Wage Formation and Earnings Inequality in the Jordanian Labor Market

Abstract

This chapter investigates the distributional and structural developments of real hourly wages and monthly earnings in Jordan over the past two decades. Crude wage differentials are first explored by examining the differences in average hourly wages and monthly earnings across important socio-economic groups (gender, occupation, industries, levels of education, and sectors of ownership). Next, selectivity-corrected regressions are employed to explore the wage formation process and to calculate sector-based and gender-based wage differentials that control for observed worker characteristics. Results reveal that public sector pay advantages still existed in Jordan in 2010, but only for women. Due to rapid real wage erosion during the financial crisis, they turned to a disadvantage in favour of the private sector for men. Gender-based wage gaps remained compressed by international standards in the private sector and are essentially non-existent in the public sector. Finally, overall hourly wage dispersion is much higher in the private than in the public sector.