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Of all the things India, can boast about achieving over the years since independence, gender equality is not one of them. Although women face discrimination in every sphere of life, this article will be dealing with the subject of pay gap between men and women in India and shed light on the economic cost of such a gap.

The difference between the average pay of women and men, expressed in terms of the men’s earnings is known the gender pay gap. Over the years, studies have found a decrease in this differential but the yearly convergence rate has been slow. Several organisations like the World Economic Forum publish gender gap reports that try to gauge the extent of gender inequality in various spheres including economic opportunities. One of the reports currently in news is the Korn Ferry Index of 2018. The report published by the global organizational consulting firm, Korn Ferry, analysed more than 53 countries and found out the pay gap between men and women by using Korn Ferry’s pay database.  The gap in India was found to be 16.1% on average and 4% for a job at the same level of work.[1]  Apart from this, according to the Monster Salary Index (MSI) calculated by Monster.com, in 2017, Men earned a median gross hourly salary of Rs. 231 while women earned  just Rs. 184.[2]

For economists, the discussions on such a pay gap fall under the umbrella of gender discrimination in all sorts of economic opportunities. Theories have been developed by experts over the years to understand the reasons as well as the impact of this economic discrimination. One view suggests that women are unable to have a voice in the household because of a patriarchal setup that takes away their ability to look at themselves as individual entities other than the household. This in turn becomes an obstacle in their decision to join the workforce.  According to the same Korn Ferry index, in 2018, men around the world earn 16.1% more than women on average and some blame the women’s choice of jobs for this result. This explanation stems from the fact that   the gap gets narrower as we move towards men and women working in the same level of job and becomes as low as 0.5% for people working in the same company and in the same function. A new study published by USA’s National Bureau of Economic Research, argues that the pay gap is nothing but a penalty on women for having kids. The study takes the case of Denmark and proves that the inequality caused by women’s decisions to have children has doubled since 1980. For a developed nation like Denmark, the study shockingly finds a drop of 30% in women’ earnings after the birth of the first child with no visible change in the men’s earnings. In the long run, this ‘child penalty’ is almost 20%.[3]

In India, the female labour force participation has been falling over the years and the gender pay gap has been pegged at high levels by many studies. The supply side factors for these results include lack of necessary skills and experience in women that are given a push by the patriarchal attitude. This view is developed by the human capital theory which argues that women lack the human capital that makes them unable to compete with men in the job market. Interestingly for India, the female labour force participation has been shown to have a U- shaped relationship with income levels. This means that there is a higher participation by women when their family income is very low or very high but it starts to fall for the middle class once a threshold income is reached. This implies that women are generally permitted to join the labour force only when it becomes absolutely necessary. According to a 2017 report presented at the International Labour Organisations and prepared by economists from IIM Ahmedabad and FLAME University, women in India face discrimination based on not just their education and skills but also on their marital status, motherhood status, age and state. The report found that even the formal sector that is supposed to be regulated by the labour laws that promise equality in every way, is riddled with problems such as undervaluation of women’s work, occupational segregation (women being preferred only for a few jobs), selection effect( women not even given the choice between occupations), lack of bargaining power with women and entry barriers for them that might stem from the societal notion about women’s ability to work hard and be productive.[4]

Experts believe that a decrease in the gender pay gap could lead to a decrease in poverty and an increase in a country’s GDP. Per a study by the Institute for Women’s Policy Research in USA, 60% of women would be able to earn more in that country only if men and women were paid equally. This proves that even the most developed countries haven’t yet been able to close the gap even though the motivations are strongly present. [5]

India will have to look at ways to close this gap in the future in order to make full use of labour productivity of its 48% women and the demographic dividend that would increase the number of employable men as well as women in the country. According to the World Economic Forum, it will take another 100 years to close the gap but first steps need to be taken now. These steps shouldn’t just include labour laws but also opportunities for women to develop human capital in form of education, skills and training. On an enterprise level, companies should be incentivised and motivated to become non-discriminatory in their hiring and firing decisions. For India, formalisation of jobs is also a necessity as the country constantly struggles with its inability to create jobs in the formal sector and companies resorting to employ casual labour without any social security benefits. Any change in the conditions of women has to be accompanied by a change in the societal attitude. Hence, the need for the mindset to change is immense and we clearly have a long way to go.

[1] Korn Ferry Media & Press, Korn Ferry Global Gender Pay Index Analyses Reasons Behind Inequalities in Male and Female Pay, 2018 April 26, Retrieved from https://www.kornferry.com/press/korn-ferry-global-gender-pay-index-analyzes-reasons-behind-inequalities-in-male-and-female-pay/

[2] Mathur N, Women In India Earn 20% less than men: Monster Salary Index, 2018, March 08, retrieved from https://www.livemint.com/Industry/suYZrTvQUwT704T0EKAA5M/Women-in-India-earn-20-less-than-menMonster-Salary-Index.html

[3] Kleven H., Landais C., Sogaard J., Children and Gender Inequality: Evidence From Denmark, 2018 January. Retrieved from https://www.henrikkleven.com/uploads/3/7/3/1/37310663/kleven-landais-sogaard_nber-w24219_jan2018.pdf

[4] Varkkey B., Korde R., Parikh D., Indian Labour market and Position of women: Gender Pay Gap in the Indian Formal Sector, 2017 July, Retrieved from https://wageindicator.org/documents/publicationslist/publications-2017/varkkey-b-korde-r-parikh-d-2017-indian-labour-market-and-position-of-women-gender-pay-gap-in-the-indian-formal-sector-working-paper-for-rdw-2017-conference-wageindicator-foundation-amsterdam

[5] Mili J., Huang Y., Hartmann H., Hayes J., The Impact of Equal Pay on Poverty and Economy, 2017 April 05, retrieved from https://iwpr.org/publications/impact-equal-pay-poverty-economy/


Image Source- The Economist

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Written By Pragya Mishra

Economics Graduate

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