Estonian women paid less than men

A recent study shows that, in Estonia, women earned only 72% as much as men, on average, in 1998-2000. Just one-third of the pay gap is explained by observable differences in human capital, occupations and economic sector. Most commentators attribute the pay gap to the horizontal and vertical segregation of the labour market.

In October 2004, the PRAXIS Centre for Policy Studies presented the results of a study Men and women in the Estonian labour market: assessing the gender wage gap (in Estonian). The study examined the main reasons behind the gender pay gap and assessed the scale of the divide, using the micro-level data of Labour Force Surveys (1998-2000). This survey is conducted by the Statistical Office of Estonia and covers a representative sample (around 12,000 people per year) of the Estonian population aged 15-74.

The report emphasises that, in the transformation from a planned to a market economy, the pay gap between men and women has narrowed. In 1994, women earned on average 71% of the male wage level; by 2001, this percentage had risen to 75.7%. The main reasons are structural changes in the economy. The transition of the economic system has increased the relative pay of highly skilled labour and, in Estonia, women are, on average, better educated than men. Therefore, the income of women rose relatively more than for men. The rapid development of the services sector has also led to a higher demand for female labour, resulting in higher wage growth for women.

However, despite the narrowing of the gender pay gap, it is still relatively high compared with the other new EU Member States and with the EU15. The general inequality of wages in Estonia may contribute to the high gender pay gap.

On average, the net pay of women was 72% of the net pay of men in the period 1998-2000. Women earned less than men in all categories (see Figure).

Of the 28% pay difference observed, 8-9 percentage points can be explained by various factors, such as education, nationality, language skills, family background, ownership and size of the company, working time, contract type, region, occupation and sector. However, the additional 20 percentage point difference - around two-thirds of the gender pay gap - remains unaccounted for.

The unexplained portion of the pay gap may be the result of unobserved differences of men and women, or discrimination. It has been shown by Tairi Rõõm (2004) that the labour market behaviour of men and women in Estonia is different, and these behavioural differences explain some of the gender pay gap. For example, unemployed women are less active in their search for work and accept lower wages than their male counterparts. Other unobserved characteristics, which may be systematically different among men and women, such as motivation to work, can also partially explain the pay gap. In addition, more precise data on occupations would probably provide further explanation. Nonetheless, at present, it is not possible to distinguish how much of the pay gap is attributable to unobserved differences and how much to discrimination.

The study has gained considerable media attention in Estonia. The prevalent attitude among commentators is that the gender pay gap is mainly the result of vertical and horizontal segregation. For example, the leader of the Confederation of Estonian Trade Unions (Eesti Ametiühingute Keskliit , EAKL), Harri Taliga, stated in the Estonian daily newspaper Postimees : 'I think that the pay gap comes from the fact that women work more in low-paid occupations and in different fields than men. In any case, I urge everybody to fight for their rights.' (6 October 2004, author’s translation).

References

Rõõm, T. and Kallaste, E., Naised-mehed Eesti tööturul: palgaerinevuste hinnang, Poliitikauuringute Keskus PRAXIS Poliitikaanalüüs nr 8/2004.

Rõõm, T., Search intensity and wage differences, Bank of Estonia Working Papers 2004, No. 1.