The salaries of women have been growing faster than those of men since the financial crisis, Kaspar Oja writes.
The gender wage gap is an important indicator of the functioning of the economy. A considerable wage gap could point to market failures keeping society from moving to higher levels of prosperity.
Controversy in the wage structure sends the wrong signal to labor market entrants, causing long-term problems for society. For example, subpar wages for education workers resulting in a shortage of teachers. While the real estate boom could have motivated too many young people to become construction workers.
Jobs mostly done by women increasingly valued
The gender wage gap in Estonia has been closing mainly because jobs usually done by women are increasingly valued. If the salary of a woman was around 28 percent below that of a man during the 2007 real estate boom, the gap had narrowed to 17 percent by 2019. (The EU average is around 13 percent).
Estonia's gender wage gap is much greater in Eurostat statistics. This is because the EU agency's assessment is based on a different sample and fails to consider small businesses that are quite prominent in a small county like Estonia.
A detailed salary survey is published every four years that makes it possible to analyze how much of the wage gap is down to differences between people doing the same job versus women working jobs that pay less (Figure 1).
The recent survey from 2018 reveals that women made on average €1.4 an hour less than men. Wage difference in the same job counts for a little over €1 of the difference (wage difference), while the rest is down to men and women working different jobs (structural difference).
Figure 1. The gender wage gap and its sources. Source: Statistics Estonia, the author's calculations
The wage gap is closing mainly because salaries are growing faster in sectors that employ more women (Figure 2). Changes in employment structure, or men and women moving between sectors, have not had a major effect. As changing one's field is complicated, this development is anticipated.
Figure 2. Sources of changing gender wage gap. Source: Statistics Estonia, author's calculations
Wage gap has been affected the most by political decisions, technological development and stable economic progress
Salaries have been growing faster as a result of political decisions in some fields. The education workers' pay rises are perhaps the most striking example. As most teachers are women, a quick pay increase for education workers has reduced the wage gap. Wages of caregivers have also been growing at a brisk pace.
The rise of minimum wage also seems to have an effect on closing the wage gap as more women than men work in low-paying jobs. (Figure 3)
It is likely that a part of the effect of minimum salary is transferred to pay that falls between the minimum and average salary – that is to say growth of the minimum salary is also pushing up salaries in other fields. This could explain the faster wage rise of sales clerks and cooks.
The development of information technology has changed financial sector jobs that are mostly held by women. While the number of accountants and tellers has fallen, their salaries have been growing faster than average, which has reduced the gender wage gap.
A considerable part of the wage gap has been explained through construction sector jobs that have been quite well-paid, which was also the case in the 2007 real estate boom. As economic development has been more stable over the past decade, construction sector jobs held mostly by men have seen slower salary advances, which in turn has helped reduce the wage gap.
The gender wage gap has been analyzed using the average of Paasche and Laspeyres indexes to reduce the effect of choice of methodology on average assessments. It needs to be kept in mind that differences in wages regarding the same occupation depend on the level of data aggregation, with professions specified down to four digits of the profession code. A profession represented by the same code could designate a different job.
Therefore, occupational wage difference does not only reflect wage gap that is down to salary for the same work but also includes wage differences that are caused by men and women working different jobs inside an occupation. An analysis sporting this level of aggregation makes it possible to describe general trends affecting the gender wage gap.
Editor: Marcus Turovski