Equal Pay for Equal Work or Unequal Pay for Equal Work?

Abstract: This study investigates how the Chinese transition from a planned economy towards an emerging market economy has affected the income gap between men and women in urban China. Before the market reform, non-market mechanisms allocated labour and wages. Under governmental manifests for equality former strong cultural preference for men were attempted to be eliminated. However, with liberalization of the labour market, firms have gained autonomy to set wages without governmental influence. This has created changes in the income distribution between genders. Through conducting an Oaxaca-Blinder decomposition on data from the Chinese Household Income Project in 1988 and 2002, years that captures China’s dramatic shift, the study reveals that both the overall income distribution in China and the income gap between men and women have increased during these fourteen years. The study also shows that during these years the income gap between the genders cannot be explained by differences in characteristics, but rather due to an increase in unexplained differences that can be caused by pure preference discrimination of women on the labour market.