The Gender Wage Gap

Background and definitions

There is no country in the world in which women and men receive equal pay for equal work (World Economic Forum, 2015). Wage differentials reflect the vast inequalities between women and men on the labour market and in society at large. There are several definitions of the gender wage gap:

• The OECD (2016) defines the gender wage gap as “the difference between male and female median wages divided by the male median wages”.

• For the European Union (2014), “the gender pay gap is the difference between men’s and women’s pay, based on the average difference in gross hourly earnings of all employees”.

Closing the gender wage gap would bring benefits to society and to the economy. Women’s lower pay puts them at greater risk of falling into poverty and does not allow companies to effectively use the talent available in society (EU, 2014).

The gender wage gap in numbers

According to the latest ILO estimates (2016), women worldwide earn on average 77% of the male wage. In 2015, the average annual salary of a woman was $11,000, compared to $21,000 for a man. This means that women were 10 years behind men in terms of earnings, since men earned on average $11,000 per year in 2006 (World Economic Forum, 2015). The extent of the gender wage gap varies from country to country. An ILO study conducted on a sample of 38 countries found that women’s average wages ranged from 4% lower than men’s in Sweden to 36% lower in the US (ILO, 2014). In the EU, women’s pay was on average 16% lower than men’s (EU, 2014). The gender wage gap in emerging and developing economies is not necessarily higher than in OECD countries (OECD, 2012). For example, in Rwanda, women earned 88% as much as men for the same work compared to 65% in China (World Economic Forum, 2015). The pay gap is even greater for women with high incomes. In OECD countries, they earned on average 21% less than their male counterparts, compared to a 16% gap for the overall population (OECD, 2012).

Possible causes of the gender wage gap

The gender wage gap has persisted even though women now tend to be better educated than men in many parts of the world. In 2012, 83% of young women reached at least upper secondary school education in the EU, compared to 77.6% of men. One of the primary causes of the wage gap is that women and men often work in different sectors. In OECD countries, services account for 80% of female employment, compared to 60% for men. On average, one in three women employed in services works in sales, hotels and restaurants. Health and community services show the highest female share of employment at 78%, followed by education at 70%, with significant variations from one country to another (OECD, 2012). Earning levels in these sectors tend to be lower than those offered in male-dominated sectors (OECD, 2012; EU, 2014). Motherhood also reduces women’s wages, according to an ILO study (2014). For example, in Mexico, mothers earn about 33% less than women without children (ILO, 2014). Unequal distribution of domestic work and unpaid care is another driver of the gender wage gap. Women who spend “only” twice as much time on domestic work as men earn 65% of male wages, whereas those who devote five times as many hours to such tasks make just 40% of men’s earnings (OECD Development Centre, 2014). Social and cultural norms that assign women to the home and make men the primary breadwinners reinforce these inequalities. Women may ‘choose’ part-time or informal work so that it can be combined with their unpaid responsibilities, or they may seek public sector jobs with good benefits and more flexible hours to accommodate work/life balance (UN Women, 2015). Furthermore, what is considered “women’s work” is often undervalued. For example, the physical tasks typically performed by men are often valued more highly than those carried out by women. A female supermarket cashier generally earns less than the men working in the warehouse of the same business (EU, 2014). In a number of countries legislation restricts the professions that are available to women. Russia, for instance, has a list of 456 jobs that are unlawful for women to perform. While such measures initially intend to protect women, they can result in limited career and earnings opportunities (World Bank, 2014). According to the White House (2015), observable factors such as choice of occupation and working hours account for 59% of the gender wage gap. The other 41% remains unexplained. Outright discrimination against women could conceivably be behind some portion of this remaining differential, but of course such prejudice is difficult to measure directly (EU, 2014, White House; 2015).

Policy implications

Many countries have adopted laws prohibiting wage differentials for equivalent work, including the “Equal Pay Act” in the United States and provisions introduced in the French Labour Code over half a century ago (OECD Observer, 2015). However, research indicates that legislation alone is not sufficient to close the gender wage gap. A combination of approaches is needed to fight inequality between men and women on the labour market, including the following:

• Promoting flexible working time arrangements for both women and men, allowing everyone to combine family and professional life (OECD, 2012).

• Expanding access to affordable childcare services so that motherhood does not damage women’s careers (OECD, 2012). Companies can play a role by providing such services to their employees.

• Addressing discriminatory social norms in the household that require women to undertake more unpaid care work than men. For instance, the “Africare’s Male Empowerment Project” in Zimbabwe seeks to change behavioural trends and challenge existing gender norms by increasing male involvement in home-based care services given to rural people living with AIDS (OECD Development Centre, 2014).

• Raising awareness of equal-pay legislation, and promoting better implementation of existing laws (OECD, 2012).

• Revising discriminatory legislation that limits women’s career options. For instance, a project supported by the European Bank for Reconstruction and Development in Kazakhstan led to review the legal requirements to obtain a bus driver license, enabling more women to have access to this profession (OECD Development Centre, 2015).

• Promoting equal access to education and training for women and men, in particular in the science, technology, engineering and mathematic (STEM) fields, which offer better earning opportunities than traditional areas of female occupation.

• Developing tools to facilitate wage transparency in companies so as to better detect inequalities between women and men. Transparent pay systems have been identified as a crucial factor in implementing equal pay (EU, 2014).

References

European Commission (2014), Tackling the gender pay gap in the European Union, http://ec.europa.eu/justice/gender-equality/files/gender_pay_gap/140319_gpg_en.pdf ILO (2014), ILO’s Global Wage Report 2014/15, http://www.ilo.org/global/about-the-ilo/newsroom/news/WCMS_324651/lang–en/index.htm ILO (2016), Women at Work: Trends 2016, http://www.ilo.org/wcmsp5/groups/public/—dgreports/—dcomm/—publ/documents/publication/wcms_457086.pdf OECD Development Centre (2014), Social Institutions and Gender Index. 2014 Synthesis Report, Editions OCDE, Paris,  www.genderindex.org/sites/default/files/docs/BrochureSIGI2015.pdf OECD Development Centre (2014), SIGI Regional Report: Europe and Central Asia, http://www.oecd.org/dev/development-gender/SIGI-BrochureECA-2015-web.pdf OECD Development Centre (2014), Unpaid Care Work: The missing link in the analysis of gender gaps in labour outcomes, http://www.oecd.org/dev/development-gender/Unpaid_care_work.pdf OECD Observer (2015), Pay gap, No 302 Q1 2015, http://oecdobserver.org/news/fullstory.php/aid/4817/Pay_gap.html UN Women (2015), Progress of the World’s Women 2015-2016, http://progress.unwomen.org/en/2015/pdf/UNW_progressreport.pdf White House (2015), Gender pay gap: recent trends and explanations, Council of Economic Advisers Issue Brief, April 2015, https://www.whitehouse.gov/sites/default/files/docs/equal_pay_issue_brief_final.pdf World Bank (2014), Voice and Agency. Empowering Women and Girls for Shared Prosperity, Banque Mondiale, Washington, www.worldbank.org/content/dam/Worldbank/document/Gender/Voice_and_agency_LOWRES.pdf. World Economic Forum (2015), The Global Gender Gap Report 2015, http://reports.weforum.org/global-gender-gap-report-2015/ Hired (2018), The State of Wage Inequality in the Workplace, https://hired.com/wage-inequality-report