Educational Attainment, Occupational Choice and Poverty: A Gender Perspective from Pakistan Masood Sarwar Awan ∗ , Syed Umar Farooq ∗∗ Rafi Ullah Bilal ∗∗∗ Abstract Education is the most important factor which plays a leading role in human development. Gender disparity in education is an obstacle for sustainable growth and poverty reduction. It is empirically established fact that provision of education to female can make them socially dynamic and economically productive. The dualism in education is one of the causes of wage differential and income inequality. Educational inequality, in Pakistan, though declined but remained a far reaching goal to meet the MDG target for 2015. Available estimates indicated the high incidence of inequality in Pakistan and very little is known of the causative factors. The changes in the earning structure of the labor force occur due to income distortions which arise from education patterns as well as from the way the labor market compensates education within a country. Another important determinant, which adds to persistent inequality, is gender disparity. The paper aims at demonstrating how increased education helps to choose better profession and narrow the income gap, by using gender disaggregated data from the household surveys of Pakistan. In order to find out the effect of different factors on earning inequality, this study used earning function and occupational choice model. The estimated Mincerian earning equation showed that extra year of schooling increased the income for male and female population, while it is stronger for the latter bringing a reduction in income inequality between males and females. Education also helps people choose ‘better earning’ occupation, and for most provides the chance to be employers and self employed. ∗ Masood Sarwar Awan, Assistant Professor, Department of Economics University of Sargodha ∗∗ Syed Umar Farooq, Assistant Professor, Department of Commerce, AIOU, Islamabad ∗∗∗ Rafi Ullah Bilal,
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Educational Attainment, Occupational Choice and Poverty: A Gender Perspective from Pakistan
Masood Sarwar Awan∗, Syed Umar Farooq∗∗ Rafi Ullah Bilal∗∗∗
Abstract Education is the most important factor which plays a leading role in human development. Gender disparity in education is an obstacle for sustainable growth and poverty reduction. It is empirically established fact that provision of education to female can make them socially dynamic and economically productive. The dualism in education is one of the causes of wage differential and income inequality. Educational inequality, in Pakistan, though declined but remained a far reaching goal to meet the MDG target for 2015. Available estimates indicated the high incidence of inequality in Pakistan and very little is known of the causative factors. The changes in the earning structure of the labor force occur due to income distortions which arise from education patterns as well as from the way the labor market compensates education within a country. Another important determinant, which adds to persistent inequality, is gender disparity. The paper aims at demonstrating how increased education helps to choose better profession and narrow the income gap, by using gender disaggregated data from the household surveys of Pakistan. In order to find out the effect of different factors on earning inequality, this study used earning function and occupational choice model. The estimated Mincerian earning equation showed that extra year of schooling increased the income for male and female population, while it is stronger for the latter bringing a reduction in income inequality between males and females. Education also helps people choose ‘better earning’ occupation, and for most provides the chance to be employers and self employed.
∗ Masood Sarwar Awan, Assistant Professor, Department of Economics University of Sargodha ∗∗ Syed Umar Farooq, Assistant Professor, Department of Commerce, AIOU, Islamabad ∗∗∗ Rafi Ullah Bilal,
Educational Attainment, Occupational Choice and Poverty: A Gender Perspective from Pakistan Sarwar Awan, Umar Farooq, Rafi Ullah
Introduction
Development should in general reflect on the quality of people’s lives,
creating opportunities and options for shaping their own future. In such a
perspective, growth seems irrelevant if it is not pro-poor. Moreover, the
trickledown effect must not be just in the form of reduction in the
population below the poverty line drawn on the basis of caloric intake,
but it must also ensure that essential capabilities of life viz., long healthy
life, education and participation in the lives of community are enhanced
(Kemal, 2003). There is a strong positive effect of economic growth on
enabling environment for poverty reduction through enhanced provision
of direct and indirect employment opportunities, social welfare, and
infrastructure development that can potentially benefit the poor.
However, there is dominant view that economic growth increases the
labor demand and reduces poverty. But poverty is also reduced by
increasing the productivity of the poor, either by increased access to
education or to physical and financial capital.
