Gender Wage Discrimination in the Portuguese Labor Market

Juliana Patrícia Marques Castro

Patrícia Crespo da Silva
Reika Ammer

University of Minho, Braga, Portugal

January 2022

ABSTRACT
The main purpose of this paper is to analyze the gender pay gap in the Portuguese labor
market and understand what part of this gap corresponds specifically to possible
discrimination. To answer these questions, we analyze the indicators of the Portuguese
labor market that show differences between genders. To complement these results, we
use theoretical and empirical studies that prove the existence of gender discrimination,
although some indicators show that it has been decreasing over the period under
analysis.

Keywords: Gender Discrimination, Wage Differential, Portuguese Labor Market.

JEL: J16, J24, J31, J71

Introduction
Gender discrimination in the labor market is a current issue and continues to arouse the
interest of many researchers, as it is a phenomenon that occurs in several nations,
including Portugal. Governments and labor institutions have, over the years, made
several efforts to implement norms and policies that guarantee equal opportunities,
market access, career progression, and wages. Despite this and the favorable progress
that has been made in some indicators’ characteristics of the labor market, discrimination
against women is still very evident. This is reflected mainly in salaries and job promotion
processes. Over the years, several authors have contributed with studies on this issue,
concluding that women suffer from discrimination, namely wage discrimination. Even
though they have more schooling, women have a lower average salary than men. Thus,
due to the high degree of complexity in analyzing phenomena of this type, this report
focused mainly on the wage gap between the two genders, trying to understand to what
extent this wage gap results from discrimination.

To this end, we divided our work into four parts, in which, first, we presented the concept
of gender discrimination in the workplace and some theories about it. Afterward, to
contextualize the Portuguese labor market situation in the last two decades, we analyzed
some relevant indicators, in particular, the wage gap. Finally, to understand exactly how
much of the gap is due to discrimination, we present some empirical studies whose data
we consider relevant for analyzing our main question.

The concept and theoretical framework of labor market discrimination

When discussing labor market discrimination against women in the press or when it
comes to policymaking, the gender pay gap is usually used as an indicator of the degree
of discrimination. Yet it is important to consider that the degree of difference in wages is
not equal to the discrimination against women, as wage differences are justified also by
differences in the individual characteristics, like schooling, or differences in the kind of
activities, like being employed in a riskier sector (Oaxaca, 1973). Therefore, we can only
talk about discrimination if women with similar personal characteristics in similar jobs
are still less remunerated. In other words, discrimination occurs, when personal
characteristics of the worker unrelated to productivity, like race or gender, are also
valued (Arrow, 2015, p. 3).

Most approaches to analyze the relationship between wages and discrimination are
based on Gare Becker’s theory of discrimination. Her concept of taste discrimination
allows measuring the monetary effect of discrimination, no matter if the women are
discriminated against by the employer, their co-workers, or even by customers. If
regarded from an employer’s perspective, the prejudice against women implies a
perceived disutility of hiring a woman. This distaste for hiring women is reflected by the
discrimination factor d translates into lower wages for women, as the employer acts as if
hiring a woman costs the male wage augmented by the discrimination factor. Reversely,
that means that a woman’s wage will be below the wages of her male colleagues and that
it will be the lower, the higher her employer’s taste for discrimination. Likewise, a
difference in women’s and men’s wages will occur due to discrimination by co-workers.
In this case, the male colleagues will demand a wage premium to compensate for the
disutility caused by having to work with women. Finally, a prejudiced customer will only
be willing to pay less for a product if attended by a woman. (Borjas, 2016, p. 365)

To estimate the share of wage differences that stem from discrimination, many empirical
studies use the Oaxaca-decomposition, which is based on Becker’s discrimination factor.
Oaxaca (1973) explains that “[d]iscrimination against females can be said to exist
whenever the relative wage of males exceeds the relative wage that would have prevailed
if males and females were paid according to the same criteria” (Oaxaca, 1973, p.694).
Thus, the Oaxaca decomposition splits the wage difference into two elements, the first
one accounts for the personal differences like age, schooling level, or working sector, the
remaining unexplained part difference in wages represents the discrimination (Oaxaca,
1973).
Although the Oaxaca decomposition is a very helpful tool to analyze whether wage
differences are justified or not by productivity-related factors, there are aspects of wage
differences that remain unexplained, and its explanatory value depends substantially on
whether all factors determine productivity have been considered. For example, the
Oaxaca decomposition ignores that similarly aged men have different labor market
histories. Therefore, it can be argued that discrimination is either higher or lower than
estimated by this method (Borjas, 2016, 386, 418).

