Poverty and Women’s Labor Market Activity: the Role of Gender Wage Discrimination in the EU

Abstract

The functioning of the labor market often has been stressed as a clear determinant in explaining poverty trends in developed countries. In this paper, we analyze the role of gender wage discrimination on household poverty rates in several EU countries, linking two related phenomena that rarely are analyzed together. In order to quantify the impact of discrimination on poverty, we propose the construction of a counterfactual distribution of wages where discrimination against women has been removed. Using this new wage distribution, we compute total household income and compare poverty rates in the absence of discrimination to those actually observed. Our results show that, in general, it is true that discrimination against women plays a determinant role in the current levels of poverty, even if we discover that results for each country present a different pattern and intensity. Further, we find that the effect of discrimination on poverty risk dramatically increases for individuals in households who largely depend on working female earnings, especially in the case of single mothers.poverty, inequality, income distribution, gender, wage discrimination, labor participation.