To what extent is education responsible for the differential labour market outcomes of women and men in urban India?

This research poses the question: to what extent is education responsible for the differential labour market outcomes of women and men in urban India. In particular, to what extent does education contribute to women's observed lower earnings than men.

As the Table below shows, women earn significantly less than men and also have fewer average years of education than men. However, they enjoy higher returns than men to each extra year of education they possess.

	Madhya Pradesh		Tamil Nadu
Means	women	men	women	Men
Wages (rupees per hour)	13.60	23.34	8.50	17.29
Years of education	5.4	7.2	4.0	6.3
Marginal return to education	10.8*	6.1*	9.4*	8.1*
Coefficient on dummy for:
Primary education	0.176	0.084	0.062	0.037
middle education	-0.024	0.360*	0.400	0.292*
secondary education	0.889*	0.787*	0.932*	0.664*
higher education	1.414*	1.075*	1.518*	1.176*

 

Note: * signifies that the coefficient is significant at the 1% level

The decomposition findings suggest that women do suffer high levels of wage discrimination in the Indian urban labour market, but that education contributes little to this discrimination: the wage-disadvantage effect of women's lower years of education than men is entirely offset by the wage-advantage effect of women's higher returns to education than men's. The data also indicate that for both men and women, returns to education rise with education level, confirming the findings of other recent educational rates of return studies in India and elsewhere.