Is gender pay gap low in plants with more female managers? evidence from Vietnamese small and medium enterprises

We use this unique matched employee and employer data to investigate the impact of female share in managers on the gender gap in earnings as well as controlling the effects of both firm

Is Gender Pay Gap Low in Plants with More Female Managers? Evidence from Vietnamese Small and

Medium Enterprises

PHAM DINH LONG

HCMC Open University - long.pham@ou.edu.vn

TRAN THI HIEU

Petroleum General Distribution Services Joint Stock Company

Abstract

The goal of gender equality in income is not only an important matter of human rights but also basic requirement for development of fair and efficiency Study on the state of gender inequality in income has the significant implications in moving toward the equality in society and enhancing the efficiency of economic and social growth Actually, there have been many previous studies related to the issues of gender income difference, particularly the factors impact on reducing the gender gap in earnings Based on these previous studies, our research attempts to investigate whether the gender gap in earnings is low in the establishments with more female managers Using the sample of 1043 employees and 2492 enterprises from the Small and Medium Enterprises survey in Vietnam in the year of 2007, matching employer and employee data and distinguishing occupation the study ends up 345 job-cells We use this unique matched employee and employer data to investigate the impact of female share in managers on the gender gap in earnings as well as controlling the effects of both firm and worker characteristics on wage of individual In addition, ordinary least squares modeling and ordinary least square with job-cell fixed effects are applied to explore the effect of proportion of female manager on male - female income difference Various explanatory variables for characteristics of workers and plants are used as control variables The result reveals that there is a negative relationship between the female share in managers and gender pay gap; the female share in managers rises 10% points, the gender wage gap thus lowers by 0.6 log points

1 Introduction

Gender pay gap is a global problem Indeed, male - female income difference is not only one of the root causes of poverty but also major factor that distributes to hinder the development process The greater gender gap in earnings are, the more poverty it has to pay dearly for that as well as more malnutrition status, illness and other hardships In addition, economic growth will bring more effective for the reduction of poverty level in the country which has a higher level of gender equality Moreover, inequalities in income between women and men prevent the equal development and this makes the use of resources in society inefficient

In fact, the situation of gender inequality in earnings occurred in many countries, especially in the developing countries It might be said that the cause of this condition primarily rooted traditional perspectives and preconceived ideas in the social about the male-supremacy in many countries Thereby, these lead to the restriction of opportunities for women to access the education and training, the choice of professions, an opportunity to improve professional qualifications The distribution of labor between men and women in different occupations, employment arrangements and job positions in the same business line is also obvious differences, which greatly affected on the difference in gender income Furthermore, women also have fewer opportunities to access to these services as well as other basic resources such as water, transportation and marketing, capital, etc These things certainly impact on their improvement of the condition and economic status

In Vietnam, as reported by the International Labor Organization (ILO) on 7th March, 2013, the gap

of income between men and women in Vietnam was continuously increasing while the proportion

of women in work force was higher than other countries in the world Approximately 72% of women participated in the labor force in Vietnam and this ratio was higher than that in most of other countries worldwide Nevertheless, Vietnam was one of the few countries where the gender wage gap was increasing in contrast with the trend in most of other countries in the 2008-2011 period compared with the period 1999-2007 Moreover, according to the 2012-2013 Global Wages Report of the ILO, gender income gap of Vietnam increased by 2% in the recent periods Statistical data of the General Department of Statistics in 2011 indicated that women's income was lower than men’s income, approximately 13% Also, the General Labor Confederation of Vietnam (VGCL) conducted a survey of employees’ salary in enterprises in 2012 This organization saw that wage of female workers was less, only 70-80% of their male colleagues Besides, Labor Survey Report published in

2012 stated the average monthly income of women was less than men’s in all economic sectors, state, non-state and foreign investment Even in occupations which primarily recruited focus on women such as health care, social work and sales, women still had a lower salary than male fellowship More specifically, the VGCL survey found that women often did the normal work whereas male undertook the management positions

Due to the important of this field, there were thus a lot of researches about gender pay gap conducted in the past indicating the determinants of difference in wage of women and men as well

as providing solutions to reduce this gap such as Anderson, Tracy, et al (2001), Hultin and Szulkin (2003), Manning (2006), Blau and Lawrence (2007), Cohen and Huffman (2007), Becker (2010), Cardoso and Winter-Ebmer (2010), Spencer (2015) In Vietnam, studies about gender gap in earnings there are Liu (2002), Pham and Barry (2007) and so on Interestingly, related to the solutions given

by the researchers in order to reduce gender income differences, there was the relationship between female share in managers and gender wage gap Particularly, in the research of Hultin and Szulkin (2003) namely “Mechanisms of inequality unequal access to organizational power and the gender wage gap”, the authors used the multilevel models in order to analyze the dataset of Swedish which combined the information on a large number of private - sector enterprises and all their employees The finding showed that gender gap in income in plants were wider while there were more male representations among managers and supervisors in these enterprises and low relative wage of female worker in plants in which there were no or only a few women in managerial position Another notable research, Hirsch’s paper (2013) is one of these above studies, through the evidences from linked employer - employee data for Germany, Hirsch found that gender income difference decreased

by 0.5 log point when increased the female share in first level management by 10% points Therefore, follows the cornerstones of Hirsch’s research and applies for the case of Vietnam in order to investigate the relationship of female share managers and gender pay gap, this study is conducted particularly in small and medium enterprises (SMEs) in Vietnam in the year of 2007

