Socioeconomic Impacts of the Gendered Pay Gap in India’s Labour Force

Suryansh is a motivated student pursuing Politics, Economics and Statistics in the 12^th grade at Shiv Nadar School, Gurgaon. He is passionate about making an impact in the worldthrough research. In the future, Suryansh hopes to create change through the arena of politics.

Abstract

The freedom to work – by choice, in conditions of dignity, safety and fairness – is integral to human welfare. Around the world, finding a job is much tougher for women than it is for men. When women are employed, they tend to work in low-quality jobs in vulnerable conditions, and earn much lesser than their male counterparts. Governments around the world have recognized this problem and the Indian Government is no exception. The gender pay gap in India is among the widest in the world and closing this gap can have huge benefits not just for the Indian economy but for its 685 million women. This paper finds out that occupational segregation, biases towards women and ‘time poverty’ of women are the main causes of the gender wage gap in India. The paper assesses the socio-economic impact of the wage gap on women and the economy and evaluates the Government policies for combating the problem. It ends with a discussion section where remedial measures are suggested.

Introduction 

The gender wage gap is defined as the difference between median earnings of men and women relative to median earnings of men (OECD). The gender pay gap is not the same as equal pay. Equal pay is where women and men are paid the same for performing the same role or different work of equal or comparable value. The gender pay gap reveals the overall economic power disparity between men and women in society. It is an indication of what types of jobs (and associated earnings) are occupied by women overall versus men overall (Payscale, 2023). 

In India, the market-determined wages for women performing similar work are considerably lower than those of men (MOSPI, 2022). The national average wage received per day by casual workers for Apr-June 2022 was Rs. 393/day for rural male workers and Rs. 265/day for rural female workers. The corresponding figures for urban workers were Rs. 483/ day for males and Rs. 333/ day for females (MOSPI, 2022). The disparity is greater in urban areas than in rural areas (MOSPI, 2022). Moreover, the gender wage gap has widened in rural areas over the past decade, although it has narrowed in towns (Thakur, 2023).

Historically speaking the wage gap between Indian women and men had reduced from 48% in 1993-94 to 28% by 2018-19. However, the gap increased by 7% between 2018-19 and 2020-21 due the COVID- 19 pandemic (Walter & Ferguson, 2022). As per International Labour Organisation estimates the gender pay gap in India stands at 27% as of 2023. The gender pay gap in India is among the widest in the world.

A report titled ‘The Glass Ceiling- Leadership Gender Balance in NSE 200 Companies’ highlights the gender pay gap in India’s corporate sector. Women executives in India earn an average of Rs 85 for every Rs 100 earned by their male counterparts. The pay gap widens as we move up the hierarchy. The report, demonstrates that while women at the individual contributor level get 2.2 per cent less than men working in similar roles, the pay gap widens to 3.1 per cent for managers/supervisors as well as 4.9-6.1 per cent for directors and senior executives (Agarwal, 2022).

While the gender pay gap is slowly narrowing, at the current rate of progress it will take more than 70 years to close it completely (Walter & Ferguson, 2022). An analysis of gender wage gap also warrants a discussion of the low female labour force participation or FLFPR in India. India’s FLFPR has been falling for the last three decades despite the growth in it’sGDP. The gap between India’s male and female labour force participation rate stands at a staggering 50% (ILO estimates, 2022). This gender divide also reflects in the wide gap between the male and female wages in the country.

Some factors contributing to the gendered wage gap in India include:

1) Occupational Segregation: Occupational Segregation results in gender pay gap when women and men tend to concentrate in different industries and different jobs, with female-dominated industries and jobs attracting lower wages. “Women workers remain highly over-represented in the low value-added industries as well as occupations, such as agriculture, textiles, and domestic service,” These low-value-added industries mean that women continue to be on the lower end of the pay scale (Basole, 2018).

2) Cultural Biases: Gender pay gaps arise because of various kinds of biases that women face. These include Conscious and unconscious discrimination and bias in hiring and pay decisions is a global cause of gender pay gap (WGEA, 2023). In the Indian context, FSG survey 2023 findings reveal five kinds of biases against hiring females (Goenka et al., 2023). 