Moreover, in the previous examples, we assumed that discrimination against women was
deliberate. Yet, discrimination can also result without prejudice. A form of “unintended
discrimination” against women is statistical discrimination. In this case, the employer
does not have any “taste for discrimination” but the preference for male workers is a
consequence of asymmetric information. If an employer faces two equally skilled
candidates of different gender, he will estimate the productivity of each candidate based
on statistical averages. As women are statistically more likely to quit a firm or at least
interrupt their work because of maternity, the firm might suffer more costs if hiring
women than hiring men. Therefore, the profit-maximizing firm will more likely hire the
men or, when hiring women, their wage will be lower than their male colleague’s wages.
Therefore, the woman, whether she intends to become a mother or not, will be
disadvantaged just because of her sex. (Borjas, 2016, 395 – 397; Meulders, 2010, 4)
Another phenomenon that is closely related to the gender wage gap and labor market
discrimination is labor market segregation. Some phenomena derived from labor market
segregation, like the under the proportion of women in top management positions, can
be understood as an indicator for labor market discrimination. Nevertheless, is highly
controversial and depends on the theoretical approach whether these inequalities
between men and women can be considered discrimination. Labor market segregation
can be distinguished into horizontal and vertical labor segregation. The first type refers
to the concentration of women and men in particular professions or sectors of economic
activities. In other words, it describes the fact that there are typical “male” and “female”
jobs and economic sectors. Vertical segregation (also hierarchical segregation) describes
the overrepresentation of a certain group at the top of occupation-specific ladders,
independently from the sector or activity. There is vast literature pointing out the
existence of invisible obstacles for women to reach leadership and top positions in public
or private firms, known as the effect of the “glass ceiling”. On the other hand, there is the
concept of “sticky floor”, which means that women are often maintained at the lowest
positions of the organizational hierarchy. (Meulders, 2010, 2-7)

Some theories see labor market segregation as an effect of discrimination. One of these
theories, which refers to vertical segregation is the idea of occupational crowding or
“overcrowding”, which says that women are intentionally segregated into different
occupations. Because of this overcrowding into a restricted number of occupations,
women’s wages are depressed. Gender theories take many factors into account that are
usually seen as exogenous. Gender stereotypes can cause discrimination in a variety of
manners. For example, employers could think that women are less qualified them men,
in general of for a particular activity, which is considered as “masculine”. Other theories
explain the hierarchical segregation, stating that men want to maintain their privileged
positions and therefore make efforts in keeping women away from high level-
occupations. However, it is important to consider, that there may be forms of
discrimination and gender stereotypes before the labor market, for example, if girls’
choices for more “female jobs” are encouraged by the cultural environment. Also, there
are numerous alternative theories to explain labor market segregation without referring
to discrimination. For example, the segregation may arise from the supply side, as women
rationally chose those jobs where human capital is less likely to depreciate during
maternity leave-(Borjas, 2016, 220 – 222; Meulders, 2010, 2 -7)
Departing from this theoretical framework, it becomes evident that the inequalities
between men and women in the labor market are closely related to the concept of
discrimination. Though, this should not lead to an anticipated conclusion that indicators,
like the gender pay gap and the labor market segregation, are equal to the extent of
discrimination, considering that there may be other factors having an impact on them,
without being related to labor market discrimination. Therefore, our paper aims to
analyze up to which point, the differences of men and women in the Portuguese labor
market can be attributed to discrimination.

Institutional and Legal Framework

The existing inequalities in the labor market are quite noticeable, especially for women,
and thus constitute a factor of discrimination. However, over time, various European
countries have developed regulations aimed at mitigating discrimination and promoting
equality between men and women. Progress in this area has not come easily and
therefore does not occur uniformly in all countries or all dimensions of gender equality
(World Bank, 2011).