2 Data and descriptive analysis

All the data, indicators, and variables obtained from the dataset of Small and Medium Enterprises (SMEs) in Vietnam in the year of 2007 The surveys were implemented after the important Enterprise Law of 2000 has been issued and they provided a valuable set of data about the private sector from SMEs in Vietnam Also, the surveys contained the most comprehensive data about SMEs

in Vietnam The surveys of SMEs have been conducted six times, and the most recent ones were in years of 2009, 2011, and 2013 This survey was conducted under partnerships between three partners: Institute of Management Central Economy (CIEM), the Ministry of Planning and Investment of Vietnam (MPI); Institute of Labour Science and Social Affairs (ILSSA) under the Ministry of Labour, Invalids and Social Affairs Vietnam (MOLISA); and Economic Development Research Group (DERG) of the university of Copenhagen Moreover, the survey was sponsored by the Embassy of Denmark in Vietnam in the Program for Enterprise Development Support (BSPS)

In the survey of 2007, the data covered of 2492 enterprises across ten provinces: Ha Tay, Ha Noi, Hai Phong, Ho Chi Minh, Long An, Quang Nam, Phu Tho, Nghe An, Khanh Hoa and Lam Dong Specific characteristics of both enterprises and employees were represented on dataset of the year

2007 Thus, in order to get more in - depth analysis of worker and firm specific impact on outcome such as gender income difference, a unique matched employee and employer was applied The 2492 enterprises of ten provinces which had the differences in sizes, categories, legal ownership status and sectors, along with 1043 employees with information on personal characteristics, job features,

earnings and other non - wage benefits were conducted in the sub sample of 582 firms covering all ten above provinces After matching employee and enterprise data and distinguishing five occupations - plants in the data and excluding the workers in managerial occupations, the data ends

up with 345 job cells

Table 1 presents some sample statistics Therein, male workers has the average of daily wage is higher than female worker, the difference is approximately 11.1958 The raw gender pay gap amounts

to 20.33 log points This indicates that there is discrimination about income between male and female workers

Table 1

Wages and female shares in managers

3 Econometric analysis

In order to answer the main question whether or not gender pay gap is low in plants with more female among managers, the study will be undertaken based on the method of Hirsch (2013) in which the augmented Mincer wage regressions The baseline specification is a fully interacted model Lnwi = β1femalei + β2femshmani + β3femalei×femshmani + x’i (γ + femalei × δ) + ui

Lnwi: log daily gross wage of employee i

femalei: female dummy

femshmani: the female share among managers

femalei x femshmani: the interaction of these two

xi: a vector of control variables, xi includes variables capturing the individual’s human capital endowment and plant characteristics

In this study, β1 is as the average unexplained gender pay gap in the sample β3 is expected to be positive in order to indicate that the unexplained gender income difference is lower if the female share in management is higher Ordinary least squares (OLS) regression is a technique of statistical estimation This technique is commonly used in the linear regression model The aim of the method

is from discrete samples, determine the function which approximately represents the distribution of these samples, and after that estimate the value which cannot be measured Moreover, the assumptions of this model related to homoscedastic, linearity and the impact of outliers are not

difficult to check (Craven and Sardar, 2011) Besides, in order to control for segregation effects, the study adds job-cell fixed effects to arrive at the unexplained within job male - female income difference that address unobserved plant and job and thus employment segregation The model is estimated by carring out in Stata

Table 2

Wages regression

OLS regression

Female

OLS wage regression with job - cell fixed effect

Note: *** significant at 1 percent, ** significant at 5 percent, * significant at 10 percent

Table 2 shows the key results of the wage regression for sample including observations from the plants which are surveyed An average unexplained gender gap in earnings is 28.82 log points Although the interaction effect of the female dummy and the female share in managers has insignificant statistic, but the positive sign is the same with expectation This can refer that the pay gap is lowered by 2.1 log points if the share is increased by 10% points When control segregation by adding job - cell fixed effects, both unexplained gender income difference and the interaction impact

of female and female share in managers are reduced In this case, the female share in managers rises 10% points, the gender wage gap thus lowers by 0.6 log points For the case of control or non-control job-cell effect, the interaction impact on gender pay gap of the female dummy and the proportion of female share managers is insignificant statistic, but there is the negative relationship among two variables Furthermore, the results are in the line with earlier findings by Hirsch (2013) and Hultin and Szulkin (2003), the gender pay gap is lower in plants with more female managers

