Policy Brief Issue 2 | March 2018 Gender Gap in Earnings in Vietnam: Why Do Vietnamese Women Work in AUSTRALIA WORLD BANK Lower Paid Occupations? PARTNERSHIP PROGRAM II (ABP-II) By: Iffat Chowdhury, Hillary Johnson, Aneesh Mannava and Elizaveta Perova The Australia World Bank Partnership Program II (ABP-II) carries out KEY FINDINGS comprehensive data- and evidence-based • Women in Vietnam earn on average 3 million dong less per year analysis on emerging than men, which is about one month’s income. The magnitude challenges to gender of this gap remained constant between 2011 and 2014. equality and provides support to policy makers • The earnings gap persists despite women having closed and innovative activities to address these the gap in education levels and is explained in part challenges and increase by women working in lower paid occupations. women’s economic empowerment. • Women forego higher pay to work in occupations and industries which offer better non-monetary benefits: paid leave, lower weekly EAST ASIA AND hours, health insurance and social insurance. This choice may PACIFIC GENDER be driven by an unequal distribution of house- and care- work. INNOVATION LAB The East Asia and Pacific Gender Innovation Lab CONTEXT (EAPGIL) carries out impact evaluations and Vietnam has achieved important progress in closing the gender gap in inferential research to education and increasing women’s labor force participation. However, are generate evidence on women’s labor market opportunities on par with those of men? We analyze what works in closing the gender earnings gap and establish that women’s propensity to work gender gaps in assets, economic opportunities in lower paid occupations is a major culprit in the emergence of a gender and agency, and how earnings gap. We provide suggestive evidence of why women choose to closing these gaps work in lower paid occupations. can help achieve other development outcomes. FIGURE 1: FEMALE EARNINGS RELATIVE TO MALE EARNINGS IN DIFFERENT SECTORS FEMALE EARNINGS AS % OF MALE All Sectors Female Earnings State Gender Earnings Gap Non-state Farm Non-farm 75% 80% 85% 90% 95% 100% WHAT DID WE DO? WHAT DID WE FIND? We use a combination of data from Vietnam’s An earnings gaps persists in Vietnam. Labor Force Surveys (LFS), the Young Lives Survey Annual data1 from the LFS between 2011 and 2014 and the World Bank’s STEP Skills Measurement suggests that women earned, on average, 3,000,000 Program to answer the following questions: Dong (about USD 1302) less than men each year, • How large is the earnings gap between men which is about a month’s income. Men earned more and women in Vietnam? than women both in the state and non-state sectors and in agricultural and non-agricultural industries. • What explains this gap? Does the fact that This gap remained constant over the course of the women and men tend to choose different types four years of LFS data we used. of occupations and industries play a role? The gap in earnings is present across all age groups, • What explains the fact that women consistently widening around child-bearing age and spiking in the choose to work in lower paid occupations? We 55-59 age cohort, around retirement age for women explore three hypotheses: (at 55). It reduces again when men retire at 60. yy Do social norms about which jobs are What explains the gender earnings gap in appropriate for men and women shape Vietnam? aspirations and educational choices at a Difference in education could plausibly explain young age? earnings gaps. However, in Vietnam, women earn yy Do women face greater difficulties in finding less than men despite having higher levels of employment in their field of study when they educational attainment. Fig. 3 panel B shows that for are transitioning from school to work? women and men with the same levels of education, the earnings gap becomes even larger. yy Do women forego higher-paying occupations and industries in order to have greater If we add occupation and industry to our analysis, flexibility: shorter hours and better leave? we find that earnings gaps of men and women 1 The Labor Force Surveys contain wage information only for men and women who are currently employed and are wageworkers (rather than self-employed, or working without pay). 2 Assuming a 40-hour work week and 52 working weeks. Conversion to USD based on an exchange rate in 2017 of 22,700 Dong = 1 USD. FIGURE 2: EARNINGS GAP IN DIFFERENT AGE COHORTS 0% -10% -20% -30% -40% -50% 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60+ Note: Bars indicate 95% confidence interval. with the same level of education, working in the FIGURE 3: FEMALE EARNINGS same occupations and industries are lower than RELATIVE TO MALE EARNINGS the earnings gap between similarly educated men FOR GROUPS WITH SIMILAR and women (Fig. 3 panel C). This suggests that CHARACTERISTICS an important factor in emergence of the gender FEMALE EARNINGS AS % OF MALE earnings gap is women’s tendency to work in lower paid occupations and industries than men. 93% Why do women in Vietnam choose to work in lower paid occupations and industries than men? We test three hypotheses about why women choose to work in lower paid occupations. A - Men and women with similar First, we explore the role of social norms. Social socio demographic characteristics norms about which occupations are appropriate for men and women are typically learned at a very 89% young age and may affect the aspirations and educational choices that boys and girls make, including what field of study they choose. The field of study restricts the occupational options available to an individual and his/her lifetime labor market B - A+ similar trajectory. education To test this hypothesis, we use the data on which occupations girls and boys aspire to at the age of 91% 12 from the Young Lives Survey and map it to data on earnings in these occupations from the LFS. We check whether we would observe a gender gap in earnings if boys and girls worked in the occupations they aspired to at age 12. We find that girls aspire to C - B+ similar occupation higher paid occupations than boys. and industry Second, using STEP data, we check whether women face greater difficulties in finding jobs in their field of study. We find no support to this hypothesis, either: women are more likely than men to work in occupations that correspond to their field of study. ACKNOWLEDGMENTS Third, we explore whether women choose to work in lower paid occupations This policy note was to secure jobs with more flexible hours and better non-monetary benefits. prepared in a partnership Indeed, using LFS data we do find that women work in occupations and between the Vietnam industries that are more likely to offer paid leave, health insurance, social Australia World Bank insurance and have a formal contract. Female workers also work on average Partnership Program II two hours less than male workers per week. (ABP2) and the East Asia and Pacific Gender Innovation WHAT ARE THE POLICY IMPLICATIONS? Lab (EAPGIL). The ABP-II is Our analysis suggests that women are more willing than men to forego higher funded by the Government salaries to secure jobs with better weekly hours, leave, insurance and having a of Australia and the EAPGIL contract. A factor likely to be driving this preference is the unequal distribution is funded by the World Bank of household work. Indeed, women in Vietnam spend 14 hours per week more Group’s Umbrella Facility than men on housework and child or elderly care3. for Gender Equality (UFGE) in partnership with the This evidence suggests that two types of interventions have the potential to Australian Department of bridge the gender earnings gap in Vietnam. First, interventions that enable Foreign Affairs and Trade. women to better balance household and market roles without incurring a The UFGE has received large labor market cost may help address the issue- for instance, making generous contributions from child care services available, affordable and easily accessible, or enabling Australia, Canada, Denmark, flexible working options. Second, interventions encouraging a more equitable Finland, Germany, Iceland, distribution of the household care- and work-burden hold promise – such the Netherlands, Norway, as legislative or private sector initiatives making parental leave more gender Spain, Sweden, Switzerland, neutral as well as programs aimed at shifting men’s attitudes towards the United Kingdom, and household work. the United States. The paper informing the policy note can be found at: www.worldbank. org/en/country/vietnam and http://worldbank.org/eapgil FOR MORE INFORMATION Elizaveta Perova, EAP GIL eperova@worldbank.org Helle Buchhave, ABPII Gender hbuchhave@worldbank.org http://www.worldbank.org/eapgil Make a House Become a Home, Action Aid Policy Brief. 3