Summary By: Elizabeth Cox, Regional Program Director,
UNIFEM, Part of UN WOMEN in the Pacific
SIGNIFICANCE
Women across Europe continue to earn less than their male counterparts, despite legislation at the EU and member-state levels that makes it illegal to pay women less than men for equal work. Research shows that this is likely remain the case for at least several decades. Yet by failing to close the gender pay gap, European businesses and countries are exposing themselves to serious problems and risks, and holding back their growth. Go to conclusion
ANALYSIS
All EU member states adhere to a body of legislation that was consolidated into a single directive in 2006, with the aim of ensuring that men and women receive equal pay for work of equal value. Nonetheless, research from the EU in 2010 and the OECD in 2008 confirm a gender pay gap in every EU member state.
CAUSES
The gender pay gap has multiple causes:
Gender segregation. Women tend to dominate low-paid occupations and industries. However, even here the gender pay gap persists.
Straightforward Discrimination. Women are also underpaid in highly lucrative industries. For example, in 2009, the UK Equality and Human Rights Commission found that women in the financial sector were being roughly half their male colleagues, even though they were doing the same work. It was only slightly better among the highest earners, with those in fund management and futures trading suffering the greatest loss of earnings.
Part-Time Work. Many women work part-time to balance family responsibilities, which fall disproportionately on women, and the need to earn a living. Not only are these women disadvantaged by the comparatively lower rates of pay in part-time work, they also suffer from a gender pay gap within those low rates of pay. In the United Kingdom, part-time female workers earn 35% less than their male counterparts (as compared to 16.4% less for full-time work). The proportion of part-time jobs filled by women is higher than the OECD average (72.1%) in several EU countries: Germany (81.1%), France (79.4%), United Kingdom (77.6%) and Netherlands (75.5%).
Lack of transparency. The culture of secrecy surrounding pay prevents employees from knowing whether they are being paid fairly. Research shows that where transparency about remuneration exists, the gender salary ratio is more equal. For this reason, the UK coalition government is implementing an equality act from October 1, which will make pay secrecy clauses unenforceable and allow hypothetical comparators for direct gender pay discrimination.
Low Female Boardroom Representation. Research has found that there is a correlation between higher numbers of women in boardrooms – a minimum of three is needed to change the culture – and more equal pay along gender lines (see EUROPEAN UNION: Commission may impose women quota – August 23, 2010). In August, Viviane Reding, the European commissioner for justice and fundamental rights, announced that the European Commission would consider a 20% quota to increase the representation of women in boardrooms if EU companies failed to address their boardroom gender balance within one year. In an interview published today in Die Welt, Reding says that the European Commission will consider a quota in which women hold at least 30% of all supervisory board members by 2015, and 40% by 2020. Norway, Iceland and Spain have already adopted quotas on the national level, France and the Netherlands are considering legislation to do so, and Germany has imposed quotas at the Laender level.
BAD FOR BUSINESS
The gender pay gap exposes businesses to unnecessary problems while preventing them from maximising their talent:
Safeguarding talent. Companies that do not ensure equal pay for equal work risk losing their top female employees to competitors who are willing pay them fairly.
Return on investment. Companies invest significant time and money recruiting and training their employees. To get a good return on that investment, they need those employees to perform well and to stay. Therefore, to lose female employees over unequal pay for equal work is a permanent loss of that prior investment.
Unbalanced leadership. Pay and promotion are informal shaping mechanism with cross-generation impacts. Unequal pay for equal work is a disincentive for women to make the investments and sacrifices necessary to advance, creating a shallower talent pool from which to draw when it comes to making senior-level appointments.
Risk of tribunals. Companies that pay women less than men for equal work make themselves vulnerable to being taken to an employment tribunal. In the United Kingdom alone, the number of such claims has risen by 56% this year.
Draining Europe’s future. The gender pay gap is hurting Europe’s economies and societies, with long-term effects:
Loss of Tax Revenue. From the moment a woman drops out of the labour market, she ceases to contribute tax revenue to the state. The gender pay gap is a major factor in the decision of many women to drop out of the labour market, often because it coexists with expensive childcare costs. This loss of revenue is hurting many EU member states. In March, Reding told Die Welt that Germany’s GDP would increase by as much as 30% if the gender payment gap were closed. Fully closing the gap between male and female employment rates in the euro-area would raise GDP by as much as 13% — closer to 20% for Southern Europe, according to Goldman Sachs.
Demographic Decline. Birth rates decline when women feel they cannot combine work with children, according to research from the Berlin Institute for Population and Development. The demographic crisis in Germany, where the gender pay gap is 23.3%, is a case in point — Germany now has the lowest birth rate in Europe (see GERMANY: Low birth rate has high impact – August 26, 2010). By contrast, EU countries with a high proportion of women in the labour force, and relatively equal numbers of working men and women, typically show higher fertility rates (see EUROPE: Ageing population clouds economic outlook – October 15, 2009). In particular, the Nordic countries and France, where there are subsidised and readily available childcare provisions, enjoy some of Europe’s highest birth rates and female labour participation rates.
CONCLUSION
Closing the gender pay gap in Europe will benefit more than the region’s women and their families. Businesses that ensure equal pay for equal work will eliminate unnecessary problems and risks while maximising their competitiveness, capitalising on their employee talent and growing their leadership. Countries that do so will see higher rates of labour market participation and thus economic growth.