4 Conclusion and policy implications

Follows the empirical studies have scrutinized in which ways gender differentiated representation

in manager effect on gender pay gap, when these studies supposed the gender gap in earnings can

be explained in the terms of discrimination Therefore, the main assumption in this research is that the gender pay gap is lower in enterprise with more female manager participation By using matched employer and employee data for SMEs in the year of 2007 and controlling for employment segregation by including job - cell fixed effects, the study finds that the impact on male - female income difference of female share manager has insignificant statistic, but it has a negative relationship between the two This may conclude that the gender earnings gap is lower than in the

plants with more female managers Research’s findings are consistent with the previous studies in this field

Discrimination in income of women stems from variety of causes, possibly due to incorrect views about gender roles in society, traditional ideas or prejudice these factors may be eliminated through educational activities Hence, the government should implement measures about education synchronously and systematically as well as carry out the policies of socio-economic development towards gender equality goals so that the people change the view on the role of gender in society, such as policy to encourage enterprise to build the fair competitive environment, create equal opportunities for both women and men worker In addition, in this study the numbers of women involved in manager position have the impact on reducing discrimination in income between men and women, for that reason businesses need to adopt policies to encourage women participation in manager as a measure to reduce the income gap Besides, the results also shows that variable of education has strong statistical significant to the income of workers, so for worker particular in female, they need to improve their knowledge and skills more and more in order to shorten the gap

in income compared with male

References

Anderson, T (2001) The gender pay gap London: Women and Equality Unit (Cabinet Office)

Becker, G S (2010) The economics of discrimination University of Chicago Press

Blau, F D., & Lawrence, M K (2007) The gender pay gap: Have women gone as far as they can? Academy of Management

Perspectives, 21(1), 7

Bojas, G J (2005) Labor economics (3rd Edition) McGraw-Hill

Bryk, A S., & Raudenbush, S W (1992) Hierarchical linear models: Applications and data analysis methods Sage

Publications, Inc

Cardoso, A R., & Winter-Ebmer, R (2010) Female-led firms and gender wage policies Industrial & Labor Relations Review, 64(1), 143-163

Cohen, P N., & Huffman, M L (2007) Working for the woman? Female managers and the gender wage gap American Sociological Review, 72(5), 681-704

Craven, B D., & Islam, S M N (2011) Ordinary least-squares regression SAGE Publications

Gelman, A (2012) Multilevel (hierarchical) modeling: What it can and cannot do Technometrics, 48(3), 432-435 Haas, S (2007) Economic development and the gender wage gap The Park Place Economist, XIV, 49-55

Hamermesh, D (2008) Fun with matched firm-employee data: Progress and roadmaps Labour Economics, 15(4),

662-672

Hedija, V (2015) The effect of female managers on gender wage differences Prague Economic Papers, 2015(1), 38-59

Hirsch, B (2013) The impact of female managers on the gender pay gap: Evidence from linked employer-employee data

for Germany Economics Letters, 119(3), 348-350

Hultin, M., & Szulkin, R (1999) Wages and unequal access to organizational power: An empirical test of gender

discrimination Administrative Science Quarterly, 44(3), 453-472

Hultin, M., & Szulkin, R (2003) Mechanisms of inequality: Unequal access to organizational power and the gender wage

gap European Sociological Review, 19(2), 143-159

Jensen, P H (2010) Exploring the uses of matched employer-employee datasets Australian Economic Review, 43(2),

209-216

Larsen, A F., Rand, J., & Torm, N (2011) Do recruitment ties affect wages? An analysis using matched

employer-employee data from Vietnam Review of Development Economics, 15(3), 541-555

Liu, A Y C (2002) Gender wage gap in transition in Vietnam Asia Pacific School of Economics and Government

Working Paper No 01-3 Australian National University

Manning, A (2015) The gender pay gap No 200 Centre for Economic Performance, LSE

Pham, T H., & Reilly, B (2007) The gender pay gap in Vietnam, 1993-2002: A quantile regression approach Journal of Asian Economics, 18(5), 775-808

Shin, T (2012) The gender gap in executive compensation: The role of female directors and chief executive officers The Annals of the American Academy of Political and Social Science, 639(1), 258-278

Spencer, N (2015) Gender pay gap increases Retrieved from https://www.greenleft.org.au/ content/gender-pay-gap-increases

Tajfel, H (1982) Social psychology of intergroup relations Annual review of psychology, 33(1), 1-39

Torm, N (2011) The union wage gap among Vietnamese SMEs Working Paper, Department of Economics, University of

Copenhagen