Gender Wage Differentials In China's Urban Labor Market

Gender Wage Differentials in China's Urban Labor MarketGender wage differential in labor markets has always been one of the main subjects of labor economics. At present, due to the lack of micro dataset, the number of related research on Gender wage differentials in China's labor market is relatively small. Based on systematic study of wage differential theories and empirical methods and by using micro-econometric methods, this paper systematically analyzes the performance characteristics and influencing factors of gender wage differentials in China's urban labor market.Under the conditions of perfect competitive labor market, wage heterogeneity is due to workers'ability differences or differences in working environment characteristics which affect productivity. Human capital theory suggests that differences in human capital will lead to wage differentials between different workers; compensating wage differential theories suggest that differences in working environment characteristics may lead to wage differentials between different workers. Under the conditions of imperfect competitive market, wage differentials between workers may not only reflect differences in productivity. Discrimination theory suggests that individuals with the same productivity may be paid differently only because they belong to different labor groups. Thus, discrimination may be an important factor of wage differentials in noncompetitive labor market. Discrimination theory related to labor mobility barriers suggests that monopoly, searching costs, crowding, market segmentation and other factors which affect labor mobility may result in labor market discrimination; statistical discrimination theory suggests that the fact that employers cannot acquire full information of employees'productivity may also lead to labor market discrimination.According to the theories of wage differential in labor market, economists have developed some decomposition methods of wage differentials between different labor groups. Traditional wage differential decomposition methods usually divide wage differential into two parts: one part is due to the differences in individual characteristics and the other is due to labor market discrimination. With further research on wage differentials, economists recognized that wage distributions of different labor groups are usually significantly different from each other, so they proposed decomposition methods of wage differential on wage distribution. The core of these methods is to transfer the decomposition of wage differential from the mean to different quantiles of wage distribution and then analyze and compare the wage differential and influencing factors of different income groups. In the early 1980s, based on the crowding hypothesis, economists proposed a new method of wage differential decomposition by taking into consideration of occupational segmentation. In this method, wage differential is decomposed into wage differences within and between occupations and these two differences are further decomposed into differences in individual characteristics and labor market discrimination. This method provides a more perfect framework for wage differential decomposition. In 1990s, in order to analyze changes in the wage differential, economists extended the decomposition methods of wage differential to the time dimension. But these methods have not been widely used by economists because the effects of labor market discrimination cannot be completely separated from other factors.Based on decomposition methods of wage differential, economists analyzed gender wage differentials in different labor markets of different countries and most of the results show that gender discrimination is an important source of the gender wage differentials. In this paper, by taking into consideration of China's reality, we propose some wage differential decomposition methods which are suitable for the behavioral characteristics of Chinese labor force and labor market environment.Firstly, we propose decomposition methods of changes in the wage differential based on traditional model and fixed effects model of wage equation, and then analyze the average gender wage differential and its changes in China's urban labor market by using 2002 CHIP data and 1991-2006 CHNS data. The results show that in China's urban labor market, the average log hourly wage differentials between male and female workers is 0.1744 and gender discrimination can accounts for 77.59% of this difference while gender characteristic differences accounts for only 22.41% of the difference. Clearly, gender discrimination is the main source of gender wage differential. From 1991 to 2006, the gender wage differentials did not show significant changes in trend, but gender discrimination showed a clear upward trend, while gender characteristic differences has shown a narrowing trend. This suggests that although changes in gender characteristic differences can help narrowing the gender wage differential, but the increase of gender discrimination will prevent narrowing the gender wage differential. Thus, compared to the enhancing of female's human capital level, controlling the increase trend of gender discrimination will be more important in reducing gender wage differential.Secondly, based on quantile regression model of the wage equation, we propose the corresponding wage differential decomposition method, and analyze gender wage differentials on different quantiles of the wage distribution by using labor force survey data in the Northeast cities of China in 2006. The results show that on all the quantiles of the wage distribution, the wage of male workers is significantly higher than that of female. At the bottom of the wage distribution (low-income group), characteristics which affect wage of male are better than that of female, and gender wage differentials are partly caused by individual characteristics and partly caused by gender discrimination; over the middle of the wage distribution and above (middle and high income groups), characteristics which affect wage of female are better than that of male, and gender wage differentials are entirely caused by gender discrimination. With the increasing of quantiles on the wage distribution, gender wage differential and gender wage discrimination are narrowing, but the explanatory power of gender discrimination to the gender wage differential is expanding. Therefore, in order to gradually eliminate employment discrimination and wage discrimination against women in low-income group, on the one hand, the government should enhance female human capital level through education and training; on the other hand, the government should be dedicated to the design and implementation of fair employment system and wage distribution system. Because female characteristics which affect wage are better than that of male in middle and high income groups, the role of enhancing women's human capital level to decrease gender wage differential is limited, so in order to gradually eliminate employment discrimination and wage discrimination against women and decrease gender wage differential more effectively in these groups, the government should be dedicated to the design and implementation of fair employment system and wage distribution system.Thirdly, we propose a wage differential decomposition method based on multilevel models of wage equation, and analyze the impact of regional economic environment on gender wage differential by using 