A Comparative Study on the Measurement of Gender Pay Gap Analysis: Oaxaca-Blinder vs Pay Ratio Method

Abstract

Purpose - This study purposes to investigate the methodology of measurement in a comparative way by pitting the traditional approach against the recently new approach: Oaxaca-Blinder medium variance and pay-ratio method. Given that Korea’s gender pay gap has been debated on diversity, equality, and inclusion, this study attempts to explore an alternative measurement method towards remedying the situation in Korea. Examining the methodology for analyzing the pay gap is crucial. Previous studies (Heath et al., 2013) have struggled to define the gender pay gap and to explain the phenomenon’s effect in the workplace. This difficulty is experienced because the scope of influence on pay differences is broad and pay-related exceptions always appear in companies.
 Design/Methodology/Approach - This study, using the data of listed companies of the Financial Supervisory Service and HCCP (Human Capital Enterprise Panel) data supported by Korea Research Institute for Vocational Education and Training, analyzes the gender wage gap in Korea in two different measurements. We employ the Human Capital Corporate Panel data (HCCP) for Oaxaca-Blinder method and collect 31,694 employees’ information between 2007 and 2017 from the database. For the organization-level approach, we extract data from the Data Analysis, Retrieval and Transfer System (DART), which provides all the information of publicly-traded firms in Korea disclose. In the DART system, we obtain the pay amounts as well as the populations of 454 firms, randomly generated between 2019 and 2021. These data are matched to the TS2000 database to incorporate the sample firms’ financial information.
 Findings - The results of this study are notable. First, in terms of the Oaxaca-Blinder, the gender wage gap, based on the average annual salary, stands at 36% over the past 10 years. In particular, the gap notably expanded from the manufacturing industry. Second, the women pay-ratio quintile method shows an average pay gap of 32.5%. The effects of data and measurement methods are important. This means the impact of human resource related variables on the gender pay gap is much bigger and consistent in Korean enterprises.
 Research Implications - This study has the following theoretical and practical implications to resolve the pay gap. First, in the pay gap between male and female workers, it is necessary to look more closely at pay-related items and measurement method. Second, it is meaningful to strengthen the evaluation of performance through the disclosure of pay information. Third, in order to reduce the pay gap for women, it is necessary to avoid unfair discrimination in terms of personnel management not only during the employment stage but also after employment.