The analysis of the various factors that affect the income
distribution in Pakistan is long overdue. Available estimates indicate that
inequality in Pakistan is high and very little is known of the causative
factors. The changes in the structure of earnings in the labor force occur
due to a number of reasons. Income distortions arise from education
patterns as well as the way the labor market compensates educated class.
Another important determinant, which adds to income inequality, is the
gender disparity. It is common observation that the female labor force
earns significantly less than males; which is generally justified by the
argument that women tend to work in low-paying occupations.
Moreover, women are not allowed to pursue higher or professional
Journal of Managerial Sciences Volume II, Number 1 76
Educational Attainment, Occupational Choice and Poverty: A Gender Perspective from Pakistan Sarwar Awan, Umar Farooq, Rafi Ullah
education and discrimination can also cause women to drop out of school
or to abstain from participating in the workforce.
Situation in the workplace also contributes towards gender
disparity and income inequality. In most of the countries, rural areas
exhibit higher inequality as compared to urban areas. The tidy logic once
again is the lower educational level of the rural workers as well as lack of
infrastructure coupled with large family size. The aforementioned
determinants of income differential are mere assertions which need to be
verified by empirical evidence. This paper discusses the changes in the
income distribution using household data disaggregated by education,
gender and location. It focused on several aspects that affect the
distribution of income across households.
The increasing return to education implies a widening wage gap
between workers with different level of education. The wage differential,
in turn, implies a more unequal distribution of earnings at individual and
household level. The occupational choices also have an important
bearing on the way income is distributed. It is commonly believed that an
important determinant of earning differential is differences in human
capital (that is educational attainment). Therefore, it is a researchable
question to trace out the level of education which gives greater returns
and to which segment of the society. Even if the innate ability of the
students is randomly distributed, children from richer backgrounds tend
to get further through education. These distributional effects are often
compounded by the skewed allocation of resources between basic and
higher education. In order to find the level of education that provides
better returns to the household, this study has focused on estimation of
the earning function. Moreover, occupational choices depict how much
skill and education will augment the earnings of a household and which
Journal of Managerial Sciences Volume II, Number 1 77
Educational Attainment, Occupational Choice and Poverty: A Gender Perspective from Pakistan Sarwar Awan, Umar Farooq, Rafi Ullah
category of earners can be made more productive. This in turn, will be
instrumental in lowering the inequality and hence reducing poverty.
Thus, it seems imperative to estimate the earning functions for the whole
range of earners, self-employed, employers and unpaid family workers.
This study estimates the gender wage differentials in the labor market
and also estimated the determinants of the probability of being poor to
provide econometric evidence on the importance of key socio-economic
factors that determine the relative welfare of the individuals and
households. The balance of this paper is as follows. Section 2 discusses
theoretical framework, section 3 describes the data and methodology,
results are discussed in section 4, and section 5 is conclusion and policy
recommendation.
Theoretical Framework
The Human Capital model in this study is the extension of Becker (1962)
and Mincer (1974) models in order to quantify the returns to investment
in education. Since education is the main source of human capital
development, large number of studies have estimated the returns to
education for different countries [(Psacharopoulos, 1980, 1985,
and1994); (Psacharopoulos and Chu Ng, 1992)]. These studies mostly
used binary variables instead of continuous variables. There were only
few studies available in Pakistan that used the Mincerian Earnings
Function approach to examine the returns to education (e.g. Shabbir and
Khan, 1991), (Shabbir, 1994), (Nasir and Nazli, 2000). The previous
studies estimated the earning function only for wage earners, whereas
this study provides estimates for earning functions of all employed
groups (employers, self-employed, wage earners, unpaid family workers)
by using most recent data sets available in Pakistan. Mincerian earning
Journal of Managerial Sciences Volume II, Number 1 78
Educational Attainment, Occupational Choice and Poverty: A Gender Perspective from Pakistan Sarwar Awan, Umar Farooq, Rafi Ullah
function was based on the assumption of uniform rates of return for all
schooling.
