How much less are women paid than men?

LONDON – The idea is simple: To narrow the stubbornly wide gap between the pay of women and men, lay out the data. That notion has driven a push towards pay transparency around the world, engineered through a rush of legislation and directives over the past few years. It is shining a light on the progress – or the lack thereof – in pay practices and which measures are actually effective.

1. Is more transparency solving the gender pay gap?

Yes and no. Among the 38 countries in the Organisation for Economic Cooperation and Development (OECD), 27 now have some form of pay transparency in place. The data that has emerged shows the gender pay gap across the OECD narrowed from 19 per cent in 1996 to 12 per cent in 2021, based on median earnings for women and men. Still, some countries have seen their pay gaps shrink, while others have not.

One reason is that some laws apply to large companies only, leaving behind smaller firms. And advocates say transparency needs to be paired with enforcement.

In the United Kingdom, for example, the gap has not budged since reporting was implemented in 2017. That is due to a lack of fines, experts say.

In Denmark, on the other hand, the differential narrowed 7 per cent after a transparency law was passed in 2006.

2. What policies are having an impact?

The toughest form is Iceland’s “equal pay for equal value” standard, meaning positions with comparable skills, hours and intensity must be paid the same, regardless of the industry or the job. The law forced employers to justify each pay and bonus decision. Non-compliant companies must pay a daily fine of 50,000 krona (S$495). Iceland’s pay gap narrowed by 3.4 percentage points after the law passed, to 10 per cent.

Barring employers from asking job applicants for salary history has also proved effective, as it can prevent a new hire from being locked into an unfairly low rate. Almost half of all US states have banned the practice, and the European Union passed a directive in April to do the same.

A 2020 analysis by the Harvard Business Review found that such bans resulted in an 8 per cent pay increase for women and a 13 per cent increase for black employees. Including a salary range with job listings has also helped. It is required by a number of US states, including New York and California.

3. Why is the wage gap so hard to fix?

A lot of the regulation has focused on company-level changes, which fails to address industry or countrywide issues. Pay transparency measures have also been more effective in countries with higher rates of unionisation, experts say.

Countries where collective bargaining is weak, such as the United States and UK, have had a hard time closing their gaps. In Belgium, where almost half the workforce belongs to a trade union, the gender pay gap halved, from 10 per cent in 2010 to 5 per cent in 2021.

Each country has its own labour dynamics, meaning one set of policies does not work everywhere. The fact that women work in sectors consistently undervalued – such as healthcare, education and eldercare – contributes to pay gaps. Childcare, and the imbalance in women taking time out of work or reducing hours to care for kids, also factors into structural pay discrepancies.

4. At what point does a wage gap violate the law?

In countries such as the UK, women and men have the legal right to equal pay for equal work, and there is a framework for comparing jobs by effort, skill or decision making.

In January 2021, US lawmakers reintroduced legislation to guarantee that women and men are paid equally for the same jobs, one of several gender equity efforts backed by US President Joe Biden.

But barriers to progress remain. Women who press their equal pay demands through the courts can face a high burden of proof and heavy legal fees. Goldman Sachs agreed in May to pay US$215 million (S$291 million) to put an end to a long-running class-action lawsuit that accused the Wall Street giant of systemically underpaying women.  

5. What is the debate around more disclosure?

The wage gap is often presented as a crude measure of what men and women earn on average across the workforce, not a direct comparison of like-for-like roles. So the data has highlighted how women are under-represented in higher-paying jobs. There is still some reluctance to be transparent on pay, with companies posting hugely wide salary ranges in New York, for example.

While the rules are driven by a sense of fairness, politicians often point out that equal pay could boost economic growth. A study by the European Institute for Gender Equality forecast that closing the gap could lead to an increase of 3.5 million to six million jobs by 2050.

In the UK, the Labour Party is pushing for mandatory pay reporting by ethnicity to expose the pay gap for black, Asian and ethnic minority groups. Some firms, such as Deloitte and KPMG, have voluntarily released their numbers. BLOOMBERG