3) Glass ceilings from gendered leadership : A study conducted by IIM-Ahmedabad argues that salaries of women executives in India are low because, it’s mostly men who decide how much a woman is paid, and women find fewer mentors and role models. The IIM-A studyshows that women representation at the senior management level stands at just 7% while at the top management level it is a meagre 5%. 21 organisations out of the 200 have only one woman in top management whereas 76 do not even have a single woman in top management. The number of women directors at the top level in NSE 500 companies has jumped to 16 per cent in 2022 from 4.5 per cent in 2014 owing to regulatory requirements. However, this has not translated into equal pay for women executives. The pay gap widens as we move up the hierarchy. In the global context an ILO report observes, “When women are managers, they tend to be more concentrated in management support functions such as human resources and financial administration than in more strategic roles. This brings down the average salary of female managers compared to that of male managers” (Bureau for Employer’s activities, 2019). This is true in the Indian context too. In India, 60 % of Human Resources roles get closed with women applicants (India Today, 2022).

4) Biases against mothers: Motherhood pay gap or motherhood penalty is defined as lower wages for mothers compared to non-mothers. (Walter & Ferguson, 2022). Some instances of motherhood penalty are  “when employers perceive mothers as being less competent and committed than non-mothers, and hold them to much higher professional standards. They are also hired and promoted less often, and generally receive lower salaries (Patnaik, 2021). Similar assertions regarding less hiring of mothers are made by Das and Zumbyte,  who have investigated the motherhood penalty in the Indian context. Using regression analysis they established an increasingly negative relationship between the probability of Indian women getting employed and the presence of a young child in their households. Their results show that although the onus of childbearing may have reduced, that of caregiving has increased (Das & Zumbyte , 2017).

An amendment to the Act in 2017 increased paid maternity leave from 12 to 26 weeks. Though well-meaning, there have been certain unintended fallouts of this change. Firstly, “it fortifies notions of care-giving being primarily the onus of the woman, and thus reinforces and raises the risk of women being subject to the motherhood penalty” (Patnaik, 2021). Considering that the burden of paid maternity leave falls on the employer, it has become another factor contributing to lesser hiring of female employees (Mittal, 2023). A survey by Teamlease has found that, more than 50% of the male employees felt that there is an increase in gender bias against women in the last two years in spite of the implementation of the Maternity Benefit Act. 36% of the male respondents felt that both the parents should get paid leave for childcare (India Today, 2020).

5) Biases in education: Gender norms and patriarchal structures in India perpetuate investments in male education and male dominated professions. It leads to a vicious cycle of limited opportunities for women education and perpetuating occupational segregation and wage gaps. Lack of appropriate skill, education and training is also commonly believed to be a for the wage gap amongst Indian women. STEM majors are likely to dominate higher-paying occupations, and women in India are significantly outnumbered by men in these majors (Sonali, 2023). Additionally, Women are unable to devote much time to job trainings, unlike men who can undergo long job trainings making them earn more than women workers (Javeed & Manuhaar, 2013). The burden of household duties leads many young girls to sacrifice their education and hence limits their earning potential. Gender gaps in financial literacy, also give rise to wage gaps (Sonali, 2023).

6) Time poverty of Indian women: The International Labor Organisation (ILO) estimates that unpaid care work is amongst the most critical barriers preventing women from joining and remaining in the workforce. This disproportionate burden of unpaid care work creates what is called “time poverty”, which inhibits women’s ability to dedicate time to paid work and acquire the skills necessary to seek better job opportunities. (Nikore, 2022). The time use survey conducted by the National Sample Survey Office (NSSO) in 2019 confirms a persistent pattern of “time poverty” suffered by women in India (Mehta & Mehta, 2020). Indian women do the most unpaid care and domestic work of any country globally, except Kazakhstan (Mehta & Mehta, 2020). Women in India spend an average of 7.2 hours on unpaid work, while men spend 2.8 hours (Express News Service, 2023). The NSSO survey, 2019 showed that men spent a longer time in employment-related activities (459 minutes per day) than women (333 minutes per day) (Mehta & Mehta, 2020).

Socioeconomic Impacts of The Gender Wage Gap

The Gender Gap Report, 2023 prepared by Payscale, estimates the impact of gender wage gap on a women’s lifetime earnings. The difference between lifetime earnings for the average male worker and for the average female worker (when all compensable factors are controlledfor) amounts to roughly $70,000 for no attributable reason other than gender The difference increases to $ 900,000 when compensable factors are uncontrolled (Payscale, 2023). The increase is attributable to, gendered opportunity barriers to holding higher-level, higher-paying jobs. It is to be noted that these estimates do not account for lost benefits, investments, promotions, or other compounding factors on lifetime wealth.

