In this short study, we quantify the gender pension gap in Germany and examine how much more women would have to save for retirement to close it. The gender pension gap is first computed as an average across all employees and then split up into various age cohorts and occupations.
Based on a broad database on wage income obtained from the Institute of Employment Research (IAB), to which all German businesses have to report, we estimate each employee’s statutory pension entitlements and find that the gender pension gap in Germany amounts on average to 26 %. While we do not observe a significant gender pension gap for employees below 35 years of age, the gender pension gap gets larger for older age cohorts. We argue that the decision to start a family is the most likely explanation for this pattern. As female labor force participation reduces drastically after giving birth, and never fully recuperates, labor income decreases and so do stat-utory pension entitlements of women.
The gender pension gap is lower, and sometimes even negative for occupations where salaries are heavily regulated (for example, municipal clerks) and for occupations that are predominantly performed by women (for example, child care workers). It increases for occupations where sala-ries depend more on employees’ negotiation skills.
We also compute how the gender pension gap can be closed, i.e., how much more women would have to save to make sure that they have the same pension payments (supplemented by their savings) than men upon retirement. We find that in most cases, the additional savings amount needed makes only up for a small fraction of women’s annual income, ranging between 1-2% for most age groups and occupations.
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