The Australian gender wage gap
Date
2017
Authors
Stephan, Mary
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Abstract
In the Australian labour market, men earn higher wages than women
and this difference is persistent. The purpose of this thesis is
to examine the gender wage gap and its determinants over time, to
measure the gap using different methods compared to prior
Australian research, and to measure the gap by sector of
employment. The gender wage gap is estimated using the real
hourly wages (in 2012 dollars) of men and women in the Australian
labour market.
The thesis begins with a review of Australian and international
studies that have measured the gender wage gap and of possible
explanations for its existence. The literature review provides a
survey of the empirical methods that have been used to measure
the gender wage gap and of empirical issues that arise when
measuring the gap. Further, the literature review provides a
discussion of labour supply and demand side factors that could
influence the gap.
The analysis in this thesis begins by measuring and comparing the
male and female mean and distributional labour market
characteristics and the returns to characteristics in 2001 and
2012. The results show that women’s labour market
characteristics have improved compared to men’s
characteristics; however, women’s relative returns to
characteristics have not increased.
Next, the gender wage gap is estimated at the mean and along the
wage distribution, decomposed, and compared over time. The
results show that the mean and distributional gender wage gap has
increased over time and the gap is increasingly unexplained by
differences in labour market characteristics. The comparison over
time extends prior static estimates of the gender wage gap.
The gender wage gap is then estimated using panel data and fixed
effects methods to account for time-invariant unobserved
individual heterogeneity. This is the first time that the
Australian gender wage gap has been measured by taking into
account individual fixed effects. The fixed effects results are
compared with the results of traditional estimation methods and
prior research.
The comparison shows that time-invariant unobserved individual
heterogeneity constitutes 62 per cent of the gender wage gap and
that the Australian gender wage gap has previously been
overestimated by approximately 7 percentage points. The inclusion
of time-invariant unobserved individual heterogeneity in the
estimation provides a clearer measure of gender based earnings
differentials.
The gender wage gap is measured by sector of employment – the
Australian private and public sector – using panel data and
time-invariant individual fixed effects methods. The results are
compared with findings from traditional methods and prior
research. This is the first time that the Australian
sector-specific gender wage gap has been estimated by
incorporating time-invariant unobserved individual
heterogeneity.
The results show that traditional estimation methods overestimate
the gender wage gap by 6 percentage points in the private sector
and 4 percentage points in the public sector. Time-invariant
unobserved individual heterogeneity explains 42 per cent of the
gender wage gap in the private sector and 41 per cent of the
gender wage gap in the public sector.
Further, the distributional sector-specific gender wage gap is
larger and increases faster in the private sector compared to the
public sector. The sector-specific gender wage gap is
increasingly unexplained by differences in labour market
characteristics along the wage distribution.
To the knowledge of the author, this is the first time that very
detailed estimates of the Australian gender wage gap have been
compared over time. This is also the first time that the
Australian gender wage gap has been measured by taking into
account time-invariant individual fixed effects. The results
highlight that the gender wage gap has increased over time and
that unobserved individual heterogeneity need to be incorporated
in the estimation of the Australian gender wage gap as
traditional estimation methods tend to overestimate the gap.
Keywords: Gender wage gap; fixed effects; Australian public and
private sectors; wage distributions; decompositions.
Description
Keywords
gender wage gap, fixed effects, Australian public and private sectors, wage distributions, decompositions
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Thesis (PhD)
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DOI
10.25911/5d76324b3ad69