Drivers behind the diverging gender patterns of wage inequality

Abstract This paper examines wage inequality in Spain across the economic cycle of 2006–2018, focusing on gender perspectives, aiming to discern the underlying factors driving it. Employing the Firpo, Fortin, and Lemieux decomposition method, we analyse how differences in worker, firm, and job characteristics impact wage inequality evolution. Drawing on data from the Spanish Wage Structure Survey (WSS), our analysis reveals a decline in wage inequality for both genders over the entire economic cycle, with a more pronounced reduction among females. However, this decrease in wage inequality cannot be attributed to changes in worker, firm, or job characteristics of the employees (composition effects), as they actually increased. Our analysis indicates that rewards associated with these characteristics (wage structure effects) primarily drove the reduction in wage inequality. Nonetheless, gender disparities become evident when exploring the contribution of the primary explanatory variables. We find that the sector of activity is associated with lower wage inequality among females but higher among males. Conversely, the de-unionization process that occurred during the analysed period tends to increase wage inequality among males while having a neutral or opposite effect on females. A notable shift occurred during 2014–2018: while female wage inequality increased, male wage inequality continued to decline. Finally, we find no significant correlation between the economic cycle and the evolution of wage inequality. JEL codes: J31; J71; C21 and D63.