Determinants of wage ineguality in Zambia

The global rise in wage income inequality has been an important topic in labour economics over the past few decades. Many studies have been undertaken to ascertain the factors affecting wage inequality. However, little research exists for Zambia on this topic in spite of the importance that is attached to labour matters in successive governments in the country. Thus the study sought to establish the determinants of wage inequality in Zambia. It further wished to document the inequality trend over the past 20 years.
The study employed the data from the Living Conditions Monitoring Survey and Labour Force Survey obtained from the Central Statistical Office to complete this analysis. A quintile regression of wages was used to decompose the observed inequality within the human capital and market segmentation framework, while the Gini coefficients and generalized entropy estimates were used in measuring within group inequality. The study further used the Juhn Murphy Pierce decomposition approach to evaluate the main drivers of wage inequality among the Zambian employees.
It was established that wage inequality has been declining throughout the reference period (1991 – 2011). This could be explained by the increased number of tertiary educated employees in the labour force whose real mean wages were seen to be rising throughout the period. Furthermore, it was discovered that wage inequality is higher among females than it is among men with similar characteristics though there was a declining trend over the review period. Additionally, the study showed that the public-private wage sector premium has been rising, with inequality high and rising among private sector employees.
The study thus established that education exerts the largest influence on wage inequality while gender and the regional location of workers also play a significant (though diminishing) role. The study recommends increased changes in the supply of skills through investments in human capital, to catch up with the rise in demand for skilled labour if wage inequality is to be reduced in Zambia.