- Mar 26 2014
Gender wage differentials are an important concern in developing countries where, more often than not, women are considered inferior to men and therefore lack access to similar economic opportunities. In this light, the main aim of this paper is to examine changes in the gender wage gap in India between the years 1999-2000 and 2009-2010, and to analyse its determinants.
Studies focusing on the gender wage gap have mainly been conducted by and on developed countries. However, gender wage differentials are an Simportant concern in developing countries, where more often than not, women are considered inferior to men and therefore lack access to similar economic opportunities. Unlike developed nations, women in these countries not only suffer from differential wage rates, but also unequal access to wage employment (Yasin, Chaudhry and Afzal 2010).
India is an important case study as it is poised to become a powerful global player in the coming years, and while women have largely contributed to the Indian miracle, the country is rated as one of the worst places in the world to be a woman (Baldwin 2012). Can India achieve its goal of becoming the next superpower without empowering half of its population?
Although Indian women are still far from achieving similar socio-economic status as their male counterparts, many laws have been passed to improve gender equality in the workplace. These laws include the Minimum Wages Act of 1948 and the Contract Labor Act of 1970. The former ensures equal pay for women by fixing minimum wages for all employees regardless of their biological sex, while the latter provides provision for utilities such as bathrooms and childcare for women in workspaces.
In 1976, the Indian Constitution recognised the principle of ‘Equal Pay for Equal Work’, which explicitly stated that women have the right to equal wages. However, legislation has not ensured the implementation of these laws; formal labour force participation rate of women is still very low, and women in many sectors of the economy receive lower wages than men. This difference in wages can, to a large extent, be explained by the human capital theory, which states that “other things being equal, personal incomes vary according to the amount of investment in human capital; that is, the education and training undertaken by individuals or groups of workers” (Encyclopedia, 2012). This means that earnings are higher for people with more education and experience.
According to this theory, the higher education and experience level of men can account for gender wage differentials in India. Yet, studies show that even after controlling for all observable characteristics such as education, age, experience, marital status, occupation and industry, the wage gap between men and women cannot be fully explained. Researchers argue that discrimination against women still exists and that it accounts for the remaining part of the wage gap. They test the argument by applying the Oaxaca-Blinder decomposition technique, to compute the wage gap that is not explained by observable characteristics of male and female workers. The Oaxaca-Blinder decomposition splits the gender wage gap into two parts: the explained gap and the unexplained gap. The explained gap identifies gender differences due to different life circumstances and career choices: education, hours worked, childcare, marital status. These gender differences are responsible for the “nature and extent of participation in employment” (Gibb, Fergusson and Horwood 2009). On the contrary, the unexplained gap measures the extent of gender discrimination: it explains wage differences that arise when women with identical characteristics to men earn lower wages than men. By differentiating between the two segments, the decomposition technique determines the true discrimination coefficient.
Although the Oaxaca-Blinder method is a widely accepted and accurate method of calculating wage differentials, many previous studies examining the gender wage gap in India do not utilise it. Moreover, most of these studies use data prior to 1999. This paper addresses the lack of such research by using this particular decomposition technique on recent data.
The aim of the study is to analyse the gender wage gap in India over the last ten years by comparing data from the National Sample Survey of 1999-2000 and 2009-2010. The paper is divided into four sections: Section 1 describes previous literature on gender wage differentials from developed and developing countries; Section 2 outlines the models and sample used in this study; Section 3 presents the empirical
results; and Section 4 discusses the results and draws conclusions. The study hopes to investigate the extent of progress made in improving the gender wage gap, and therefore gender equality in India, and provide a set of recommendations for policy-makers to bridge this gap.