Inequalities in income: Till death do us part

The gender pay gap is a perennial issue on social networks, in politics and in companies. The EU Pay Transparency Directive, which the German legislator has to transposed into national law by mid-2026, has been the subject of numerous publications in the recent past.

The Directive (Directive (Eu) 2023/970) of the European Parliament and of the Council of 10 May 2023, is designed to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms.

The main topics are:

• pay transparency for job applicants
• rights to information during the current employment relationship regarding pay structures in the company
• reporting to a public body on pay differentials in companies with over 100 employees
• entitlement to compensation if the employer bears the burden of proof

What most articles on equal pay in the current employment relationship don't address is the logical consequence of the gender pay gap is a gender pension gap.

In 2023, the gender pension gap in Germany was 39.4% (source: Destatis). Women receive almost half less in old-age security income than men. To calculate the gender pension gap, we use the group of people who have reached 65 and whose personal income is based on the three pillars of the German old-age security system (public compulsory systems, company pension schemes, private provision).

However, as a study conducted by the Fraunhofer Institute for Applied Information Technology (FIT) for the Federal Ministry for Family Affairs, Senior Citizens, Women and Youth (BMFSFJ) in 2011 shows, the gender pension gap is only slightly based on the gender pay gap. It's primarily based on these issues.

• Interruptions in working life
  Women interrupt their employment more often in the course of their lives. The interruptions last longer. The reason for this is another gap: the gender care gap. In 2022, women spent an average of 44.3% more time per day than men on raising children, caring for relatives, housework and volunteering (source: Destatis).
• Shorter weekly working time
  Women work shorter weekly hours than men, mostly because of the unequal distribution of care work and the resulting requirement for availability and flexibility in everyday life and in private emergencies/exceptional cases. While 47.4% of employed women aged 15 to 64 worked part-time in 2021, only 10.6% of men in this age group worked part-time (source: Destatis).
• More frequent employment in (mini) jobs not subject to social insurance deductions
  As a result of the lower weekly working hours, mini-jobs, which are privileged in terms of tax and social security, are often the employment option of choice for women. In conjunction with the married couples' income-splitting tax system and the husband's non-contributory co-insurance in the health and long-term care insurance, this is a popular employment model. However, it's not suitable for independent economic security, let alone for building up independent pension entitlements.
• Personal circumstances
  It has also been shown that the gender pension gap was significantly higher, at 63.8% and 65.4% respectively in 2007, for married and widowed people than for divorced or single people, at 18.8% and 9% respectively (source: FIT study).
  The smaller gap for divorced people is largely due to two phenomena: divorced women have a higher level of income from their own pension than married women, because in the event of divorce, their ex-husbands' pension entitlements from the time of their marriage are credited to them as their own pension income as part of the pension rights adjustment. This means that divorced men have a lower level of their own old-age income compared to married men. This narrows the gap for divorced people.
  Another important factor in the gender pension gap is children. While the gap for married people without children was 48.9% in 2007, it was 64.4% for married people with children (source: FIT study).
• Level of education
  Measured in terms of five categories of vocational qualifications – starting with "no vocational qualification" and going up to "university degree" – we see that the higher the vocational qualification, the smaller the gender pension gap becomes. While the gap in 2007 in the same vocational qualification category was 58.1% for people without a vocational qualification, it was 35.6% for academics (source: FIT study).
• Place of residence
  While the gender pension gap in the old federal states was 43.8% according to an evaluation from 2023, it was significantly lower in the new federal states at 18.6% (source: Destatis).

Looking to the future

The positive thing is that a downward trend can be seen. The younger age cohorts in the FIT study show significantly lower values than the older ones. While the gender pension gap for the over-80s in 2007 was still 66.0%, it was 54.3% for the 65-70 year-olds at the same time. In 2023, the gender pension gap for all women aged 65 and over was 39.4%, compared to 59.6% in 2007.

As a recommendation for continuing this trend to close the gender pay gap, the Expert Commission for the Second Gender Equality Report from 2017 suggested that the "community of property" should be implemented for married couples. In contrast to the statutory matrimonial property regime of community of accrued gains (in which the accrued gains generated during the marriage are only equalised after divorce), men and women in the community of acquisitions would also acquire ownership of the acquired assets of each other during the marriage. The Expert Commission's proposal would mean that, at the time of retirement, all income from old-age security acquired during the marriage would be distributed equally. In this way, patriarchal structures could be reduced, at least in the area of marriage. Interruptions in working life, a lower weekly working time and the form of employment that is free of social insurance contributions would no longer be to the disadvantage of women at the time of retirement.