GENDER BASED WAGE GAP AND ITS

MICROECONOMIC IMPLICATIONS

NURFATIHAH BINTI MUSTAFHA KAMARUDDIN EEE130078

SYAFIKAH BINTI KUNHAMOO EEE130087
NAJEEBA MOHAMMED ALTAF EEE130704
NUR SYAMILLAH BINTI MD YUSOP EEE110096

CONTENTS
1. abstract
2. introduction
3. literature review
4. findings and discussion
5. Methodology
6. POLICY IMPLICATIONS AND Conclusion
7. REFERENCES

ABSTRACT
This study examines the unpaid labor wages, that often go unnoticed, and its
microeconomic implications regarding the gender inequality prevalent throughout the economy
itself and thus, this study aims to shed light on the unidentified consequences to the national
economy due gender bias in the workforce. Despite the general misconception being that female
participation in the labour market has come a long way, there is still an under representation of
the struggle that women make when transitioning from education to the workforce. The most
severe factors of which are the societal norms that cause the gender segregation to occur and in
turn perpetuates the ideology that even an increase in educational equality cannot guarantee
equality of opportunities in the workplace. Another key factor identified is the unequal
distribution of unpaid labour among the genders. While it is recognized to be a woman's
prerogative to commit to both unpaid services in the household and the workplace, it is exactly
this that represents an infringement on women's rights and their journey to economic and social
empowerment. The data and figures have been retrieved from the Ministry of Women, Family
and Development of Malaysia report and International Labor Organizations recent research
work concerning Domestic work, wages and gender equality. Most of the studies have shown
that women have, indeed, experienced huge differences in income sensitivity discriminations in
the labor market. Women are, continually, having to face huge job burdens in comparison to men
due to the unpaid labour work. The importance of this issue is to bring up the current social
justice being carried out in society between genders and to focus on maximizing on the best
human resources among both men and women employees.

INTRODUCTION
Discrimination is the reason women in Malaysia still suffer under the gender pay gap.
This is where the unpaid labor wage towards woman that often go unnoticed, and its
microeconomic implication regarding the gender inequality prevalent throughout the economy
itself. Regarding to the Mincer argues that wage gap are highly clarified by contrasts in human
capital right among the different parties. His argument depends on human capital theory that
stress on the capacity of human capital to create income. As Becker called attention to that there
was a positive relationship between human capital and productivity. As wages are paid according
to marginal productivity, differences in the productivity, therefore, will lead to wage differentials.
The marginal productivity is more appropriate in clarifying wage gap by gender. This
theory clarifies gender wage gap develop in light of the fact that ladies are seen to have lower
productivity because of lower human capital fulfillment. They are likewise included in less
difficult occupation and congestion in certain jobs. Another theory that can clarify gender wage
gap is the dual labour market. As indicated by this theory, labour market can be separated into
two classes, i.e. the primary labour market, which is more organized and composed and the
secondary labour market which is more sloppy. The larger part of women are in the secondary
labour market since they are seen to have less expertise.
The other reason of the wage gap based on gender is where the misconception of being
that women participation in the labour market has come a long way, there is still an under
representation of the struggle that women make when transition from education to the workforce.
It is where when women go into the workforce, they has been discriminate by man when they
need to do some women coursework like making a drink for their client and treat them because
for man, that is the women job and they know how to do it rather than man himself. From above
reason, there a also relate to the societal norms that cause the gender segregation to occur and in
turn perpetuates the ideology that at even an increase in educational equality cannot guarantee
equality of opportunities in the workplace. While it is recognized to be a woman's prerogative to
commit to both unpaid services in the household and the workplace, it is exactly this that
represents an infringement on women's rights and their journey to economic and social
empowerment.
The importance of this issue is to bring up the current social justice being carried out in
society between genders and to focus on maximizing on the best human resources among both
men and women employees. This is where, Malaysian women who have income, their income is
less than male counterparts in all working area. Based on 2008 statistics from the Ministry of
Human resources, male who held the senior officials and managers earning average monthly
salary of RM4,296, while women in the same position obtained only half of the amount,
RM2,522. Man in the professional category earn an average of RM3,670 but women get
RM2,848.

This paper attempts to examine the determinants of gender based wage gap and its
microeconomic implications. Differences in wage are normally attributed to implication to the
microeconomics. This paper is organized into six sections. The next section reviews the

literature, while Section IV describe the methodology. The findings and discussion in Section V
and Section VI is conclusion and policy implication.

