Empowerment Through Equity Closing the Gender Pay Gap

Globally, women still earn an average of 23% less than men, according to the International Labour Organization. This translates to significant financial losses for women throughout their careers, impacting their ability to save for retirement, purchase homes, and support their families. In Ethiopia, the situation is even starker, with women earning only around 63 cents for every birr (37% less than) men earn for similar works in urban and worse in rural. This disparity not only limits the economic security of women but also represents a missed opportunity for the nation’s economic development. Women constitute a significant portion of the workforce and their full economic potential remains unrealized due to this imbalance. EBR delves into the reasons why closing the gender pay gap is an urgent necessity, exploring its economic and social impacts, and outlining potential solutions to achieve a more equitable future.

Almost in all vacancy announcements, it is expected to notice a statement saying ‘applications from qualified women are encouraged’. Often, companies do this to find, encourage and attract more capable female candidates and create gender-diverse organizations. Yet, it also serves other purposes, as Elsa Wossen, a professional accountant, learned recently.

On February 14, 2019, Elsa learned that she was chosen from among many other finalists shortlisted for an accounting position by a manufacturing company operating in Addis Ababa. “Initially, I asked for a monthly gross salary of ETB15,000. But after negotiating with the company I settled on ETB13,000,” she tells EBR.

She needed to know then that the same company offered a monthly salary of ETB15,000 to a male candidate who initially requested ETB19,000. However, the male candidate, with qualifications and experience similar to Elsa, turned down the offer. As a result, the second-best candidate managed to secure a job. However, the intent of encouraging more female candidates, displayed on the vacancy announcement in bold, forced her to question the company’s intention.

Elsa is among the many female workers in Ethiopia who receive less pay than their male counterparts, even though they have the same qualifications and experience. However, this is wider than developing countries like Ethiopia. Instead, the issue is becoming more visible in developed countries as well.

Mesenbet Shenkute, the first female president of Addis Ababa Chamber and Sectoral Associations, who managed to climb to the top of the ladder in the banking industry, has seen her fair share of injustice. “Personally, I have seen many companies where women are paid less for equal work,” she recalls.

For Mesenbet, the problem mainly emanates from a need for enforcing the law and proper follow-up. “The law says people should be compensated equally for the same output regardless of gender. However, the authorities don’t enforce the law and penalize offenders.”

 Experts stress that there are factors that lead to unequal pay. “Women are preferred because they are less aggressive, demand lower salaries, are loyal, and present less of a threat to the company,” argues Amin Abdela (PhD), head of the Trade and Industry Development Department at the Ethiopian Economists Association, who conducted a study on equal wealth distribution.

Melkam Aschalew, who runs MA General Business, a recruitment and HR consulting company, agrees with Amin. “The number of women hired by companies as well as public institutions is increasing in recent years. This is mainly because they accept lower salaries than men,” Melkam explains. “For instance, many companies in the construction sector hire women for lower salaries than they pay men.”

Of course, studies reveal that women often settle for lower salaries because they prefer better working environments over better pay. Since women mostly prefer occupations that allow them maternity leave and provide an environment specific to their needs, they are willing to give up better salaries.”

However, Mathewos Asele, CEO of Kaliti Metal Factory, says it is unfair to generalize. “Any person fit for a position at our company gets the correct salary. Even though the company is affected when female employees take maternity leave, we do not do a cost-benefit analysis. We cover that vacant space with other alternatives.” Kaliti Metal Factory assembles trucks and manufactures construction and agricultural materials. Out of 450 permanent workers, 60 are women.

A senior manager who talked to EBR on the condition of anonymity argues that the stereotype towards women can be solved with natural solutions rather than further feminist distortion. “Women might be paid less because they do not negotiate like men, but that is their advantage and competitive edge against men. Women should do what best fits their nature, time and potential.”

Equal pay is not just an issue in developing countries like Ethiopia. Instead, the principle of equal pay for equal work without discrimination has yet to materialize even in many developed countries, even though the United Nations adopted it as part of the Universal Declaration of Human Rights in 1948.

Even countries like the United States have failed to eliminate compensation-related discrimination towards women in the workplace. However, the government passed the Equal Pay Act in 1963, requiring men and women to be paid equally for similar work.

Inequality in salaries between men and women endures globally and in all sectors. Worldwide, women only make 77 cents for every dollar men earn, according to UN Women, an organization dedicated to gender equality. As a result, a lifetime of income inequality exists between men and women. However, it is essential to distinguish between equal pay and the gender pay gap. Equal pay is where women and men are paid equally for performing similar or equivalent work with equal value.

On the other hand, the gender pay gap is the payment difference between women and men who have different roles and produce outputs which have unequal values. Most commonly, the gender pay gap, which is used to describe a general wage disparity between women and men in the economy as a whole on an hourly or monthly basis, relates to the full range of payments and benefits, such as basic salary, non-salary payments, bonuses and allowances.

Those close to the issue stress that there is less of a problem regarding equal pay in Ethiopia. “Unequal pay is relatively rare because salary scales are usually fixed. Especially at higher levels, there are uniform salaries regardless of gender,” argues Heran Girma, a senior human resource specialist at LonAdd. This company offers various services, including recruitment, outsourcing, training, and human resource consultancy.

Instead, it is the massive gender pay gap, supplemented by few job opportunities for women, that is widely observed in Ethiopia. “The gender wage gap results from women’s segregation into lower-level roles across all sectors,” says Heran.

