Gender Difference in Returns to Education Independent of Gender Wage Gap in Korea*

• DOI: http://doi.org/10.1111/asej.12209
• Date: 01 June 2020
• Published date: 01 June 2020

Gender Difference in Returns to Education

Independent of Gender Wage Gap in Korea*

Jaeram Lee and Jungjoon Ihm

Received 17 August 2018; Accepted 28 March 2020

This study examined the difference between male and female groups’return on

investment (ROI) in education independent of the average gender wage gap.

Women’s additional ROI in education was significant and positively estimated.

Furthermore, the ROI in women’s education was consistently higher than that in

men regardless of educational stage, except for graduate education. These gender

differences were greater in the younger generation than in the older generation

and have decreased significantly in the recent ten years in high school education.

Although the additional ROI in women’seducation was positive in the field of cul-

ture and arts, education’s effecton wage increases in professional occupations was

less than in men, especially in the fields of law and medicine. In addition, we

show that gender differences in ROI in education were countercyclical. A base

effect, large wage declines for low-educated women during recessions, could

explain this phenomenon. However,coinciding with the existence of positive cash

flow news in the stock market that promises good business performance, a signifi-

cant wage increase among highly educated women was found.

Keywords: education economics, gender wage gap, income inequalities, macro-

economic analysis, returns on education.

JEL classification codes: G12, I22, I26, J24.

doi: 10.1111/asej.12209

I. Introduction

Korea’s ratio of women’s to men’s median wages increased from 61.5 percent in

2006 to 64.1 percent in 2016, which is lower than the OECD average of 86.3

percent.

1

This high gender wage gap in Korea may be due to the so-called

‘unexplained premium’of men, although previous studies have examined vari-

ous causes of this phenomenon. Most of these studies have examined how the

gender wage gap is influenced by social and environmental factors, such as

women’s low labor market participation, career interruptions and type of

*Lee: College of Business,Gachon University,Seongnam-si, Gyeonggi-do,Korea, Ihm

(corresponding author): Dental Research Institute,Seoul National University,Seoul,Korea, Email:

ijj127@snu.ac.kr.

1

See Women’s Life from Statistics, 2013, Statistics Korea.

© 2020 East Asian Economic Association and John Wiley & Sons Australia, Ltd

Asian Economic Journal 2020, Vol.34 No. 2, 213–232 213

occupation (Cho, 2007; Chi and Li, 2008; Chi et al., 2011; Mohapatra and

Luckert, 2014).

Education is has traditionally been an important cause of wage differences

between men and women (Choi, 2015; Katz and Autor, 1999). Many previous

studies have considered return on investment (ROI) in education as one of the fac-

tors explaining the total gender wage gap but have not taken into account the gen-

der differences in the ROI in education. However, wage discrimination caused by

education can be an independent social phenomenon with characteristics distinct

from a simple gender wage gap. Although the change in women’s‘average wage

level’determines the gender wage gap, the change in the ROI in education affects

‘wage inequality’among women. That is, the gender wage gap remains constant

if the average wage levels of men and women do not change, regardless of the

changes in ROI in education. At the same time, changes in wage inequality could

be accompanied by changes in average wages. In this case, the ROI in education

contributes to the gender wage gap. Therefore, to understand the role of ROI in

education independent of the gender wage gap, contributions of male and female

worker s’average wages must be eliminated from the analysis.

The effect of education investment on wage inequality within gender groups

can vary depending on policies and cultural and economic circumstances. As

explained by Park and Shin (2005) and Biddle and Hamermesh (2013), the aver-

age gender wage gap is procyclical. Although certain macroeconomic factors

may not significantly affect the average gender wage gap, it may be significantly

affected by wage inequality, which can vary by gender. For example, relatively

low-educated women may be more adversely affected than lower-educated men

when the economy deteriorates and the employment rate declines. This phenom-

enon may decrease the average female population’s wage while worsening their

wage inequality more than that of the male population. This gender wage gap

can have important policy implications in that it can represent wage differences

not only between men and women but also within each gender group.

This study, therefore, investigates whether the difference in the ROI in educa-

tion between the gender groups can be distinguished from the average gender

wage gap. When the effect of the average gender wage gap was removed, the

ROI in education was significant and additional ROI in education for the female

group was considerable and positively estimated. In addition, to consider the

nonlinearity of educational stage, we divided education level into high school,

college, university and graduate school education. The wage gap between each

education level was higher in the female group than in the male group, although

the ROI in graduate school education between men and women was not signifi-

cantly different. These patterns were relatively irrelevant to educational stage

over time, but the ROI in women’s high school education has decreased signifi-

cantly in the recent ten years. These additional ROI in education for women

were more pronounced in the younger generation than in the older generation

and in the arts and in cultural jobs than in professional occupations such as law

and medicine.

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