LITERATURE REVIEW
Disparities in the opportunities offered between the genders has always existed and
several methods have been identified to measure the degree of disparities, but many authors have
assumed that with the economic developments around the world, this would most likely
decrease. Relative wages earned have consistently been used to reflect the socio-economic value
of individuals and the disparities in incomes earned by women and men have been at the
forefront of countless social movements. The income earned is not only the reflection of the
valuation of an individual but it also encompasses the individuals education, training, former
work experience and expected future participation.
In a study carried out by the American Association of University Women, the authors
stipulated that a Jennifer is not only less likely to get hired over a John but that she will most
likely, despite having the same degree from the same school, earn 7 percent less than John
using a case study approach.
But the gender based wage gap is prevalent in majority of the countries around the world
and is determined by several varying factors. As stated in a report by Plantega & Remery 2006,
the gender wage gap appears to closely related to the level of occupational segregation and the
wage structure itself. This appears to call out the fact that even though there is higher literacy
rate and females are achieving higher levels of education, in a lot of developing countries, female
participation rate is still influenced by gender specific jobs rather than individual characteristics.
An ILO report by Haspels and Majurin 2008 analyzed a major factor of wage disparities
as occupational gender segregation; It was found that lower level jobs in the job hierarchy were
considered to be predominantly female. This was a reflection of the traditional perception of
females roles in both the domestic and sexual spheres as the subservient beings. A deeper
analysis revealed the underlying arrangements of occupational segregation and identified them as
horizontal job segregation, when there are fewer jobs for women than men, and vertical job
segregation which is when women occupy the lower tier jobs than men.
The statistics available within the context of developing countries is limited as is but the
existing literature providing by the UNDP: MDG 2015 shows that despite females outperforming
males in the tertiary level, gender parity in the wages had still not been achieved. Another
example could be taken from a study carried out by ILMIA, Malaysia 2013, that despite having
the same marital status, years of study, experience and occupation, women were earning
significantly lower than men. On the other hand, Boserup (1970) has contended that the when a
nation is at its initial stage of development, it is inevitable that gender gap widens, and it is only
after the nation has reached a certain stage of development that the gender based wage gap will
begin to diminish. In another article (Kahn, 2015), it states that the wage differentials, in all
industrialized countries, are a consequence of women being more likely to have interrupted work
careers due to taking time off for family and child care.
There has not been extensive research carried out on intra-occupational gender wage
differences in Malaysia but the findings of study carried out by Chapman and Harding (1985),
comprising of 733 former students of Mara Institute of Technology determined that females

earning an average lower wage was a result of their own making by choosing to be in low paying
jobs. Another study, carried out by Mohamad Nor (2000), used information provided by the 1988
Second Malaysia Life Survey to find out that male to female wage ratio was lower in female
dominated occupations. This finding cements the ideology that the resulting wage differentials in
each occupation is a consequence of the discrimination within that occupational group itself.
The relationship that exists between the wage differentials, that are not based on the
productivity level and economic growth is one made up of direct and indirect factors. But the
impact that we are considering is based on Beckers theory of Discrimination. (Becker, 1971).
This theory explains that the gender based wage gap that occurs because of the
employers tendencies to discriminate according to his/her preferences is one that results in the
employers having to pay over the marginal productivity because of their preferences. If profits
were calculated for both discriminating and non-discriminating firms, then profits made for nondiscriminating firms would be higher than that of a discriminating firm. This is due to the
reduced level of productivity, in turn leading to slower growth of the firm.
(Rahmah and Idris, 2012) study the wage differential including discrimination by gender
in Malaysia labour market. The literature has emphasis on the distinctions in wage gap are
regularly add to contrasts in the productivity-linked characteristic of human capital. This paper
mention that the characteristic of the occupation also give impact to the wage gap among gender.
There are the place women is low productivity than man where the working hour of women is
lower because of the lower human capital. This is the place this paper notice about the positive
relationship between human capital and productivity and it will prompt wage differential.
Were revisiting the impact of occupational segregation on the gender earnings gap in
Malaysia journal as part of our literature review. This study shows how gender based earning
inequalities remain universal and conducted by empirical study using data that has been taken
from Malaysian Population and Family Survey in 2004 that conducted by National Population
and Family Development Board. The respondents are employed within age 16 to 64. This study
found that gender segregation less adequate of women in production industries and high
adequate in services sectors, while men are overrepresented in skilled form employment. The
data also shows that women still lags far behind compared to men in professional profession.
Their simple summary suggested the reason behind is because men possessed more years of
potential work experience than women, and the percentage of respondents that have secondary
education is higher for men than women. The study shows that men earned higher average
monthly earning than women across all occupations which means higher level of education
attained are associated with higher earnings. This study suggested government to make policy
intervention that can appealing possibility and widely used. This is the time to re-evaluate the
existing policy which implemented in 1969 in Malaysia yet the policy only legally applied to all
employees in the public sector, while in private sector its only accepted principally.
Imperatively, we also need to change gender typical prejudices and stereotypes in labour marker,
increase awareness regarding the capabilities that women and men is similar and includes
flexible work arrangements, parental leave and child care facilities.

