The effects of austerity measures on gender gaps in labor market outcomes

Recent empirical evidence, largely based on descriptive analyses, suggests that women's wages and employment are more likely to be affected by government austerity measures because women constitute a majority of the public-sector labor force. Employing panel data from the 2014 and 2015 Labour Force Survey as pre-and post-treatment periods, we provide an econometric assessment of the effects of a 10% public-sector wage cut in Serbia that was introduced at the beginning of 2015. Wage cuts mandated by austerity measures increased the likelihood that younger and older women workers would transition into unemployment and inactivity, while no such effect was identified for men. On the other hand, evidence of heterogeneous compliance with the wage cut across public subsectors. State-owned enterprises, a subsector dominated by men, exhibited lower compliance with wage cuts compared to the state-sector, which is dominated by women. The difference in compliance prevented wage cuts from having the positive effect they could have had on the gender wage gap.