workers with the same characteristics, and 8 percent less when occupation and firm size are also controlled for. This can be explained by the fact that most fixed-term workers have failed to find permanent jobs, and therefore have low reservation wages. Such workers face relatively high unemployment risks as well as low wages. Any compensating wage differentials are overwhelmed by other effects, such as unobservable differences in quality between workers with temporary and permanent jobs. The negative wage differential for temporary workers is larger for ethnic Latvians (-14 percent) than for minority workers (-8 percent).

# **Wage Discrimination and Segregation**

**Gender pay gaps.** Wage discrimination refers to a situation in which equally productive individuals are paid different wages due to some characteristic (like gender, or ethnicity) that is unrelated with productivity. The issue of the gender pay gap has been a focus of research and policy for both for transition and developed market economies. On average, Latvian females earn about 80 percent of males’ earnings. This ratio, the same as in Poland, lies between those of Estonia and Lithuania, and is higher than in Czech Republic (see Appendix Table 28). While at the national level this ratio has been broadly stable since 1997 (see Appendix Table 29), it varies significantly across occupations (see Appendix Table 29), industries and regions.  For example, in 2001 women earned 99.5 percent on men’s earnings in public administration but just 57 percent in financial intermediation. The gender pay gap tends to be wider in higher wage regions of Latvia (see Appendix Figure 21).

**Occupational segregation** . The degree of industrial and occupational segregation in a country can be measured by a dissimilarity index (see Tables 5 and 6). This index is a calculation of the minimum proportion of females who would have to change occupations (industries) in order to make the distributions of males and females equal. Thus, higher values of the dissimilarity index suggest higher degrees of segregation. According to this index, Latvia is not very different from Estonia. As far as occupations are concerned, it is not very different from Poland or Hungary. Latvia has somewhat higher occupational segregation than Lithuania or the Czech Republic.

**Table 5.  Occupational and Sectoral Segregation of Full-Time Employees by Gender and Ethnicity in the Baltic Countries, 2000: Dissimilarity Index**<sup>**a**</sup>

|Segregation<br>|Estonia|Latvia|Lithuania|
|---|---|---|---|
|Genders by occupations<sup>b</sup>|0.41|0.38|0.35|
|Genders by economic activities<sup>c</sup><br>|0.31|0.31|0.29|
|Ethnic groups by occupations<sup>b</sup>|0.15|0.11|0.29|
|Ethnic groups by economic activities<sup>c</sup>|0.26|0.21|0.14|

_Notes:_ Dissimilarity index is a number between 0 and 1, with 0 indicating equal distribution of genders (or ethnic groups) among occupations, and 1 indicating complete segregation. It shows the minimal proportion of females which have to change occupations in order to make occupational distributions of females and males equal.<sup>b</sup> Nine major groups of occupations according to ISCO 88.<sup>c</sup> 15 sectors (A, B,...,O) according to NACE. _Sources:_ Calculation based on LFS data.

Can segregation, human capital, or the longer hours worked by men explain inequality in pay between the sexes? While females are better educated and over-represented among professionals (see Appendix Table 27), a well-paid occupation, they are heavily concentrated in education and health care. These two sectors are found at the bottom of the wage ranking.

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