Effects of automation on the gender pay gap: the case of Estonia

Abstract

Abstract This paper investigates how investments in automation affect the gender pay gap. The evidence of the effects of automation on the labor market is growing; however, little is known about the implications of automation for the gender pay gap. The data used in this paper are from a matched employer–employee dataset incorporating detailed information on firms, their imports, and employee–level data for Estonian manufacturing and service employers for the period of 2006–2018. Through the use of the imports of automation goods as a proxy for the introduction of automation at the firm level, this paper estimates the effect of automation using simple Mincerian wage equations. The causality of the effect is further validated using propensity score matching (PSM). We find that introducing automation enlarges the gender pay gap, and PSM confirms that this also has a higher causal effect on the wages of male employees than female employees. The results imply that a higher representation of women in higher-paid positions does not guarantee a reduction in the gender pay gap in the presence of automation, and appropriate measures in education and retraining are needed to tackle the effect of automation on gender inequality.