The gender pay gap between men and women is among the most researched. On one hand, some argue that the gap stems from prejudices against women. Although gender pay differences on a company level are not illegal, those who support this school of thought stress it is the result of the widespread discrimination against women.

On the other hand, some scholars maintain that wage differences reflect different traits and preferences in the labour market. For instance, experts like Luca Micheletto, professor of Political Economy at the University of Milan, Italy, stress that one of the factors that contribute to gender gaps in the labour market is parenthood. Since women traditionally take the lion’s share of household responsibilities, including taking care of children, they tend to have less job experience, more significant career discontinuity and shorter work hours. This, in turn, forces high-skilled mothers to compromise for part-time low-level jobs rather than pursuing a specialized and demanding job.

Although discrimination in all forms has been a ceaseless battle, whether it is race, gender or religion, the origins of the gender pay gap are more intricate, especially when it comes to developing countries like Ethiopia. Yet, the majority of the wage gap can be explained by various labour market characteristics.

Hadas Fuchs, researcher at Taub Center for Social Policy, a non-partisan socioeconomic research institute, believes that the stubborn inequality in the average wages between men and women persists in all countries and across all sectors because there are fewer job opportunities for women. In Ethiopia, close to 65% of the economically active women population is employed in the agriculture sector at the national level, while 30% are engaged in service. According to the labour survey conducted by the Ethiopian Statistical Service in 2016, the rest are used in the industry sector. Yet, women’s participation in agricultural activities can be seen as marginal. Women are considered more consumers than producers in an agrarian society.

Looking at the labour market in urban areas where major economic activities occur is necessary to paint a clear picture. Seven million are employed out of the 13.4 million economically active urban populations (7.2 million women and 6.2 million men). According to ESS’s latest urban employment survey, four million of this working population are male, while three million are women. This makes the population-to-employment ratio 43.6% for women and 63.7% for men, indicating women’s lower participation level in the labour market than men.

On top of this, Gelila Kirkos, operations manager at LonAdd, stresses that women remain in a limited number of jobs. “Women are more employed in elementary occupations, while they are rare in more professional areas.”

For instance, the data obtained from Ethiopian Statistical Service (ESS) reveals that 119,462 men work in positions that are classified as managerial in urban areas. Only 36,166 women hold similar positions. On the other hand, while 1.2 million women workers are in service and sales positions, only 912,282 men have similar positions.

The fact that women are more concentrated in elementary positions also means they are getting lower pays than men. According to ESS, the average monthly payment for women in urban areas is ETB1,450.6 (This was a data collected in 2020), while it is 62% higher (ETB 2,354.1) for men. The same payment differences can also be observed when looking at the different sectors of the economy. In the agriculture sector, men receive an ETB1,900 monthly average salary, which is 80% higher than women. Similarly, the monthly average wage for women and men in the manufacturing sector is ETB 1,184.6 and 1,696.1, respectively. Men also earn 28% higher than women in wholesale and retail trade.

In addition, experts argue that the so-called ‘motherhood penalty’ pushes women into the informal economy. “These situation forces women to take on vulnerable occupations that fail to protect their basic labour rights,” stresses Gelila.

Indeed, out of the total three million female paid employees in urban areas, 56.7% are engaged in the informal sector, according to ESS. On the contrary, 47.5% of the four million employed men in urban areas work in the informal sector.

At the global level, Ethiopia’s performance in the gender pay gap is minimal. According to the Gender Gap Report published by the World Economic Forum in 2018, Ethiopia ranks 99th place out of 148 countries regarding wage equality for similar work while it holds 80th place regarding the gender pay gap.

However, Measho Berihun, foreign and public relations department head at the Confederation of Ethiopian Trade Unions (CETU), argues that the problem in Ethiopia is not equal pay or the gender pay gap. Instead, it is the absence of minimum wage. “Both men and women in industrial parks are paid USD30 per month on average. This does not allow women to buy sanitary items, let alone rent a house or raise a child. This is mainly because there is no minimum wage in Ethiopia.”

Currently, CETU has 570,000 members, of which 48% are women, according to Measho. “Minimum wage has been a source of dispute between CETU and the government for at least the last 20 years. But the draft proclamation that will allow for the introduction of minimum wage across industries has been submitted to the Council of Ministers recently.”

Globally, legal frameworks aimed at minimum wage proved instrumental because women are more likely than men to be concentrated in elementary occupations with the lowest salaries. Minimum wage policies also enabled workers, especially women, to be lifted from poverty. However, this should be accompanied by policies that improve the status and abilities of women as well as eliminate gender-related discrimination.

The gender pay gap affects individual women and the overall economy significantly. Studies have shown that closing the gap could lead to substantial economic growth. A McKinsey Global Institute report estimates that achieving gender parity in the workplace could add up to USD28 trillion to the global GDP by 2025. A more diverse and inclusive workforce leads to a broader talent pool, increased innovation, and higher productivity. When women are underpaid and discouraged from reaching their full potential, the entire economy suffers.

The gender pay gap extends beyond economics and touches upon fundamental equality and social justice issues. Leaving the pay gap unaddressed reinforces historical gender biases and stereotypes. It sends a message that women’s work is less valuable than men’s, contributing to a persistent societal climate of gender inequality. It perpetuates the gender inequality that disadvantages the more immense humanity.

EBR12th Year • March 2024 • No. 127