The effect of COVID-19 on gender wage gap in the Czech Republic

• Thesis title in Czech: Vliv COVID-19 na gendrové rozdíly v mzdách v České republice
• Thesis title in English: The effect of COVID-19 on gender wage gap in the Czech Republic
• Academic year of topic announcement: 2021/2022
• Thesis type: Bachelor's thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: Mgr. Barbara Pertold-Gebicka, M.A., Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 29.06.2022
• Date of assignment: 29.06.2022
• Date and time of defence: 12.09.2023 09:00
• Venue of defence: Opletalova, O314, místnost. č. 314
• Date of electronic submission: 01.08.2023
• Date of proceeded defence: 12.09.2023
• Opponents: Bc. Daniel Kolář, M.Sc.

References

1. Adda, J., Dustmann, C., & Stevens, K. (2017). The career costs of children. Journal of Political Economy, 125(2), 293-337.
2. Albanesi, S., & Kim, J. (2021). The gendered impact of the COVID-19 recession on the US labor market (No. w28505). National Bureau of Economic Research.
3. Alon, T., Coskun, S., Doepke, M., Koll, D., & Tertilt, M. (2021). From Mancession to Shecession: Women's employment in regular and pandemic recessions (No. w28632). National Bureau of Economic Research.
4. Leythienne, D., Pérez-Julián, M. (2021, September). Gender pay gaps in the European Union - a statistical analysis. © European Union. https://doi.org/10.2785/98845
5. Madgavkar, A., White, O., Krishnan, M., Mahajan, D., & Azcue, X. (2020). COVID-19 and gender equality: Countering the regressive effects. McKinsey Global Institute, 15.
6. Mysíková, M. (2012). Gender wage gap in the Czech Republic and Central European countries. Prague Economic Papers, 21(3), 328-346.
7. PwC. (2018, March). Women in Work Index 2018 – Closing the gender pay gap. https://www.pwc.com/hu/hu/csr/assets/women-in-work-index-2018.pdf
8. PwC. (2022, March). Women in Work Index 2022 – Building an inclusive workplace in a net zero world. https://www.pwc.co.uk/economic-services/WIWI/pwc-women-in-work-index-2022.pdf

Preliminary scope of work

Research question and motivation

The COVID-19 crisis, referred to as a “shecession” (Alon et al., 2021), differs from previous recessions and therefore was already studied from the perspective of different effects on men and women given its unique characteristics. For example, women’s work is usually counter-cyclical, meaning that when a recession takes place, women’s working hours increase as the economic situation of families can no longer afford to rely on men’s earnings. However, in the COVID-19 crisis, Alon et al. (2021) identified the opposite effect with decreased economic activity of women, which was probably driven by school closures and more, thus increasing the gender employment gaps (Alon et al., 2021).
Overall given that women are strongly represented in accommodation, food service, and more sectors affected by COVID-19, women’s jobs and livelihoods are more vulnerable to the COVID-19 pandemic (Madgavkar et al., 2020).

The harmful effect this crisis had on women in the workforce can also be seen in PwC’s Women in Work Index, which has fallen for the first time. This means that the progress of closing gender inequality, including the gender wage and employment gap, has seemingly dropped back in 2020 by two years in OECD countries (PwC, 2022).

The Czech Republic has struggled with the gender wage gap even in recent history. Amid the financial crisis in 2008, the Czech Republic had the most notable gender pay gap among Central Europe countries (Mysíková, 2012). Even in 2018, that is before COVID-19, the unadjusted gender wage gap in the Czech Republic was at 20%, and the gender employment gap was at 17%, with the EU-27 average being both 15% (Leythienne, Pérez-Julián, 2021). On the other hand, between 2017 and 2018, the Czech Republic improved the most on the Women In Work Index of all OECD nations, rising four places from 23rd to 19th (PwC, 2018). This improvement has declined as the Czech Republic now finds itself back at 21. place amidst countries with an overall decreased index, as explained above (PwC, 2022).

There can be expected a relationship between employment during the crisis and future wages. This is analogous to the observation that mothers, who leave the labor market briefly to care for children, face a significant impact on their income and lifetime earnings. Adda, Dustmann, and Stevens (2017) state that the share of the child penalty associated with “atrophy” during periods of non-participation due to skill obsolescence or human capital depreciation amounts to 13% of the overall wage gap. Additionally, many occupations that have suffered from significant employment losses during the pandemic are highly susceptible to automation. This raises the prospect that as the economy recovers, at least some of the jobs lost may not be reinstated (Albanesi & Kim, 2021).

As we have been in the COVID-19 crisis not long ago, the research about changes in gender wage and employment gap during this timeframe has only started and, in the case of the Czech Republic, is a bit delayed given the lack of data. As the availability of data even for the Czech Republic is increasing, I would like to look into what contributes to gender wage and employment gaps. Still, my main aim would be to see the effects of COVID-19 on these gaps and their determinants. Given the characteristics of the data I will be using, the focus will be mainly on the short-term effects.

Contribution

My contribution will consist of further understanding of the determinants of gender employment and wage gaps specific to the Czech Republic and examining their reaction to the unique situation of COVID-19. This may be able to uncover some relationships unknown to us before. Therefore this thesis could help gain more insight into gender wage and employment gaps in the Czech Republic in hopes of being helpful in the process of eliminating the gender wage and employment gap in the Czech Republic. Alternatively, my thesis could serve at least as an addition of a new perspective to the ongoing discussion.

Methodology

I will use two datasets: Labour Force Survey (LFS) from the Czech Statistical Office and data from the Average Earnings Information System (ISPV), both quarterly collected. Labour Force Sample Survey contains data about employment structure by sex, age, industry, hours worked, and more, but there is no data about wages, which is why I will also be using the second dataset. I will be using occupation codes to merge it with LFS. That is, identify the occupation in which each person included in the LFS is working and then give that person the average or median salary for that occupation as recorded in the ISPV, gaining a rough estimate rather than the real pay that each person makes.

I will focus on the period from 2018 to 2021 to see the evolution from the time before the pandemic to the time “after.”

I will estimate the gender employment and wage gap based on a classical regression :

y_i= α+ γ*female_i+ X_i*β+ u_i

where female_i is a dummy variable for gender and vector X_i is a vector of other control variables (age, education, industry, or region, for example). I will estimate this regression for every time period separately and determine the change in γ coefficient in time.
My thesis will include an event-study approach as an alternative path to inspect the changes in gender wage and employment gaps throughout COVID-19. Lastly, I will use different decompositions (the Oaxaca-Blinder, for example) to determine how much of the observed gap can be accounted for by the different characteristics between men and women (such as their levels of education or work experience) and how much is unaccounted for.

Outline

1. Introduction
2. Literature review
i) Gender wage and emplyment gap as a whole
ii) Specification of COVID-19
iii) Gender wage and employment gap in Czech Republic
3. Methodology
4. Data and description
5. Models and decompositions
6. Comments on the results and interpretation
7. Conclusion