International Women's Day 2017

Close the gender pay gap – How far are we?

Gender inequality in the world of work has economic repercussions. Wage Specialist Xavier Estupinan decodes the wage gap issue in India and globally.

Analysis | 22 February 2017
Gender inequality occurs when social constraints based on gender roles result in unequal distribution of opportunities and outcomes. There are different ways in which gender inequality is manifested and the consequence of this inequality has a direct impact on human development. From a point of view of labour, respective labour force participation rates of both women and male populations give the first glimpse of gender inequality. If one looks closer at the endowments of women and men, we are able to identify if there is a direct link between the stock of abilities (acquired through education, skills, experience and other attributes that then determines the ability to perform a labour activity), and the capacity of either sexes to produce economic value. In other words, if someone has better qualifications and experience, the likelihood of obtaining higher returns from a job increases. From a sectoral perspective, certain advantages in productivity or location tend to influence in the returns from work.

As per this understanding, one can say that gender inequality in the wage form of employment is determined by the difference in endowments between women and men. While this still be a simplistic explanation there exists other determinants behind the gender wage gap.

Gender equality is addressed in the ILO Conventions. Equal Remuneration Convention, 1951 (No. 100) and Discrimination (Employment and Occupation) Convention, 1958 (No. 111), have been ratified by 90 per cent of ILO’s members. These Conventions provide a legal framework for countries to work towards their own legislation.The ratification of these Conventions has helped countries to address the gender wage gap.


According to ILO’s Women at Work: Trends 2016, globally, in the last twenty years labour participation has decreased for both women and men, but still there is a gap of 27 p.p. (percentage points); 49.6 per cent and 76.1 per cent has been the corresponding labour force participation in 2015. The low participation of women impacts their economic opportunities, stability and security. South Asia’s labour participation gap is far greater than the global average and this lack of participation as compared to men has increased in the last few years.

The low labour force participation rate of women is an aggregation of their sectoral segregation and occupational participation rates. Certain sectors and occupations that are associated to lower returns or lower productivity tend to have a dominance of women workers. Agriculture for instance, in low and lower-middle countries, is still the major source of employment for women. More than 60 per cent of working women in South Asia are employed in agriculture which is time and labour intensive and also poorly paid, sometimes even unpaid.

Economic growth pattern in developing countries shows a shift in employment from agriculture to manufacturing and then to services. For women and men, in the last few years, women’ employment in industry has decreased 5.6 p.p. while men’ participation in this sector has increased by 5.3 p.p. This confirms the fact that majority of women have shifted directly from agriculture towards services.

More so the occupational structure within sectors has remained virtually unchanged. Jobs that are women- dominated jobs still continue to remain so.


The global gender wage gap, has decreased in a substantial way in the last two decades, and in 2015 is estimated to be of 23 per cent, with women earning 77 per cent of what men receive, on average. This gap can be estimated on a monthly or an hourly basis, and the latter reflects a more consistent result as women are engaged more in part time work than men. This gender wage gap is also referred to as the unadjusted wage gap. It is so because it is a raw measurement that does not take into account endowment characteristics that directly affect the level of returns from work. Recent studies explain that characteristics related to work, sectors and geography are insufficient to explain the gender wage gap. The residual in such analysis is attributed to discrimination and this is what is referred to as the adjusted gender wage gap.

The recent ILO Global Wage Report 2014/2015, breaks down the unadjusted gender wage gaps for few developed and emerging countries. It helps identify the explained part of the gap as per the measurable labour market characteristics (such as education, experience, economic activity, location, work intensity and occupation). Developed countries like Germany and the United States have explained the wage gap within these factors. Some of the explanations may reflect that women end up working greater share of their time in part time jobs yet they draw a lower pay than those employed in full-time jobs.

Also, most women tend to leave work because of motherhood, childcare and elderly care and the age of the women and the number of children at home are also variables that influence differences in their wages as compared to the men. Some working mothers, “tend to value family friendly workplaces policies more than men” and some of the gap is explained by the percentage of women, who work in the industry and occupation, with less returns from their work. What is not captured by these explanations, is the adjusted gender wage gap.


Many researches have looked at both the adjusted and unadjusted gender wage gap in India. In fact there are many papers which estimate earning functions determined by the production. This are typically broken down into an endowment effect and the unexplained or discrimination effect against women workers (These include authors like: Duraisamy (1995, 1998, 1999). Divakaran, (1996). Glinskaya and Lokshin (2005). Kingdon (1997). Kingdon and Unni (1997). Jacob (2006). Mukherjee and Majumdar (2011). Chakraborty and Mukherjee (2014).  Rustagi, 2005, finds significant disparity levels between women and men workers across levels of education, types of employment, industries and locations that place women in a disadvantageous position as compared to men. Madheswaran and Khasnobis (2007) found that wage differentials have declined in India from 0.40 in 1983 to 0.26 in 1999-2000 for the regular workers, and this has to do with the narrowing of the endowment difference.

Using NSS 2009-2010 data, Khanna’s (2012) study reveals the existence of “Sticky Floor” in regular labour market that indicates there is a larger gap at the lower levels of the wage distribution. Duraisamy and Duraisamy (2014), shows that female wage growth has been faster than that of the man’s. 81 per cent of the wage differences could be related to discrimination and part of this is due to the choice of industry and occupation. Bhattacharjee, Hnatkovska and Lahiri (2015), see in their results that gender wage gaps have shrunk in most percentile groups, the gaps have narrowed for the youngest cohorts that suggests that this gap will continue to narrow in the future.

These investigations reveal the reasons behind the gender wage gap in the Indian labour market. Larger gaps are found at the lower end of the wage distribution. And in this lower end, as identified by Khana (2012), if one takes the National Floor Level Minimum Wage as a threshold, there is evidence that for women almost 42 per cent of the regular working population fall below this line.

Extending the coverage of minimum wage to all workers, and working towards achieving compliance based on full consultation with employer’s and worker’s organizations are noted in ILO’s Convention No. 131, and ILO’s policy guidelines on minimum wages. These measures can have a direct impact on the most vulnerable and reduce the gender wage gap at the lower end of the distribution. Other measures to close this pay gap will need to include strengthening of the education system and skill enhancement (that then results in obtaining high added value jobs), raising awareness to overcome discriminatory practices, and advocacy to create an environment for narrowing the gender labour participation gap.

What is even more important is to address the work overload that women face as compared to men. Most women tend to be primary care-givers, looking after their households and children, —this phenomenon isn’t captured in the gender wage gap studies which is something to consider so as to construct better policy measures.