Equal pay guidelines were first stipulated at the international level by the International
Labor Organization (ILO) through conventions in 1951. ILO Convention No. 100
established that the principle of equal pay for female and male labor should be applied to
all workers so that there is an equal value assigned to equal work regardless of the gender
of the person producing it. Years later, in 1958, Convention No. 111 defined
discrimination as "any distinction, exclusion or preference based on race, color, sex,
religion, political opinion, national extraction or social origin, which has the effect of
destroying or altering equality of opportunity or treatment in respect of employment or
occupation", and gender discrimination is therefore prohibited.

At a national level, the Constitution of the Portuguese Republic (CRP), in the fundamental
rights and duties, more specifically, in the general principles (principle 13, nos. 1 and 2)
stipulates that everyone has the same social dignity and "is equal towards the law", and
"no one may be prejudiced or favored because of his or her sex, descent, race, language,
country of origin, or religious or political beliefs".

In labor matters and about economic rights and duties and, more specifically, about the
rights of workers, the CRP reinforces the normative importance attributed to the absence
of discriminatory practices by defining, in its art. 59, no. 1, al. a), that "everyone, without
distinction of age, sex, race, citizenship, the territory of origin, religion, political or
ideological convictions, has the right to be paid for his work according to its quantity,
nature, and quality, observing the principle of equal pay for equal work, to guarantee a
decent existence. In addition, for reasons of gender equality, the CRP also stipulates that
one of the primary functions of the state is to promote "equal opportunities in the choice
of profession or type of work and conditions so that access to any positions, work or
professional categories is not denied or limited based on sex" (art. 58, no. 2, al. b)).

Despite the CRP and the ILO guaranteeing these rights and duties of equality between
men and women, to prevent any kind of discrimination, the Portuguese labor market still
shows discriminatory practices against the female gender.

Portuguese Labor Market Analysis

To better understand the phenomenon of gender discrimination, it is important to

understand the general context of the work situation of women in Portugal. For this
purpose, some socio-economic indicators will be analyzed such as the unemployment
rate, activity rate, percentage of schooling by the level of education for men and women,
the wage gap by gender, by the level of qualifications and occupation of positions.

UNEMPLOYMENT RATE AND ACTIVITY

The following graph shows the unemployment rates by gender and the GDP growth rate.
The comparison between the rates allows us to verify the economic cycles experienced
in Portugal between 2000 and 2020 and is therefore relevant for understanding how the
Portuguese labor market has been shaped in the last two decades. The global economic
and financial crisis in 2008 led to a slowdown of the economy which, in turn, reached its
worst phase in 2012, when the effects of the sovereign debt and recession were felt. This
resulted in the highest unemployment rates in 2013, both female (16.4%) and male
(16.0%), in recent years.
In a subsequent phase, the two variables continue to outline an inverse but noticeably
more favorable relationship, in which the progressive decrease in unemployment rates is
accompanied by an increase in the Portuguese GDP growth rate. We also see a
convergence between female and male unemployment rates, especially from 2012
onwards, when the difference between them is practically zero (0.1p.p.). In the last year
under analysis, due to the pandemic crisis, the situation is again reversed, i.e., increases
in both unemployment rates and a decrease in Portuguese economic growth.
The observation of the evolution of the unemployment rates of men and women shows
us that they show a similar trend and, therefore, similarly respond to the economic cycles,
although the female unemployment rate is persistently higher than the male rate. About
the EU27 we see that the female unemployment rate in Portugal, from 2006 onwards, is
always higher than the average of the 27 member states, placing the country in a
comparatively worse situation in terms of the female contingent.
Chart 1- Unemployment rate by gender and GDP growth rate in Portugal, 2000-2020
20,0

10,0

0,0

- 10,0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Unemployment Rate - Men Unemployment Rate - Women
GDP growth rate

Source: Eurostat, own elaboration.

