Decomposition of the Gender Wage Gap in Indonesia: Analysis from Sakernas Data

This paper investigates the gender wage gap in Indonesia by analyzing data from the 2016 Indonesia-National Labor Force Survey (SAKERNAS) to quantify the gap and decompose it into explained and unexplained gaps. Without controlling for differences in characteristics, we found that women were paid approximately 30 percent less than men. The results of the decomposition show that the explained gap accounts for only approximately one-fourth of the total gap. When casual workers in agricultural and non-agricultural are excluded from the analysis, women still earned 30 percent less than men, but the portion of the explained gap increases to just more than one-third of the total gap. The gender wage gap can be diminished through increases in women’s work hours, experience, education, and skills. Moreover, the high proportion of the unexplained gap indicates the presence of unfair discrimination against women. Therefore, reducing the level of gender discrimination in the labor market is also a critical factor in narrowing the gender wage gap in Indonesia.