We know that the gender wage gap in India is much wider than the global averages. In the absence of India specific research, by using these global estimates we can assume that the lifetime economic loss for Indian women would be much higher.

Apart from economic loss, the gender wage gap also translates into other negative consequences for women such as hindering their economic empowerment, amplifying family and societal pressures on them, perpetuating gender inequality and dampening their spirit. Since pay and quality of work are directly correlated low pay can also impact the quality of work

Gender wage gap not only affects individual women’s economic prospects but also hurts overall economic growth. A McKinsey Global Institute report finds that $12 trillion could be added to global GDP by 2025 by advancing women’s equality. The corresponding estimate for India’s incremental GDP is $0.7 trillion. The report estimates that with an estimate of a staggering 16% increase in GDP, India’s gain could be more than any other country. (Woetzelet al., 2015)

At the organizational level also, there are multiple benefits that can arise from having a gender diverse workforce and equitable practices. A survey conducted by the Peterson Institute for International Economics in 2016 found that companies with at least 30% of women in senior management had a 15% higher profit. Reducing the wage gap also translates into lower employee attrition, creation of a better brand and increased employee productivity.

Policy Recommendations

India enacted the Minimum Wages Act in 1948 (Walter & Ferguson, 2022). The Act provisions for statutory fixation of minimum wages that must be paid to skilled and unskilled labours irrespective of gender. This was followed by the adoption of the Equal Remuneration Act in 1976 (Walter & Ferguson, 2022). This Act provides for equal pay to men & women for equal work. In 2019, India consolidated both the legislations and enacted the Code on Wages, 2019. This code too provides for the prohibition of discrimination on the basis ofgender (Deshpande & Ungender Blog Team, 2021).

The International Labour Organization (ILO) adopted the Equal Remuneration Convention, 1951 (No.100) that solidified the principle of equal remuneration for men and women. It was ratified by India in 1958 (Deshpande & Ungender Blog Team, 2021). The convention recognises the difference between the principle of ‘work of similar nature’ and ‘work of equal value’ and adopts the latter. The latter is more comprehensive and progressive as by using this principle, two completely different jobs can be taken and analysed using factors such as the effort needed, required skills, decision making involved while working etc. It is quite unfortunate that though India ratified the convention, the Indian law doesn’t adopt the principle of ‘work of equal value’ to comprehensively address the problem of gender wage gap.

In 2005, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) was introduced (Walter & Ferguson, 2022). It is a key safety net for rural Indian women in times of distress and guarantees them a wage equal to men. MGNREGA has benefited rural women workers and helped reduce the gender pay gap (Walter & Ferguson, 2022). However, it is important to note that MGNREGA wages are lower than even minimum wages for agriculture in 17 out of 21 major states (Aggarwal & Paikra, 2020). There is also a perpetual shortage of work under the scheme along with delay in payments. To encourage women to participate, childcare facilities and crèches at worksites are required, but overlooked (SunainaKumar, 2022).

In 2017, the Government amended the Maternity Benefit Act of 1961, which increased the ‘maternity leave with pay protection’ from 12 weeks to 26 weeks for all women working in establishments employing 10 or more workers. This was expected to reduce the motherhood pay gap among mothers in the median and high-end wage earners working in the formal economy. We have discussed in the preceding pages the unfortunate negative impact that this amendment has had on female employment.

A McKinsey Global Institute Report links, for the first time, gender equality in work with gender equality in society, saying that, “The former is not possible without the latter” (Bhattacharya, 2018). Gender equality in society is the fundamental pre-requisite to close the gender wage gap, eliminate gender based segregation of jobs and balance the burden of unpaid care on women. Policies and programs need to be geared for changing the gender norms at all levels of society. Campaigns should be created for promoting gender equality, sharing household workload and respecting female employment. 

This needs to be followed with creating a female workforce friendly environment at organizational levels. Pay transparency, investment in female training and child care support, flexible work arrangements, sensitization of male employees are some steps that can help.

Government should rope in private sector and charitable organizations for contributing to public awareness campaigns. Investment in reliable child care facilities, female education, mandating more female employment at senior levels are certain measures that can help bridge the wage gap. Government should also adopt the principle of “ Equal pay for work of equal value” in the law.

India is the fastest growing economy in the world today. In order that the rewards of India’s development are equitably distributed, bridging the gender wage gap is a fundamental pre requisite. Gender wage gaps have seen a decline over the past decade but the pace of change is not fast enough to get timely benefits to half it’s population. The systemic causes of this wage divide call for consistent and massive action on the part of the government, society and employers.

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