Sweden: Approx 75pct of the top 1 men have a partner with income below the 90th percentile; for top 1 women, three-quarters of them have a partner with income above the 90th percentile, and about 30% have a partner who is also in the top 1pct

Women in top incomes – Evidence from Sweden 1971–2017. Anne Boschini, Kristin Gunnarsson, Jesper Roine. Journal of Public Economics, Volume 181, January 2020, 104115, https://doi.org/10.1016/j.jpubeco.2019.104115

Highlights
• Women have increased their presence in the top of the total income distribution.
• Women are still a minority (and more so higher up in the distribution).
• Top women have gained in labour incomes, while top men have gained in capital.
• Top men and women have converged in a number of dimensions.
• Family circumstances remain different for top men and women.

Abstract: Using yearly register data on the full population of Sweden we study gender differences in top incomes, down to the top 0.01 percentile group, over the period 1971–2017. We find that, while women are still a minority of the top decile, and typically make up a smaller share the higher up in the distribution we move, their presence has steadily increased in all top groups over the past half-century. At the beginning of the period, top income women relied more on capital incomes, but the rise in the share of top women is not due to the growing importance of capital. Instead, women have increased their presence in the top by gains in the top of labour incomes, while top income men have captured most of the growth in capital incomes. Studying gender differences in observable characteristics we find small gender differences in some respects, convergence in others, but also some important remaining differences. Overall, our results suggest that many findings in the top income literature have a clear gender component and that understanding gender equality in the top of the distribution requires studying not only earnings and labour market outcomes but also incomes from other sources, as well as family circumstances.

Keywords: Income inequalityWealth inequalityIncome distributionGender inequalityTop incomesCapital incomesRealized capital gains


7. Concluding discussion

This paper arrives at several conclusions about the evolution of women in the top of the income distribution in Sweden over the past fifty years. First, and most obviously, it shows that the presence of women in top incomes has increased significantly. There are still fewer women than men in top groups, and typically fewer the higher up we move in the distribution, but there has been a relatively steady rise over the whole period; from 12 to just below 30% in the top decile, from around 6 to 19% in the top 1 group, from 5 to 15 in the top 0.1 percentile group.

Even when focusing on the top 1 group (where capital incomes become important), this change has overwhelmingly been driven by women increasing their share of total labour income, while, on average, losing shares in the capital income distribution. This highlights the importance of studying the joint distribution of labour and capital to understand the changes in total income, especially in the very top.

When looking at the characteristics of top income women compared to men, they are not very different in terms of age and education (though women are, on average, more educated), and both groups become more and more similar over time. In terms of marital status, however, differences are large, especially at the beginning of the period. Around 1970 more than 90% of top 1 men were married, while this was the case for less than 50% of top 1 women. At that time more than 20% of women were widows (in the top 0.1 group almost 40%), while the share of widowers in the top 1 was close to zero. Over time the share of married men has gone down, the share of married women has increased, and today the marital status of top men and women are much more similar.

The largest remaining difference, however, seems to be in terms of “partner type”, especially concerning partner income. While the education levels of the top earners' partners, men and women alike, are similar – around 65% have tertiary education, 30% have secondary education, and only 5% have primary education – approximately three quarters of the top 1 men have a partner with income below the 90th percentile. For top 1 women, the opposite is true, three-quarters of them have a partner with income above the 90th percentile, and about 30% have a partner who is also in the top 1.

Trying to take all of these developments together, gives a picture of top income men and women being much more different in the 1970s than today. The typical top 1 woman had much higher capital incomes, and also owned more wealth in relation to the average top 1 man, but in return, she had significantly lower labour income. Over time capital has become more important in total incomes in general and also for top income men. For top income women, however, capital incomes have become relatively less important, both in relation to the population average and especially to the average top income man. In short, concerning income composition and wealth, top income men and women have become increasingly similar.

Why have women gained ground in terms of labour income? The short answer to the first part of this question is simply that more women have gradually risen to higher and higher-paying jobs. Exactly how this has happened requires further detailed study, but it seems to happen with a lag to women's education levels, since already well before the 1990s, when the increase really takes off, more women than men were graduating from Swedish universities. Also, one should recall that education, while certainly being important, is not everything when it comes to explaining top incomes. More than a third of top 1 earners, and about half of the top 10 earners do not have a tertiary education still today. The increasing share of women executives and senior managers, both in the private and public sector, is notable in the last decade or two. Moreover, tireless pro-active policy for gender equality in wages since the 1970s might finally have been fruitful. Despite these positive trends and also more men taking out parental leave after the introduction of so called “daddy quotas” (especially in high-educated high-income couples) and more women CEOs in listed companies than ever, there is also less positive evidence of both increasing gender wage gaps among executive managers after having their first child (see Keloharju et al., 2019, and more generally Kleven et al., 2019) and an increase in the divorce rate of particularly successful women managers and politicians (see Folke and Rickne, 2019). These findings are undoubtedly related to the partner choices of top men and top women. While the partners of top men and top women are increasingly similar in many dimensions, the large majority of top men's partners are still not pursuing a career of their own, as opposed to the majority of top women's partners.

Why have top income women gained less than top income men from the increased role of capital in the top? Again, answering the question in detail requires further study and is likely a complex web of connected developments. But our results give some important clues. First, as far as we can tell using tax data, the wealth difference between the average top income women and man has been shrinking over time. In 2007 – the last year when wealth was taxed – top income women had on average 1.5–2 times more wealth than the average corresponding man, down from more than 3 in the 1970s. At the same time, seen over the whole period, women have not lost ground in the top of the wealth distribution. The number of women in the top 1 of the wealth distribution has been between 30 and 40% over the whole period. This suggests that as the share of women has increased in the top, the composition of the average type of women has shifted in the direction of one with more labour income and less wealth. Furthermore, there are gender differences beyond wealth levels. In particular, our analysis of realized capital gains shows that top men, much more than top women, top-up their incomes with capital gains, and also that these are mainly based on financial assets. This suggests that top income men have more financial wealth than top income women (in line with what numerous government commissions and other studies find for gender differences in wealth holdings in general). These assets generate, not only an income when sold but also a flow of income in the form of dividends, which in turn have grown in importance in relation to other types of income. If top men have more financial assets than top income women, this has a relatively larger impact on their income growth. Finally, while capital incomes, in general, were adversely treated relative to labour before the great tax reform in 1991, the situation today is reversed. This has led to several different ways in which one can suspect that activities that, in a different tax system, would be taxed as labour are now categorized as capital. However, in this respect incentives are similar for men and women alike and to the extent that men would profit more than women from this requires further study.

Overall, the results in this paper suggest that to understand the gender dynamics of top incomes, we need to analyse the joint evolution of both labour and capital incomes, as well as family circumstances.