Key Determinants of Wage Differentials Between Men and Women

Walk into any office, factory, or farmland in the country and ask two simple questions: who works here, and how much does each person earn? The answers reveal a pattern that economists have studied for decades. Men and women rarely earn the same, even when they do similar work. The gap is not random. It is shaped by a set of identifiable forces that begin long before a woman signs her first job contract and continue throughout her career. Understanding these forces, known as the determinants of wage differentials, is the first step to making sense of one of the most persistent inequalities in the modern economy.

What wage differentials actually mean
Education and the skills gap
Unequal access to quality education
The skills mismatch
Occupational segregation
Horizontal segregation: clustering in low-paying sectors
Vertical segregation: the glass ceiling
The informal sector trap
Cultural and social norms
Patriarchal expectations and the burden of care
Restrictions on mobility and choice
Discrimination and bias in hiring
The motherhood penalty
How these determinants interact
Why this matters for the economy

What wage differentials actually mean

A wage differential is simply the difference in pay between two workers or two groups of workers. When that difference consistently falls along gender lines, it becomes a gender wage gap. According to the International Labour Organization, women in India earn roughly 66 percent of what men earn, a gap of about 34 percent. The World Economic Forum’s Global Gender Gap Report 2024 placed India’s economic parity at just 39.8 percent, a sobering figure that points to deep structural causes rather than isolated cases of discrimination.

Researchers usually break the gap into two parts. One part can be explained by measurable differences in education, experience, sector, and hours worked. The other part, often called the unexplained component, captures discrimination and unobserved factors. A study on India’s urban labour market found that around two-thirds of the pay gap is attributable to labour market discrimination and only one-third to differences in endowments like education and experience. That ratio alone tells us the problem is not only about what women bring to the job market but also about how the market treats them once they arrive.

Education and the skills gap

Education is the most studied determinant of wages anywhere in the world. More schooling generally means higher earnings, better job stability, and greater bargaining power. Yet for women, the relationship between education and wages is complicated by unequal access, social pressure, and the kind of skills training that is made available.

Unequal access to quality education

While female enrolment in schools has improved significantly in recent decades, completion rates and quality remain uneven. Reports indicate that only about 48 percent of Indian women complete basic schooling, with rural girls particularly disadvantaged. Early marriage, household responsibilities, lack of menstrual hygiene facilities, and safety concerns push many girls out of the classroom long before they finish secondary education. Each year of schooling lost translates into lower lifetime earnings.

The skills mismatch

Even when girls do attend school and college, the subjects they are encouraged to study often steer them toward lower-paying fields. Science, technology, engineering, and mathematics, the disciplines that lead to the highest-paying jobs in today’s economy, remain male-dominated. Research shows that only around 14 to 20 percent of the engineering and technology workforce in India consists of women. The result is a skills gap that is not about ability but about opportunity and steering.

Vocational training shows a similar pattern. Women are over-represented in tailoring, beauty, and handicrafts courses, while men dominate enrolment in electronics, mechanics, and IT certifications. These training choices map directly onto future wages, locking women into lower-income tracks before they ever apply for a formal job.

Occupational segregation

If education determines where the starting line is, occupational segregation decides which race a worker gets to run. Occupational segregation refers to the uneven distribution of men and women across jobs, industries, and hierarchical levels. It comes in two flavours, and both reduce women’s wages.

Horizontal segregation: clustering in low-paying sectors

Horizontal segregation describes the concentration of women in certain industries and occupations. Women are overwhelmingly found in education, healthcare, domestic work, garment manufacturing, and agriculture, while men dominate manufacturing, construction, transport, and finance. The Periodic Labour Force Survey 2022 highlighted that female-dominated sectors like education, healthcare, and social work are typically less compensated than male-dominated sectors like engineering and finance. The skills required in these sectors may be just as demanding, but society systematically values them less.

Domestic work offers a stark illustration. According to the ILO, women make up about 80 percent of domestic workers globally, and in India this sector employs millions of women from marginalised communities who earn significantly less and lack basic legal protections. The work is essential, often physically demanding, but it sits outside formal wage protections and is therefore poorly paid.

Vertical segregation: the glass ceiling

Vertical segregation describes the concentration of women at the lower rungs of a profession’s ladder. Even in fields where women are well represented, they are scarce at the top. In the public sector banking industry, for example, women constitute about 24 percent of the workforce but hold only about 8 percent of board positions. The glass ceiling, an invisible barrier preventing women from reaching senior leadership, persists across corporates, academia, and government.

An interesting finding from the India Human Development Survey research is that moderately educated women are largely excluded from white-collar clerical and sales jobs that elsewhere in the world absorb similar women. In India these roles remain male-dominated, which depresses both women’s employment levels and their earnings. The lost middle of the labour market is one of the most important features of India’s gender wage story.

