Why women earn less – and how to fix it

In many countries around the world, women earn substantially less than men. This earning differential, which is also known as the gender pay gap (GPG), is estimated to be around 20 per cent around the world. In many countries, these wage disparities cannot be explained by differences between men and women in terms of individual or labour market characteristics. Rather, they are often explained by discrimination.

During the last decade, the policy attention towards the reduction of the GPG has considerably increased. The United Nations Sustainable Development Goals explicitly mention the objective that women and men get equal pay for work of equal value (target 8.5). Reducing the GPG represents an important step to achieving this goal. Multi-stakeholder international coalitions, such as the Equal Pay International Coalition, have also been established to help countries progress in reducing the GPG.

These international efforts have also been matched by a series of country-level initiatives involving governments, trade unions and employers. In Pakistan, the Organization of Islamic Cooperation 2016 Plan of Action for the Advancement of Women included the objective of “increasing women’s income through equal pay”. A series of initiatives at the national and provincial levels are being promoted by the Government such as the use of gender-neutral job evaluations, in line with the provisions of the ILO Equal Remuneration Convention, 1951 (No 100).

Recent data from the ILO indicates that the gender pay gap persists in Pakistan. After adjusting for differences in employment distribution between men and women, using the factor-weighted measure of the GPG, it was found that women still earn, on average, 25 per cent less per hour than men. Furthermore, since women tend to work fewer hours per month compared to men, the monthly wage gap is even more pronounced at 30 per cent.

The data also shows that the GPG is higher for individuals above the age of 35, potentially because women who return to the labour market after childbirth need to take more flexible work arrangements, which often offer lower wages. The GPG is also lower among more highly educated individuals. This suggests that acquiring education helps women overcome, at least partially, some of the barriers they face to decent employment.

Lack of adherence to labour laws also significantly contributes to the gender pay gap in Pakistan. Specifically, the pay disparity is pronounced in the informal economy and the private sector, while it is nearly negligible in the formal economy and among public sector employees. This indicates that higher compliance with labour legislation enables women to achieve wages comparable to men's.

What is more, these wage differentials cannot be explained by differences in the characteristics of women and men in employment (such as differences in age, educational attainments or sector and occupation of employment). Rather, they are entirely unexplained by observable factors and potentially driven by discrimination. This is particularly true among low-income workers.

All this calls for renewed policy efforts to reduce the gender pay gap in Pakistan. Evidence from other countries shows that promoting the use of gender-neutral job evaluations to assess the value of work can help companies reduce wage disparities. Only in Balochistan, the legislation explicitly includes the principle of ensuring equal pay for work of equal value, as recommended by the ILO Convention No 100. The legislation in all other provinces should then be amended, to explicitly include the principle of equal pay for work of equal value. This will ensure that interventions can be implemented to ensure that men and women earn the same wage, provided that the value of their jobs is the same.

Pakistan has demonstrated its commitment to undertake legal reforms aligning the laws with the ILO Conventions. The draft labour codes in Punjab and Sindh are taking into account these provisions but need to be promulgated and applied.

Wage policies can also address gender wage inequalities. In particular, raising the minimum wage can disproportionately benefit women, since they are over-represented at the bottom of the wage distribution. It is therefore important that the minimum wage setting process, either through legislation or collective bargaining, explicitly accounts for these gender considerations.

Women in Pakistan cannot work in specific sectors that are considered unsafe (eg mining) or under conditions that could be problematic (eg at night). While these restrictions are meant to protect women’s safety and health, they can create disincentives to female employment and limit their wages. A review should be conducted to assess the effectiveness

of the existing limitations and maintain in place only those that are strictly needed.

The duration of maternity leave could be made equal for each child, while it currently decreases from 180 days for the first child to 90 for the third child (and 0 days for any subsequent child). With respect to paternity leave, it could be considered to make it partially or fully compulsory. The public provision of childcare services should also be expanded,

to promote female re-employment after childbirth.

Finally, promoting compliance with labour legislation will also contribute to reducing the GPG. This is because, in Pakistan, an important part of the GPG is related to the presence of either direct or indirect discrimination. The informal economy includes sectors and jobs that are not regulated by the government, such as domestic work, street vending, and agriculture. Many women are disproportionately represented in these informal sectors, where wages are lower, working conditions are poor and there is little to no social protection. Women in the informal economy are more vulnerable to exploitation, face barriers to accessing legal redress, and often have little negotiating power over their wages.

Strengthening the system of labour inspection and promoting the formalisation of the informal economy will have large positive effects on women’s wages. Promoting the formalisation of informal work means bringing these jobs under the protection of labour laws, making it easier for women to access benefits like health insurance, paid maternity leave, and job security. This can increase women’s wages by formalising their positions, ensuring that they are paid at least the minimum wage and that employers cannot exploit their labour without consequences.

While the GPG is an issue that characterises countries at all levels of economic development, the evidence shows that there are options available to reduce it. These efforts require the involvement of the government, trade unions, employers’ organisations and members of the civil society, in order to implement a comprehensive approach that tackles the root causes behind gender inequalities in the labour market.

On International Women’s Day, we would like to remind everyone that every day is a good opportunity to scale up efforts to build more resilient and inclusive labour markets, where all women and men can fully develop their potential and contribute to a fairer society and more prosperous economy. It is now time to come together and, building on the available evidence, implement coordinated strategies that put an end to unjustified inequalities.

Dr Arshad Mehmood is the federal secretary of the Ministry of Overseas Pakistanis and HRD, Government of Pakistan.Geir T Tonstol is the Pakistan country director for the International Labour Organization (ILO).