The female presence in the labor force is considered by many to be a crucial factor in
understanding the evolution of women's wages (Blau and Kahn, 2016). For this reason,
its analysis is important.
When analyzing the graph, we notice that the activity rate of men is consistently higher
than that of women, which means that in the total population there are more men in the
labor force than women. This gap may be related to the fact that women face more
barriers to entry than men.
More recently what we denote is an approximation of the two rates, due to the decrease
in the male activity rate by 5.3p.p. and the increase in the female rate by 2p.p. between
2000 and 2020. Moreover, in all years under analysis, we found that both the male and
female activity rates are above the average of the 27 member states, showing a favorable
situation for Portugal.
 Chart 2 - Activity rate by gender in Portugal, 2000-2020

80,0
70,0
60,0
50,0
40,0
30,0
20,0
10,0
0,0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Activity Rate - Men Activity Rate - Women

Source: INE, own elaboration

SCHOOLING
Education is one of the main factors in the characterization of individuals in the labor
market, so it is important to analyze its evolution by gender.
According to the data in Graphs 3 and 4, in the last decade, the percentage of men with
primary education has always been higher than that of women. Regarding Secondary
Education, we see that the percentages, over the years, are practically equal.
According to Figueiredo et al. (2015), educational attainment is also a good indicator of
the wage gap, and in Portugal, there has been "a particularly rapid increase in the
proportion of women graduates relative to men over the years." In fact, by looking at the
graph, we realize that it is in Higher Education where the largest discrepancies are found.
In 2011, about 18.3 women out of every 100 held the highest level of education, compared
to 12.7% of men. Over the years, there has been an increase in these percentages for both
genders, with the female percentage always remaining higher. Currently, in 2020, 30%
(11.9 p.p. more than in 2011) of women have higher education, against only 20% (7.5 p.p.
more than in 2011) of men. Thus, we can conclude that the level of education among
women is markedly higher than among men. Even so, in the most qualified professions,
women earn lower wages than men, partly because of the discrimination they suffer in
the labor market.
 Chart 3 - Share of women in education by educational level in Portugal, 2011-2020

70
60
50
40
30
20
10
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Ensino Básico 60,9 57,8 55,3 52,2 50,9 49,3 47,5 45,3 43,6 40,9
Ensino Secundário 20,9 22,6 23,4 24 24,5 25,3 26,4 27,4 28,4 28,9
Ensino Superior 18,3 19,7 21,3 23,7 24,6 25,4 26,1 27,2 28 30,2

Ensino Básico Ensino Secundário Ensino Superior

Fonte: Eurostat, own elaboration.

Chart 4 - Share of men's schooling by education level in Portugal, 2011-2020

80
70
60
50
40
30
20
10
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Ensino Básico 67,6 65,6 63,7 60,7 58,1 56,7 56,1 54,7 51,9 48,3
Ensino Secundário 19,7 20,7 22,6 23,9 25,3 26 26,8 27,8 29 31,5
Ensino Superior 12,7 13,7 13,8 15,4 16,6 17,2 17 17,5 19,2 20,2

Ensino Básico Ensino Secundário Ensino Superior

Fonte: Eurostat, own elaboration.

WAGES
Through the indicators presented so far, we have been able to perceive the differences
existing in the Portuguese labor market. However, these are not the only relevant
disparities between men and women, and it is necessary to analyze the evolution of the
gender pay gap.
The European Commission defines the gender pay gap as "the difference between men's
and women's wages based on the average difference in the gross hourly earnings of all
workers". (European Commission, 2014). This wage gap provides us with an overview of
inequalities in pay, with one part of this difference being explained by the individual
characteristics of men and women (experience, education, sectoral and occupational
segregation) and the other by contextual factors such as gender discrimination. Despite
the mentioned data showing an "increase in women's labor force participation rates and
a significant investment in their human capital" (Simmer, 2013), this progression has not
been accompanied by equal pay between men and women, and the inequality in average
pay between men and women is a structural feature of Portugal (Carvalho, 2016).
The gender pay gap in the last decade was predominantly lower than the EU27 average,
except for 2015 when it was 0.5 p.p. higher. (16%), indicating that in that year, for every
100 euros earned by men, women earned 16% less, or 84 euros. Since this peak, the
Portuguese wage gap has decreased significantly, reaching a minimum in the period
under analysis in 2018 of 8.9%, remaining 5.5 p.p. away from the EU27 average. From
this analysis, we can conclude that the gender pay gap has shown a favorable evolution,
with Portugal being in a good position compared to the average of the other member
states. Nevertheless, we cannot conclude anything about discrimination, since this gap is
divided into two components: that underlying the individual differences in schooling and
that corresponding to discrimination and, therefore, it is an unadjusted measure of the
gender pay gap.

