Understanding the Evolution of Gender Wage Gaps in Ukraine

1
Understanding the Evolution of Gender Wage Gaps
in Ukraine
Ina Ganguli Harvard University Katherine
Terrell PREM-Gender, University of Michigan World
Bank Workshop on Women in the ECA Region
Jan. 24, 2008
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Extensive Interest in Evolution of Gender Wage
Gap in ECA

• Would the gap grow in transition from socialist
  to market-based economy?
• Arguments for and against
• Evidence is Mixed
• Brainerd (2000) grew in 2 FSU but fell in 4 CEEs
  and no change in 1 CEE
• Newell and Reilly (2001) no rise in 16 TEs in
  1990s
• Orazem and Vodopivec (1995) Fell in Slovenia

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Extensive Literature on Evolution of Gender Wage
Gap in ECA

• However, changes in gender gaps are due to many
  different factors Returns to labor
• Changes in the level of discrimination
• (Joliffe, 2002 for Bulgaria Joliffe and Campos,
  2004 for Hungary)
• Relative changes in returns to HC
• (Münich, Svejnar and Terrell, 2005 Liu et al.,
  2000)
• Wage-setting policies
• (Blau and Kahn,1997 2003 DiNardo, Fortin,
  Lemieux, 1996)

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Extensive Literature on Evolution of Gender Wage
Gap in ECA

• Changes in gender gap due to various factors
  Composition of the labor force
• Productive Characteristics
• (Hunt, 2002 Orazem and Vodopivec, 1995)
• Occupational segmentation
• (Jurajda, 2003 for CZ Ogloblin, 1999 for
  Russia).
• Other transition factors, e.g. privatization
• (Brainerd, 2002 Liu et al., 2000 Munich,
  Svejnar and Terrell, 2005)

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Our Research Questions

• 1. Size of gender gap across the wage
  distribution in 1986, 1991 and 2003
• 2. To what extent are changes in the gaps due
  to
• a) Returns (Institutions)
• Minimum Wages
• Discrimination
• b) Composition of labor force
• 3. Differences in Private v. Public Sector
  composition and wage setting practices?

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Our Contribution

• First micro-economic evidence on Ukraines gender
  gap during and after communism
• Look at impact of wage-setting institutions - how
  does the MW affect the gender gap in Ukraine over
  time?
• Previous transition studies focused on the
  average gap. We examine the gap across the
  distribution.

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Ukraines Transition

• Independence in 1991
• Gradual transition (1992)
• price liberalization privatizn.
• Decline in GDP, hyperinflation, small change in
  emp.
• Min Wage (92)
• Entry into the EU

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Data Ukrainian Longitudinal Monitoring Survey
(ULMS)

• Carried out April-July, 2003
• Retrospective questions of jobs in 1986, 1991
• Three cross sections (1986, 1991 and 2003)
  full-time men and women over 1,300 men and 1,400
  women in each year.
• Data issues
• Retrospective
• Recall error and representativeness of 1986
  1991 samples
• Selection
• Use of FT workers and people with wage 0
• Transition related
• Inflation
• Wage arrears (12 among men and 9 among women)
  but net contractual monthly salary

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Gender Gap
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Public and Private Gaps, 2003

• Larger mean gap in public sector driven by
  difference at the top of the distribution
• Glass ceiling is most notable in Education,
  Health Social Protection

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Three Puzzles

• Why did the gap in the lower end of the
  distribution fall from the communist period to
  the market period?
• What explains the persistence of the gaps at the
  top end of the distribution (glass ceiling) from
  communism to markets?
• Why is the a larger gap in the upper end of the
  distribution in the public sector than in the
  private sector in 2003?

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Counterfactual Analysis, Using Machado and Mata
(2004) Method

• Method
• Create counterfactual densities where women are
  given mens characteristic (Xs) in one scenario
  and then women are given mens rewards (bs) in
  another scenario.
• Summary of Static Findings
• Differences in pay structure (bs) are much more
  important than differences in characteristics
  (Xs) in explaining the gaps in every year --
  explain more the 75 at each point in
  distribution

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Counterfactual Analysis Over Time Summary of
Findings

• How did changes in the distribution of womens Xs
  change the gaps?
• No effect on mean.
• Helps reduce gap in the bottom of the
  distribution
• No change in the percentiles at the median and
  above
• Xs at the bottom werent as good in 1986, but Xs
  at the top were similar ? explains puzzles 1 and
  2.
• How did changes in womens bs affect change in
  the gaps?
• Increased mean gap
• However, contributed to a reduction in gap at top
  and an increase at the bottom ? does not help
  explain our puzzles.

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Counterfactual Analysis, Over Time Summary of
Findings

• How did changes in the distribution of mens Xs
  over time change the gaps?
• Raised mean gap
• ? decline in mens productive characteristics
  lead to widening of the gap at bottom 10 but not
  elsewhere in the distribution
• How did changes in mens bs affect changes in the
  gaps?
• Lowered the Gap ? Mens bs declined over time
• Contributed to reducing gap in the bottom and
  increasing gap at the top
• ? Helps explain Puzzle 1 - narrowing of the gap
  at bottom

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Kernel Density Estimates and Minimum Wages in
1986, 1991, 2003
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Counterfactual Analysis, Public vs. Private
Summary of Findings

• In both sectors, gap is mainly due to difference
  in bs, more important in Private Sector
• Private Sector If women had mens Bs, mean gap
  would have fallen to nearly zero and would have
  fallen more in the top half than in the bottom
  half distribution.
• Public Sector If women had mens bs, the mean
  gap would have also fallen and more in top half,
  but effect is smaller than in private sector.
• Differences in Xs small, but composition effect
  is different in each sector If women would have
  had mens Xs
• Private Sector mean gap would not have changed
  (but U shaped across distribn).
• Public Sector mean gap would not have changed
  but would have grown at bottom and fallen
  slightly at top. Lower glass ceiling in public
  explained by womens relatively worse
  characteristics

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Another explanation for rise in floor

• Importance of Min Wage for women

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Conclusions on Evolution of Gender Wage Gap in
Ukraine

• Mean gender gap declined from socially planned
  economy (0.40-0.41) to market driven economy
  (0.34)
• Decline due to narrowing of gap at the bottom
  distribution, no change in gap at the top
• Change in structure of LF from public to private
  jobs put forces on reducing the gap at the top

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Conclusions on Evolution of Gender Wage Gap in
Ukraine

• Explanations
• Decline at bottom due to
• increase in MWs
• improvement of womens characteristics (as those
  with poor characteristics left the L.F.)
• decline in mens rewards
• Lack of change at top due to
• No change in composition of mens or womens
  characteristics (although bs did change and
  contributed to widening)

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Conclusions on Evolution of Gender Wage Gap in
Ukraine

• In 2003, the public sector had wider mean gaps
  than private sector (0.40 v. 0.26)
• due to diff. at top, similar gaps at the bottom
• Explanation
• Both sectors rely heavily on MW, especially for
  women MW relatively high in that year
• Again, men get much higher rewards for their
  labor than women, especially in private
• Public sector, women at top of wage distribution
  have somewhat poorer characteristics than men
  (not in public)