Abstract
Work experience is a key variable in earnings function estimates and wage gap decompositions. Because data on actual work experience are rare, studies commonly use proxies, such as potential experience. But potential experience is identical for all individuals of the same age and level of education, so it ignores labor market intermittency because of childbirth and child rearing—a critical omission when analyzing gender differences in earnings. This paper constructs a better proxy: expected work experience, which is the sum of the annual probabilities that an individual worked in the past. This measure can be generated using commonly available data on labor force participation rates by age and gender to gauge the probability of past work. Applying the measure to labor force survey data from the Philippines shows that conventional proxies underestimate the contribution of gender differences in work experience in explaining the gender wage gap.
•We construct a better proxy for actual work experience than potential experience.
•Conventional proxies underestimate gender differences in work experience.
•Expected work experience proxy reflects women’s labor market intermittency.
•In the Philippines, using the proxy results in a smaller residual gender wage gap.
•Results point to importance of policies that promote women’s labor force attachment.