Graph 5 - Gender pay gap in Portugal and the EU27, 2010-2019

20,0

15,0

10,0

5,0

0,0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Pay gap between men and woman - EU27

Pay gap between men and woman - Portugal

Source: GEP/MTSSS – Portugal (Gabinete de Estratégia e Planeamento do Ministério do Trabalho e

Solidariedade Social)

If we look at a wage measure adjusted for qualifications, we can draw some conclusions
about the existence of gender discrimination in the Portuguese labor market, although
not very exact.
From the data in Chart 6, we see that the wage difference between men and women in the
case where both are "qualified professionals", i.e., have completed some specific course,
remains relatively constant over the years under analysis, 10%, indicating that for this
level of qualification women earn 10% less than men. If we look at the level of "highly
qualified professionals" this wage gap, on average, increases, standing at around 16% as
of 2010. In this case, women earn 16% less than men. These two qualification levels
suggest the existence of gender wage discrimination in the Portuguese labor market,
since for occupations requiring the same qualification level women earn lower wages.
In the case of "Quadros superiores", the wage difference becomes much greater,
approaching values on the order of 28%, which means that in top positions such as
deputies, ministers, presidents, judges, and secretaries of state, women tend to receive
only 72 euros for every 100 earned by men. These data relate to the phenomenon
mentioned in the theoretical framework, vertical segregation, suggested by many authors
as an indicator of discrimination. Here we can infer the existence of discrimination
because even in situations where women manage to overcome glass-ceiling and reach top
positions like men (although with many difficulties) and have the same level of
qualifications, their salaries are lower.

Chart 6 - Gender pay gap by qualification level in Portugal and the EU27, 2010-2019

0,0
- 5,0
- 10,0
- 15,0
- 20,0
- 25,0
- 30,0
- 35,0

Quadros superiores Profissionais altamente qualificados

Profissionais qualificados

Source: GEP/MTSSS – Portugal (Gabinete de Estratégia e Planeamento do Ministério do Trabalho e

Solidariedade Social)

However, as we mentioned in the theoretical framework, we cannot jump to conclusions

based only on these graphs regarding the gender pay gap and the segregation
phenomenon, even though the latter graph reports a measure that is almost adjusted to
qualifications. In other words, we found several and substantial differences between men
and women in the Portuguese labor market, but we cannot guarantee with conviction that
there is gender discrimination, since there are other factors that have an impact on the
pay gap and are not exactly related to discrimination.
Since the aim of our work is to analyze to what extent the gender pay gap is the result of
gender discrimination, in the next section we present three empirical studies carried out
in Portugal which provide us with some relevant data on the gender pay gap and gender
discrimination.

Empirical Evidence
Cardoso et al. (2016) designed a study in Portugal whose main objective was to
investigate the origins of the gender wage gap between 1991 and 2013. The four authors
used data provided by Quadros de Pessoal, with their final sample consisting of 27 921
002 observations and the dependent variable used a measure of real hourly wages given
by the ratio between the sum of deflated base wages, regular benefits and overtime pay
and the sum of normal working hours and overtime. The authors found that in these years
the female labor force participation rate increased from 35 to 45 percent and the wage
gap decreased by 12 percentage points. The authors concluded that the decrease in the
wage gap was primarily due to improved female qualifications rather than structural
changes associated with gender discrimination. In addition, the authors make a
comparison between the unadjusted and the adjusted wage gap, and the adjusted wage
gap measure, over the period under review, remains relatively constant at around 25
percent. This shows that the allocation of workers to firms and categories is decisively
influenced by gender, thus discriminating against women. If this were not the case, that
is, if individuals were allocated completely randomly to firms, the wage gap would be 5.8
p.p. smaller. Similarly, if workers were distributed among the various occupational
categories independently of gender, then the gap would be reduced by 4.3 p.p.. Together,
the authors conclude that discrimination in Portugal is responsible for two-fifths of the
wage gap, i.e., 40%.

