The Role of Mid-Career Income for Gender Differences in Pensions

This study investigates the importance of mid-career earnings for the gender gap in pensions and potential scarring effects of low income earlier in life. Swedish income register data from 1990 to 2015 was linked to the ‘Health, Ageing and Retirement Transitions in Sweden” (HEARTS) survey from 2015. We investigate the gender pension gap of 960 retirees and worries about pension income of 2518 older workers between the age of 60 and 66 years. Oaxaca-Blinder decompositions were applied to analyse the gender gap in pensions and linear regressions were used for the analysis of financial worries. Results show that gender differences in mid-career income play a stronger role for the gender gap in pensions than late career earnings. Mid-career earnings are furthermore related to higher subjective worries about pension income and explain gender differences for this variable. Results are related to the context of the current Swedish pension system and the role of the preceding pension reforms is discussed. It can be concluded that different aspects of the reformed pension system potentially contributed to higher gender gaps in pensions.