Occupational choice determines the current earnings as well as
the future earnings of individuals which are closely linked with
household consumption, health, and general status in the society [Harper
and Haq (1997) and Freeman (1971)]. The major factors which can affect
the decision of occupational choices are educational levels, experience of
particular field and Training.
Data and Methodology
We have used the PIHS 1998-99 and 2001-02 in this study. The sample
size for the 1998-99 PIHS was 16,305 households, approximately one
third of which was urban. A total of 1,150 PSUs were selected. The
survey covered all the four provinces, including Azad Jammu and
Kashmir, Northern Areas and FATA.
The sample size of the 1998-99 PIHS survey was large enough
to obtain estimates for each province and region (urban/rural). A two-
stage, stratified random sampling strategy was adopted for each of the
surveys. At the first sampling stage, a number of Primary Sampling Units
(PSUs) were selected from the different strata. The enumerators then
compiled lists of all households residing in the selected PSUs. At the
second sampling stage, these lists were used to select a sample of
households from each PSU randomly, in all twelve households were
selected in each urban PSU, and sixteen in each rural PSU.
PIHS 2000-01
A sample size of 16,400 households was taken to provide reliable
estimates of key characteristics. The entire sample of households
(SSUs) was drawn from 1150 Primary Sampling Units (PSUs) out of
Journal of Managerial Sciences Volume II, Number 1 79
Educational Attainment, Occupational Choice and Poverty: A Gender Perspective from Pakistan Sarwar Awan, Umar Farooq, Rafi Ullah
which 500 were urban and 650 were rural. In this survey 90 sample
households were not covered due to non-response/closed/non-contact
and non-cooperation from the respondents in this Survey.
Table 1.1: Profile of the 1998-99 and 2001-02 PIHS samples.
*** Showed that the coefficient is significantly different from zero at 0.01 probability level and t-ratios are in parenthesis.
The positive coefficient on the gender dummy (Male) in overall sample
was indicative of gender gap in labor market earnings Being male
increases income by 169.9% than being female. Male earned
significantly more relative to their female counterparts. But the separate
analysis for male and female showed that females enjoyed a higher
return of 18.1 percent and 13.2 percent to education due to narrow base
of income in 1998 and 2001 respectively. These results were consistent
Journal of Managerial Sciences Volume II, Number 1 85
Educational Attainment, Occupational Choice and Poverty: A Gender Perspective from Pakistan Sarwar Awan, Umar Farooq, Rafi Ullah
with the results of Atlas and Bourguignon (2004) in case of Indonesia as
well as that of Fields and Soares (2004) for Malaysia and Asadullah
(2005) for Bangladesh. The coefficient of experience showed
substantial increase in wages with each additional year spent in the labor
market for both male and female workers. The results for the year 1998
showed that five years of experience earned 35 percent higher wages for
male workers and 32 percent higher wages for female workers as
compared to those with no experience.
Similar results were revealed for the year 2001 where five years
of experience earned 37.9 percent higher wages for male workers and
32.5 percent higher wages for female workers compared to male and
female counterparts with no experience respectively. These results were
consistent with prior studies in Pakistan (see for example; Khan and
Irfan, 1985; Shabbir, 1991; Ashraf and Ashraf, 1993 and Nasir, 1999).
3.2 Earning Function with various level of Education by Gender
Many studies indicated substantial differences in earnings across school
levels in various countries. Van der Gaag and Vijverberg (1989) noted
that an increase of one year in elementary, high, and university education
showed an increase of 12 percent, 20 percent, and 22 percent in earnings
respectively. Nasir & Hina (1999) showed that an increase of one year in
education at middle level increased the earning by 9.8 percent for Male
workers and 2.9 percent for female workers.
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Educational Attainment, Occupational Choice and Poverty: A Gender Perspective from Pakistan Sarwar Awan, Umar Farooq, Rafi Ullah
Table 2: Regression results of earning function equation with level of education in Pakistan (Overall, Male and Female) Parameters Over all Pakistan Male Female