Can Temporary Wage Subsidies Transform Women’s Hiring in Pakistan’s Job Market?

A large experiment in Pakistan shows that offering firms a temporary wage subsidy significantly increases the likelihood that they hire women, especially in male-only workplaces. The study suggests that modest financial incentives can reduce employer hesitation and even shift hiring preferences over time.

In Pakistan, only about one in four women participates in the labor force, compared to more than four in five men. For years, experts have focused on barriers that stop women from working, such as safety concerns, household duties, and social norms. But what about employers? Are companies reluctant to hire women, and if so, can that reluctance be reduced?

A new study led by the World Bank’s South Asia Region Office of the Chief Economist, together with researchers from the University of Exeter and Johns Hopkins University, explored this question through a large real-world experiment. Working with Rozee.pk, Pakistan’s largest online job portal, researchers tested whether offering firms a temporary wage subsidy would increase their willingness to hire women.

How the Experiment Worked

The study involved 1,227 firms that had posted gender-neutral job advertisements. These companies were randomly divided into two groups. One group was offered a six-month wage subsidy if they hired a woman for the advertised position. The other group received no such offer.

Instead of setting a fixed subsidy amount, researchers used a special method to find out how much financial support each firm said it would need to hire a woman. Hiring managers were asked to state the minimum percentage of a woman’s salary they would require as a subsidy. A computer then randomly selected a subsidy level. If the company’s stated requirement was lower than or equal to that number, it qualified for the subsidy.

This approach helped reveal something important: when firms had a real financial incentive to answer honestly, they said they needed an average subsidy of 15 percent of wages. When asked the same question without consequences, they claimed they needed around 26 percent. In short, employers may overstate barriers when there is nothing at stake.

A Clear Boost in Female Hiring

The results were striking. Firms that were offered the subsidy were 10.7 percentage points more likely to hire a woman than firms that were not. Among firms that actually received the subsidy offer, the increase in female hiring was even larger, exceeding 20 percentage points.

The strongest effects were seen in firms that had no female employees at the start of the study. In these male-only workplaces, the subsidy significantly increased the likelihood of hiring a woman. It appears that a temporary financial nudge was enough to overcome hesitation, especially where firms had little prior experience employing women.

Importantly, the subsidy did not change who applied for the jobs. The share of female applicants stayed roughly the same. The difference happened at the final hiring decision. Employers were more willing to choose a woman when part of her salary was covered.

Did It Change Workplace Conditions?

The study also looked at job quality and longer-term effects. Women hired under the subsidy often received slightly higher wages, and firms were somewhat more likely to offer formal contracts. This suggests that some of the subsidy may have benefited the employee directly.

About 18 months later, firms that had been offered the subsidy were still more likely to have a woman in the originally subsidized position. Many of the women remained in their jobs or had moved on to better opportunities. There was no evidence of workplace conflict or negative team effects.

However, the overall share of women across the entire firm did not change significantly. The subsidy helped fill one position with a woman, but it did not dramatically reshape company-wide gender balance.

A Shift in Employer Attitudes

Perhaps one of the most encouraging findings came from job advertisement data. Researchers examined more than 25,000 job postings by participating firms over several years. Firms that had been offered the subsidy became less likely to explicitly state a preference for male candidates in future job ads. This change was especially noticeable among firms that previously had no female employees.

While a temporary wage subsidy is not a complete solution to Pakistan’s gender employment gap, the study shows that employer-side barriers are real and responsive to policy. A modest, time-bound financial incentive can meaningfully increase women’s hiring and may even shift how companies think about gender in the workplace.

In a country where progress on women’s employment has been slow, this research offers a practical lesson: sometimes, reducing the cost of taking a chance can open the door to lasting change.