to sustain a position in the top 0,1% or the next 0.9% over time, but the difference is not large. The trends is clearly upward. For example, based on one-year data, women were about 6% of the top top 0.1% in earnings back in 1982, and were about 18% of this top 0.1% by 2012. As the authors write: "The glass ceiling is still there, but it is thinner than it
was three decades ago."

A different way of slicing up the same data is to look at the proportion of men to women in each group at any given time (basically, this is the reciprocal of the figure above).

The authors explore this data in considerably more detail. Here are some other facts about the study and highlights that caught my eye.

1) Many studies of the top of the earnings or income distribution look at tax data. In contrast, this study uses data on earnings as reported to the Social Security Administration: more technically, it's a representative 10% sample drawn from the Master Earnings File at the SSA. In the data, people are identified only by anonymous numbers, but because of those numbers, it's possible to track the same people over time--which is why it's possible to look at average income over five years in the figure above. The Social Security data also includes data on the industry of the employer. The data is limited to people between the ages of 25 and 60, who had annual earnings of at least $1,885 as measured in inflation-adjusted 2012 dollars. The measure of earnings here includes wages, bonuses, and any stock options that are cashed in.

2) How much in earnings does it take to be in the top 1% or the top 0.1%? In 2012, it's $291,000 to reach the top 1% of earnings, and $1,018,000 to reach the top 0.1%. Interestingly, these thresholds for the top income levels rose sharply in the 1980s and the 1990s, but have been pretty steady since then. Also, the thresholds don't vary much acor

3) Along with the "glass ceiling" that limits women from entering the highest-paying jobs, there is also a discussion in this literature a "paper floor," which is the pattern that women who are highly-paid in one year are more likely than men to drop out of the top earnings group in the following year. However, the "paper floor" seems to have changed over time. The authors write:
This high tendency for top earners to fall out of the top earnings groups was particularly stark for females in the 1980s -- a phenomenon we refer to as the paper floor. But the persistence of top earning females has dramatically increased in the last 30 years, so that today the paper floor has been largely mended. Whereas female top earners were once around twice as likely as men to drop out of the top earning groups, today they are no more likely than men to do so. Moreover, this change is not simply due to females being more equally represented in the upper parts of the top percentiles; the same paper  floor existed for the top percentiles of the female earnings distribution, but this paper floor has also largely disappeared.
4) the reason behind more women moving into the top earnings group can be traced to younger cohorts of women having more members in that group--not to increases in earnings for the older cohorts of women workers.
Entry of new cohorts, rather than changes within existing cohorts, account for most of the increase in the share of females among top earners. These new cohorts of females are making inroads into the top 1 percent earlier in their life cycles than previous cohorts. If this trend continues, and if these younger cohorts exhibit the same trajectory as existing cohorts in terms of the share of females among top earners, then we might expect to see further increases in the share of females in the overall top 1 percent in coming years. However, this is not true for the top 0.1 percent. At the very top of the distribution, young females have not made big strides: the share of females among the top 0.1 percent of young people in recent cohorts is no larger than the corresponding share of females among the top 0.1 percent of young people in older cohorts.
5) The persistence of earners who are in the top 0.1% for successive years seems to be increasing, not decreasing.
Throughout the 1980s and 1990s, the probability that a male in the top 0.1 percent was still in the top 0.1 percent one year later remained at around 45%, but by 2011 this probability had increased to 57%. When combined with our nding that the share of earnings accruing to the top 0.1 percent has leveled o ff since 2000, this implies a striking observation about the nature of top earnings inequality: despite the total share of earnings accruing to the top percentiles remaining relatively constant in the last decade, these earnings are being spread among a decreasing share of the overall population. Top earner status is thus becoming more persistent, with the top 0.1 percent slowly becoming a more entrenched subset of the population.
6) The industry mix of those at the very top is shifting toward finance.
[R]egarding the characteristics of top earners, we find that the dominance of the finance and insurance industry is staggering, for both males and females: in 2012, finance and insurance accounted for around one-third of workers in the top 0.1 percent. However, this was not the case 30 years ago, when the health care industry accounted for the largest share of the top 0.1 percent. Since then, top earning health care workers have dropped to the second 0.9 percent where, along with workers in finance and insurance, they have replaced workers in manufacturing, whose share of this group has dropped by roughly half.