Discussion Paper No. 255 of 2021 on Gender Wage Differentials between Public and Private Sectors in Kenya

Abstract

An aspect of gender wage gap that is often neglected is the wage differentials between the public sector and the private sector. Cognizant of the fact that the Kenyan labour market is segregated into public and private sectors, entry into the labour market therefore differ significantly by gender and so is the wage. Using microdata from the 2015/16 Kenya Integrated Household Budget Survey (KIHBS), this study analyses the gender wage gap in the private and public sectors, considering the whole wage distribution with the assumption that the decision to work in a sector is a prior process which is determined endogenously in the model. Therefore, the usual Ordinary Least Square technique of estimation is inconsistent, and it is necessary to use alternative techniques. The study employs the Recentred Influence Function (RIF) Oaxaca-Blinder decomposition to calculate how much of the gap is due to differences in returns between men and women and sectors, considering the sample selection bias. We find that the size of the gap attributed to different returns varies substantially across the wage distribution. Public sector employees in Kenya are paid higher wages, on average, than their counterparts in the private sector, and the gap is wider for women. Moreover, the proportion of the gender wage gap explained (by different characteristics) tends to be wider for workers who are at the top of the wage distribution in both sectors. Looking at the whole wage distribution reveals that discrimination in the gender wage gap is typically higher at its bottom than at its top, suggesting that sticky floors are more prevalent than glass ceilings. A very important contribution of this study is evaluation of covariates that widen gender wage gap along the wage distribution.