The informal sector trap

A large share of working women in India are stuck in informal employment, where wages are lower, contracts are absent, and social security is minimal. Casual labour wages reveal the gap clearly. The latest Periodic Labour Force Survey 2023-24 shows that self-employed men earn about three times what self-employed women earn, salaried men make about 1.2 times more, and male casual workers earn roughly 1.5 times women’s earnings. The informal economy magnifies every other disadvantage women face.

Behind the statistics on education and occupations lies the deeper layer of cultural expectation. Wages are not set in a vacuum. They are shaped by the unspoken rules about what work is appropriate for women, how much of their time belongs to the household, and how their ambitions should be ranked against those of male family members.

Patriarchal expectations and the burden of care

In most Indian households, unpaid domestic labour and caregiving fall disproportionately on women. This time poverty means many women either drop out of the labour force after marriage and childbirth or accept part-time and home-based work that pays poorly. Analysts have argued that the gender gap in workforce participation is driven more by patriarchy than by lack of education or policy support, with cultural ideals of the ‘good wife’ and ‘good mother’ built on sacrifice and invisibility, quietly disincentivising paid ambition.

This shows up in a curious pattern that economists call the income effect. As a household’s income rises, women in India are often less likely to work outside the home, the opposite of what classical economics predicts. The reason is social. Higher status families often signal their status by keeping women out of paid labour, especially in manual or public-facing jobs.

Restrictions on mobility and choice

Cultural norms also restrict where women can work. Concerns about safety, family honour, and reputation often confine women to jobs close to home. This shrinks the pool of opportunities and pushes many women toward domestic and home-based work that is poorly compensated. A woman who cannot commute, travel for training, or relocate for a promotion has a far narrower wage ladder to climb than her male peers.

Discrimination and bias in hiring

Even when women are equally qualified and willing, employer bias intervenes. Research has documented gendered language in Indian job advertisements that nudges applicants toward roles reinforcing existing segregation. Hiring managers often assume women will leave after marriage or childbirth, leading to lower starting offers and slower promotions. The demand-side bias is increasingly seen as a critical piece of the puzzle, working alongside supply-side factors like education and caregiving responsibilities.

The motherhood penalty

Career breaks for childbirth and caregiving carry a measurable cost in lifetime earnings. Women who take maternity leave or step away to care for young children often return to lower positions, lose seniority, and miss out on the compounding effect of annual raises and promotions. Even with strengthened maternity benefit laws, the social expectation that mothers, not fathers, will absorb most of this cost remains intact.

How these determinants interact

It is tempting to treat education, occupational segregation, and social norms as separate problems, but they reinforce one another. A girl who is pulled out of school early ends up with fewer skills, which pushes her into a low-paying sector, where wages confirm the family’s belief that her education was not worth investing in. A young professional who shoulders most of the household work has less time for the networking and upskilling that lead to promotions, which slows her career and reinforces the assumption that women are less committed to work.

This is why isolated fixes rarely close the wage gap on their own. Free education without job opportunities for women, equal pay laws without enforcement, and skills training without challenging the norms about who does the cooking at home all run into the same wall. Researchers consistently argue that closing wage differentials requires simultaneous action on education, demand-side labour market reforms, affordable childcare, and a cultural shift in how unpaid work is shared.

Why this matters for the economy

The gender wage gap is not only a moral problem. It is a macroeconomic one. When half the population earns substantially less than the other half, household consumption is weaker, savings are lower, and economic growth is held back. Studies estimate that closing the gender employment and wage gap could add several percentage points to India’s GDP. The wage gap also feeds intergenerational inequality, since lower female earnings translate into reduced investment in the next generation’s health and education, particularly for daughters.

What do you think? If education levels alone cannot close the gender wage gap, which determinant do you think deserves the most urgent policy attention in the next decade, and why? And how much of the gap, in your view, will shift if men begin sharing unpaid domestic work equally with women?

References

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Key Determinants of Wage Differentials Between Men and Women

Table of Contents

What wage differentials actually mean 🔗

Education and the skills gap 🔗

Unequal access to quality education 🔗

The skills mismatch 🔗

Occupational segregation 🔗

Horizontal segregation: clustering in low-paying sectors 🔗

Vertical segregation: the glass ceiling 🔗

The informal sector trap 🔗

Cultural and social norms 🔗

Patriarchal expectations and the burden of care 🔗

Restrictions on mobility and choice 🔗

Discrimination and bias in hiring 🔗

The motherhood penalty 🔗

How these determinants interact 🔗

Why this matters for the economy 🔗