From Raj Nallari and Breda Griffith's lecture notes.
Continuing and persistent gender inequalities in wages suggest that the labor market is not operating freely. One reason may be differences in bargaining power between men and women and the different obligations that the individual sexes face. For example, the reservation wage for women is often lower than that for men. This may reflect the lower mobility that women have because of family obligations. In effect women are price takers in the labor market. This is especially true in developing economies where most times agricultural wages paid to women are lower than those paid to men, even for the same work.
A second area is that of segmentation in the labor market. Gender gap in wages reflects sex-segmented labor markets and discrimination based on segmentation. It is unlikely therefore that if markets are not providing equitable wages, continued liberalization will not improve the gender wage gap. In such cases, policy may play an active role through regulation. Furthermore, the ramifications of persistent wage gaps and discrimination against women in the labor market may lower labor force participation both now and for future generations. As noted in World Bank (2007) the wage loss due to discrimination may cause parents to under invest in the education of their daughters compared to their sons.Lastly, as noted by Tzannatos (1992), significant gains output gains can be achieved from greater pay equity among the sexes. Using data on pay differentials in LAC countries, he identified non-trivial economic costs imposed on these societies as a result of pay differentials and illustrated the substantial output gains that would arise from pay equity.
Research on wage inequalities among the sexes is hampered by available data as noted previously. Cross-country differences with respect to the definition of wage rates and earnings, payment methods, time units whether hourly or weekly preclude comparable cross-country and regional studies. The figure below examines wage data for six occupational groups for industrialized economies, Central and Easter Europe and CIS and developing economies.
Average Female Wages/Earnings as a Percentage of Male Wages/Earnings in Selected Occupations, latest available year
Source: ILO (2007)
The figure above illustrates the gender gap in wages – only for hotel receptionists and professional nurses is there approaching parity and this occurs in Central and Eastern Europe and CIS and developing economies for the former occupation and in industrialized and Central and Eastern Europe and CIS for the latter. Indeed, wage rates were higher for female professional nurses, first-level education teachers, computer programmers and accountants in Central and Eastern Europe and CIS compared to males. This reflects the historically greater wage equality in the planned economies of Central and Eastern Europe and CIS and may not continue once the few women who have successfully managed the transition process retire (ILO, 2007).
According to the European Commission (2005) the pay gap between men and women remains unchanged at 15 percent across all sectors in recent years. Economic considerations such as slower growth in the Euro-zone and worsening labor market conditions in the new member states are a factor as well as the tendency for women to remain in sectors that are prone to lower and declining wages.
Wage inequality is found across all occupations, predominantly in low-skill occupations but also in high-skill. Corley et al. (2005) quoted in ILO (2007) notes that the average female wage is only 88 percent of that of males in occupations such as accounting and computer programming. Oostendorp (2004) showed that globalization has led to an improvement in wages in low-skilled occupations where women are more highly represented but has led to a widening gender gap in wages among high skilled occupations in developing economies where men are more highly represented.
In summary, wage inequalities continue to exist between male and female workers.