The Distribution of Income in Ireland (2000) - Combat Poverty Agency

86The Distribution of Income in Irelandemployment, on the other hand, with a greater increase in employmentfor women with low-earning rather than high-earninghusbands, might in itself be expected to reduce household incomeinequality.It is interesting to contrast the Irish experience with whathas been happening in the US, where Juhn and Murphy (1997)examined changes in female earnings and employment between1969 and 1989. Their analysis shows that the trend in femalewage behaviour in the US is similar to Ireland, with thelargest gains being experienced by women married to highearning husbands. However, the employment behaviour overthe period is the opposite of what we have just seen for Ireland:the highest employment rates were initially found amongwomen married to low income men, but over time the largestincreases in employment have been among women married tohigh earning husbands. Thus, in the US both the wage changeeffects and the participation effects for females operated insuch a way as to result in an increase in household income inequality.As we have shown for Ireland these forces operated inopposite directions between 1987 and 1994, and we must turnto a more detailed analysis in order to determine which of thetwo had the greater bearing on inequality.Total household income can be disaggregated into its componentsin order to determine their individual impacts on inequality,allowing us to identify the effect of wives' earnings andemployment on inequality and how it has been changing. Thecoefficient of variation is a summary inequality measure whichis particularly suited to this purpose, and we have used it to lookat ttie period from 1987 to 1994: the details of the methodologyT J T T T Sh ° Wn * Appendbc L »•resul * *WSt that,despite the fact that the correlation in spouses' earnings has in-T ^StantiaUy ° Ver •* period ' *» evolution of wives'fn^ 5 f ? equalising effect on the distribution of householddb«Z * ° Ver "* Peri ° d - *• leased correlationbetween the earnings of spouses would in itself have had a disequahsingeffect. However, its impact was outweighed by the retZl2*^ f ° n * eaJnmgS aCTOSS * "^ed women (as~LnTtr m P ° yed **»»*>> «* fa y * reduction in the correlationbetween wives' earnings and non-labour income ThisFemale Labour Force Participation and Inequality87brings out the complexity of the relationships between individualand household incomes, and the need to carefully disaggregatethe different sources of income accruing to household membersand the ways in which they relate to each other.7.4 CONCLUSIONBetween 1987 and 1994 wage inequality in Ireland increasedsubstantially yet household income inequality, as reflected inthe ESRI surveys carried out in those years, was stable or actuallyfell marginally. In this chapter we have examined one possibleexplanation for this, namely the increased contribution offemale wages to total household income. We have documentedthe changes in wives' employment rates and earnings over thisperiod, paying particular attention to how these varied with theeconomic status of the husband.We saw that while increases in female employment rateswere greatest among wives married to low earning husbands,these women have experienced only modest wage gains whencompared to the wives of husbands with earnings above theaverage. These changes have resulted in a reduction in the dispersionof earnings among all wives (the participation effect)but an increase in dispersion among wives at work and an increasein the correlation between spouses' earnings (bothwage effects).We then used a decomposition of the coefficient of variation,a summary measure of inequality, to examine the contributionof wives' earnings to changes in household income inequalityover the period. The results suggest that the effect of the highercorrelation in spouses' earnings (which would in itself work toincrease inequality) was dominated by the other trends associatedwith wives' earnings. Overall, changes in wives' earningswould have had an equalising rather than disequalising impacton household incomes over the period.Although we have shown that trends in female participationrates have reduced income inequality over the 1987-94 period,one must be careful in extrapolating these findings from thatpoint on. Despite the rapid increases in female participation,female earnings still accounted for only 15 per cent of total