MAIN FINDINGS AND DISCUSSION

Increasing the
literacy rates
among all have
been a part of
Malaysias
central
development
plan and that
while rates of
literacy among
females have
most definitely increased since the 1990s, the number of unemployed
women who happen to have higher education have also increased since
1990.
While the statistics do show that there is higher labour force participation
following higher levels of education attained but the current levels are lower
than should be seen in comparison to the male counterparts. Malaysian
women are more likely to work as higher levels of education are attained but
it may be the rigidity of the formal workplace that doesnt allow the female
to join as easily or that her qualifications do not meet the requirement.

But rather than lack of

ability, it will appear
with
the
following
sources of data that it
is a lack of opportunity
offered.
Unpaid
domestic work, taking
care of the family and
child rearing are all
considered to be a
womens prerogative
which has led to the
unbalanced share of
family
responsibility
between the men and
women. So not only is
it difficult to even
enter the labour force,
or even participate but
it is also difficult to
remain
active
in
handling
both
domestic care and
formal work.

A major factor that is used to argue the mere existence of a gender

based wage gap is that not enough females enter higher paying
specializations in tertiary level education, which is why they earn a lower
pay. While this particular view is the socio-cultural perspective for many,
statistics show that not only females outnumber males in secondary
education but they also overshadow their male counterparts in university
enrolments.
Between the years of 2009 and 2013, females made up a higher
proportion, of varying degrees, of enrolments in all the fields except for in
Engineering, Manufacturing and Construction. This may be a result of sociocultural perspective that Engineering, Manufacturing and Construction were
areas that were previously male-dominated and a male prerogative which
may have made it harder for females to enter the particular specialization. It
must also be noted that decisions to pursue specializations in university are
not done so in a vacuum, but they are made considering the individuals own
opinion, situation and background as well as influences that are resulting
from a combination of all.

So while overall literacy rates for the genders is a key component in

pushing forward the Malaysian Economic situation and gender parity is being
reached in several fields of study in university level. Thus, resulting in the
slow but steady breakdown of derogatory stereotypes and the eventual
empowerment of women in the workforce. The current male-to-female wage
ratio reflects a different situation.
In the table above, GWG is the Gender Wage Gap or the ratio of male
wage to female wage. A GWG of 1 is a representation of gender parity but
any ratio more than 1 illustrates that men earn more than their female
counterparts. For many of the occupations, GWG is relatively on the lower
ratio and closer to achieving gender parity. Between the years of 2012 to
2014, the ratio has definitely narrowed for Managerial positons,
Professionals, Sales and Service workers, Craft and related trades workers
and Plant and machine operators and assemblers. But for occupations like
skilled agriculture, forestry and fisheries workers as well as elementary
occupational worker, the gender disparity have increased.
Only for the positions of technicians and associate professionals did the
ratio of male to female wages remain stagnant.
As we have seen in the table before that females were not only
rivalling their male counterparts in educational system but also

outperforming in several cases, yet there remains a persistent disparity in

the wages offered to both. In order to solidify the existence of discrimination,
a study was performed by the Institute of Labour Market and Analysis (ILMIA)
Malaysia 2013 that found that in 2010, women were earning significantly
lower incomes than men despite having the same marital status, years of
study, working experience and occupation in the same economic sector. This
is the issue at hand that needs to be addressed. Unpaid labour in the
household and child-rearing are already seen as a womens prerogative and
to top it off, females are being paid lower because their labour input per hour
is valued to be lower. So, equal pay for equal work needs to be
implemented in order to empower women, allow them to see opportunities in
rejoining the workforce and thus, contribute to pushing forward the economy.

Female representation in high tier positions is a crucial indicator of

female empowerment. So an example of illustrating such representation was
addressed when Malaysia passed out a survey, in 2001, among the Kuala
Lumpur Stock Exchanges top fifty companies. Initially, the much needed
female representation was at an underwhelming 6 percent. The survey then
expanded to include all the Ministry of Finance companies, later on in 2005,
and the result showed that the percentage of women in board of directors all
around was only a rough 12 percent.
It was only in 2011, that Malaysia recognized the importance of
implementing a policy stipulating that female participation in decisionmaking positions in the corporate sector must reach at least 30 percent. And
by the conclusion of 2014, there was a 16 percent involvement of women on
board of directors among the public companies included in the Companies
Commission of Malaysia.

Thus, as illustrated above, female participation in top tier positions,

between 2010 and 2014, have increased greatly. In areas that were formerly
male dominated roles, women have been appointed as the Head of
Immigration Department, the Head of Government Security Office and the
Head of Research Division, Prime Ministers Department. The percentage of
women on the board of directors in Ministry of Finance companies also
appeared to increase to a 17 percent from the initial 12 percent.