In 2004, Bastos et al. carried out a study of the Portuguese labor market to analyze gender
pay discrimination in the cities of Lisbon and Porto. The three authors used the 1997
Quadros de Pessoal, and their sample consisted of 269,494 full time and fully-paid
employees who provided several pieces of personal information (gender, age, education
level, qualification level) and professional information (firm's wages, location, sector, and
sales volume). To answer their main question, the authors used the Oaxaca
decomposition, mentioned above, to decompose the gender wage gap into two
components: differences resulting from personal characteristics of workers and
employment, and differences corresponding to discrimination in the labor market. The
authors also pointed out that there is a high concentration of women in certain sectors of
activity compared to others that, in turn, are dominated by men, and that this distribution
of workers derives from gender discrimination. Based on their results, the authors
concluded that in Lisbon and Porto, men, older on average, have more experience and
higher skill levels, but lower levels of education than women. In both cities, an extra year
of experience favored men more than women; women's wages were negatively affected
by industry and services sectors, in Porto; women's wages were positively affected, more
markedly than men's, by seniority in the company. About pure gender discrimination, this
study concluded that there is wage discrimination between men and women in the cities
of Lisbon and Porto, although in the capital this phenomenon is more significant since in
the Invicta city there is a higher value for the component associated with productivity
differences and a lower value for the discrimination component than in Lisbon. This
discrimination component shows greater dispersion in Porto than in Lisbon, although
with relatively low values. This has to do with the different distribution of employment
sectors by gender between the two cities. In the case of Porto, women are more
represented in the textile industry, while men are less represented. However, in Lisbon,
the female gender has greater participation in the services sector, where there is also a
high representation of men.

Tiago et al. (2015) developed a study in the Autonomous Region of the Azores to analyze
gender equality in employment in the region. Using the same methodology as Bastos et
al., the authors used the 2003 Quadros de Pessoal, with a sample of 23 739 men and 15
382 women, aged between 15 and 64 years. The authors found that the average log hourly
wage for men was 0.114 higher than for women, so the gender wage gap was 12.1%. The
return on education was equal for women and men, at 2.7%, and an additional year of
experience in the organization meant a 1.4% increase in the hourly wage for both. About
pure gender discrimination, the authors concluded that approximately 83.3% of the wage
gap corresponds to the discrimination component and only 16.7% of the wage gap was
explained by differences in the individual characteristics of employees. In other words,
this study allows us to conclude that the gender discrimination that occurs in the labor
market in the Azores Archipelago derives from contextual factors and not from
differences between the sexes.
Conclusions
The focus of this report was to analyze to what extent the gender pay gap in Portugal is
related to the phenomenon of gender discrimination.

Based on the indicators analyzed concerning the labor market we realize that women
have higher unemployment rates than men, lower activity rates, much higher
qualification levels, but, in general, much lower salaries than men. Of this wage gap, it
should be noted that it is lower than the EU27 average and shows a tendency to improve.
However, and in line with the conclusions of the study presented by the Bank of Portugal
by Cardoso et al, this progression was only due to the improvement in female
qualifications. Moreover, since the gap is not adjusted for qualifications, we can conclude
nothing with conviction about discrimination. If we adjust for the level of education, then
we can infer the existence of discrimination in the labor market, since, for equal levels of
education and positions, women tend to receive less than men, corroborating the data
presented by the three empirical studies analyzed whose main conclusion is that
discrimination justifies a large percentage of the wage gap.

In Portugal, several laws fight against this type of discrimination, but, certainly, several
signs of progress and improvements are still needed to reach the so desired gender
equality in wages.

As with any study, this one had some limitations, namely regarding the search for data,
since these issues are still little statistically analyzed, and regarding the date of the studies
and respective periods.

In future research, we would suggest an evolutionary analysis of the phenomenon of

discrimination to understand whether it has increased or on the other hand stagnated or
decreased, and a deepening of this theme related to top management positions and
corporate hierarchies.
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