2002 CHIP dataset. The results show that in all regions, gender discrimination is the main cause of gender wage differential. Raising the level of regional marketization will increase gender wage discrimination, while the increase of unemployment rates will reduce gender wage discrimination. Gender wage differentials in different regions are the result of several factors, so a simple comparison between regions cannot determine the impact of regional factors on wage differentials. As we can see from the discrimination level and the explanatory power of discrimination on gender wage differentials, eastern region has the highest level of gender discrimination and western region has the lowest level of gender discrimination while the gender discrimination in central region is at the middle level, indicating that the gender discrimination in developed areas is clearly higher than less developed areas. Therefore, government should balance regional development. At the same time of increasing marketization, improving economic and social development and increasing employment in less developed areas, government should pay more attention to social justice and increase labor mobility among various regions, which will play an important role in reducing the gender wage discrimination which is caused by regional factors.Fourthly, we present a wage differential decomposition method based on double sample selection model of wage equation, and analyze the gender wage differentials of different ownership sectors by using labor force survey data in the Northeast cities of China in 2006. The results show that the gender wage differential in the state sector is lower than that in the non-state sector, which suggests that with the improvement of the marketization, gender wage differential shows a trend of expansion. In both sectors, gender discrimination is the main cause of gender wage differentials. In terms of discrimination level, wage differential in the state sector and non-state sector due to gender discrimination are 0.1295 and 0.3007 and gender discrimination in non-state sector is higher. In terms of explanatory power of discrimination on gender wage differentials, gender discrimination in the state public sector and non-state sector explains 180.61% and 104.96% of the gender wage differentials respectively and the explanatory power of discrimination on gender wage differential in state sector is higher. The main source of gender discrimination in two sectors is different. In the state sector, gender discrimination is mainly from wage discrimination within sectors, while in the non-state sector, gender discrimination is mainly from labor participation and employment discrimination when selecting sectors. Therefore, designing and implementing fair wage system and providing fair competitive positions, job promotion opportunities and wage levels for women will help reducing the level of gender wage discrimination and decreasing gender wage differential in state sector; increasing employment through expanding labor demand and eliminating female labor participation and sector selection barriers will be more important in reducing the level of gender wage discrimination in non-state sector.Fifthly, based on quantile regression of wage equation and counterfactual analysis, we analyze the influence of education on gender wage discrimination by using labor force survey data in the Northeast cities of China in 2006. The results show that gender wage differentials within group is smaller when the group's educational level is higher; there is significant wage discrimination against women in all groups, and in the groups with low level of education, wage differential due to gender discrimination is larger, while in the groups with high level of education, wage differential due to gender discrimination is smaller. The distribution curve of discrimination at different educational level shows that education can help narrowing wage differential within groups; difference of wage discrimination suffered by women with universities and higher educational level is small between individuals, while difference of wage discrimination suffered by women with senior high school, secondary school, junior high school and lower educational level is significant between individuals. Women with higher wage suffer smaller wage discrimination. With the increase of wage, wage discrimination against women moves to the negative direction under the predicted wage distribution curve. Education cannot only increase women's income by enhancing their human capital level, but also reverse the overall distribution of gender wage discrimination. Therefore, on the one hand, the government should be dedicated to the design and implementation of fair employment system and wage system in order to gradually eliminate the employment discrimination and wage discrimination against women; on the other hand, the government should enhance human capital level of women, especially those at the low wage level, by developing education and training with greater efforts, which will help alleviate gender wage differential in urban labor market.Finally, we propose a method of decomposing changes in the wage differential by considering occupational segregation, and analyze the impact of gender occupational segregation on gender wage differential changes according to the 1995 and 2002 CHIP data. The results show that from 1995 to 2002, there is an increasing trend of gender occupational segregation. The Duncan coefficient, which is an indicator of gender occupational segmentation, increases from 0.1883 to 0.2238. In 1995, within-occupation and between-occupation wage differential resulted from occupation segmentation account for 69.57% and 30.43% of total gender wage differential respectively. Wage differential within occupations is mainly from wage discrimination while wage differential between occupations is mainly from gender characteristic differences. In 2002, within-occupation and between-occupation wage differential resulted from occupation segmentation account for 66.56% and 33.44% of total gender wage differential respectively. Wage differential within occupations is all from wage discrimination, while wage differential between occupations is mainly from employment discrimination. From 1995 to 2002, log hourly wage differential between male and female is increased by 0.0480, which accounts for 33.97% of the overall gender wage differential in 1995. The rising of gender discrimination plays a significant role in the increasing of gender wage differential. Change in gender characteristic differential within occupations is in favor of narrowing the gender wage differential within occupations, but a significant increase of wage discrimination makes the overall gender wage differential within occupations increase significantly. The explained change in wage differential within occupations only accounts for 3.45% of the total change in wage differential, and the remaining 96.55% of the wage differential is entirely caused by changes in employment discrimination. Therefore, the government should focus on the elimination of obstacles confronted in female employment and reduce gender occupational segregation due to employment discrimination, which is an effective way of reducing gender wage differential.The results of this paper will not only help deepening our understanding of labor market operation rules, but also help the evaluation and design of labor market public policy, and thus have theoretical and practical significance.