Labour Force Participation Rate (LFPR), for the purposes of this

document, refer to the number of persons in the labour force who are
currently working or looking for work. The working age is also defined as
those persons between the ages of 15 to 64 years. The graphs above
illustrate the nature of the trend of labour force participation from 1980 to
2014 between males and females.
As can be seen above, in 1980, the line exhibits two humps leading to
the assumption that women entered the workforce in their twenties but left,
presumably to start a family, and then some chose to return later on in their
mid-forties. This bimodal tendency of the female LFPR may be due to the fact
that during the 1980s, most women were employed in the agricultural
sector which allowed them to leave and come back to the work force. But as
the years progressed and manufacturing and sector-based economies came
into full force, the flexibility that used to enable return of women into the
labour force disappeared leaving behind a unimodal trend of female LFPR.
Many of the new factors included the rigidity of seniority in career
advancements and promotions that resulted in those female persons leaving
the labour force and having no incentive to return.
Thus, during the time between the 1980s and early 2000s, female
labour force participation was at its peak of 60 percent for ages 20-24 years.
While the time leading after the year 2000, majority of women were joining
the work force between the ages 25 to 29 years and so the LFPR peaked
differently. This delay in joining the workforce is a result of an amalgamation
of factors. Several of which include that women wait to receive higher levels

of education before entering the job market in order to ensure their position
in the labour force. Many women also join later as it is presumed they want
to get married and have children beforehand so they are not forced to exit
the labour force midway. The shift in the ages of females entering the labour
force is the response to the economic shift that does not provide them with
workforce flexibility, which allows them to remain a part of the work force for
longer periods of time. As is illustrated by the less steep decline in the
female LFPR after its peak in 2010 and especially in 2014.
While male LFPR does peak a little later that the female LFPR, a result
of the education effect, it reaches a 100 percent and remains consistent till
the age of retirement.

POLICY IMPLICATIONS AND CONCLUSION

According to a previous study, (O'Neill 309-314) is important to look at the impact of
productivity between the genders in discussing the issue of the pay gap between genders. This is
because, often said to be the difference in salaries between genders is due to differences in the
quantity and quality of education and other human capital obtained from different institutions. So
because of this, is very important for the government to make a big step to improve the
competitiveness of women in facing the challenges of the pay gap between the genders. High
competitiveness can be a solution for this problem. Generally, women are the largest group in the
world who have problems can not read or write, which is approximately 876 million adults
worldwide. Assist women empowerment, it is important to improve education because it's
important to be the most important driver in the development of mankind.
Malaysian women has a very huge achievement. In the field of education, from 2009 to
2011, female enrollment at the first degree in Public Higher Education Institutions have
consistently exceeded 62% per year and the 2013/2014 academic session 68.02% of the 41,573
candidates who will participate in undergraduate programs are women. In the labor market, the
participation rate of women has increased from 44.7% in 1995 to 49.5% in 2012. In terms of
employment structure, the percentage of women working in professional groups has also
increased, from 7.5% of all working women in 2005 to 14.8% in 2012. This achievement is the
result of the government's move to provide an environment conducive to upholding women in
Malaysia include eliminating all forms of discrimination against women.
Overall analysis has shown a number of factors that have been identified as contributors
to the wage gap between men and women in the economy. The existence of these factors, it is not
impossible for the government to make a deeper analysis to identify factors that are a major
factor in this issue. Current trends indicate that the reduction of genders wage gap thick each
year. Malaysia is seen as a country that is committed to ensuring women's equality regardless of
political, economic and social. As such, Malaysia is also a state party to CEDAW has continued
to make all kinds of discrimination against women are eliminated. As proof of this, in 2001, the
Federal Constitution of Malaysia was amended under Article 8 (2) of the Federal Constitution of
Malaysia, as a measure to prohibit discrimination against citizens solely because of gender.
Following the amendments, some laws were reviewed to ensure gender equality, and the
new law was drafted with the principle of non-discrimination based on gender. In determining
the legal framework, the government got a lot of public opinion to make room for the public to
be involved in this process. The machinery of government has always tried to understand the
issues directly correlates with the reality of women's lives, including the determination of salary
based on gender.
Convention on the Elimination of All Forms of Discrimination against Women or the
Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW) was
approved by the General Nation Assembly, United Nations (UN) on December 18, 1979 and
effective from 3 September 1981. This Convention emphasis on efforts to eliminate all forms of
discrimination against women, including in the political, economic, social and cultural. Malaysia
has ratified CEDAW on July 5, 1995 ("UNICEF Malaysia - Sumbangan - Wanita Di Malaysia").
Wages between the genders can be reduced if the prejudice of employers reduced labor and thus

can have a positive effect on income distribution, especially when more and more women join
the labor market. The need for labour law related to discrimination between the gender is also
required if you want to reduce discriminatory practices in view of the free market fails to control
the sentiments of employers against workers.

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