The gender pay gap has remained stubbornly wide for decades, despite efforts by governments to narrow it. But a recent rush of legislation and directives aimed at bringing greater transparency on pay appears to be succeeding where other mandates have not—though progress still varies markedly country by country.
Whether it’s requiring employers to report pay gaps within companies or publish salary ranges on job postings, or barring them from asking applicants for their salary history, the measures are yielding results, experts say. “Addressing the gender wage gap requires a multipronged approach,” says Emanuela Pozzan, senior gender equality specialist at the International Labour Organization. “It’s great to see this momentum for pay transparency and its effects on the gap.”
One standout has been Iceland, which in 2018 enacted legislation demanding “equal pay, equal value,” meaning positions with comparable skills, hours and intensity must be paid the same, regardless of the industry or the job. The law forced companies to justify the reasoning behind each pay and bonus decision. The measure has contributed to the country halving its gender pay gap in the past decade. It’s also sparked a wave of similar initiatives around the world.
The latest is from the European Union, which in April published directives to reduce pay inequality in companies. Japan and Australia also recently enacted laws to address their gender pay gaps. “The last few years we’ve seen a number of countries passing transparency measures, inspired by Iceland’s success,” says Ines Wagner, a senior researcher focused on labor mobility and gender at the Institute for Social Research in Oslo.
Among the 38 member countries in the Organization for Economic Cooperation and Development, 27 now have some form of pay transparency policy in place, according to a Harvard Business School study, a much higher proportion than a decade ago. Businesses in countries with reporting requirements have an incentive to reduce pay gaps, not just for public-relations reasons but also to attract talent. In Denmark, the differential narrowed 7% after such a law was passed in 2006, according to 2018 research from French business school Insead.
The April EU directive, which allows employees to demand information about salary ranges on internal positions they’d like to apply for, may also serve as inspiration to lawmakers elsewhere, including the US. But there’s no one-size-fits-all approach. “Not every measure works for every country, as they each have their own labor dynamics, but implementing a range of specific measures will reduce gaps in the long term,” Pozzan says.
Pay transparency measures have been more effective in countries with higher rates of unionization, experts say. Governments are able to bring employers and employees to the table to decide on industrywide pay scales, eliminating company-level inequities.
In Belgium, where almost half the workforce belongs to a trade union, the gender pay gap halved, from 10% in 2010 to 5% in 2021, as a result of collective bargaining and transparency measures. In contrast, the pay gap in the UK, where a quarter of workers belong to a union, stands at 9.4%; in the US, where about 1 in 10 workers are unionized, it’s 16.3%. In the US, the fight for pay transparency is largely being waged state by state. Publishing salary ranges on job postings has become mandatory in a number of states including New York in recent years.
In addition, the EU along with 21 US states now prohibit corporate recruiters from asking job applicants for their salary history, a practice that experts say can entrench pay discrimination throughout a woman’s career. The US Office of Personnel Management has proposed a similar ban that would apply to all federal workers. A 2020 analysis by the Harvard Business Review found that such bans resulted in an 8% pay increase for women and a 13% pay increase for Black employees.
Pay reporting legislation—if not combined with fines, industrywide pay negotiations or other measures—can fail to effect change. That’s been the case in the UK, where the gap has barely budged in the five years since the reporting requirement has been in place. “Companies that publish their pay gaps every year, without facing any consequences for the disparities, have to an extent normalized it and aren’t doing much to reduce it,” Wagner says.
To deal with the shortcomings of pay transparency, countries have experimented with various methods of enforcement. In Iceland, noncompliant companies must pay a daily fine of 50,000 krona ($364). In Cyprus, Serbia and Spain, labor inspection officials regularly audit companies’ pay decisions. Other nations have instead gone with moral suasion: Chile’s Ministry of Women and Gender Equity confers “equality awards” on companies. “Pay transparency must be done in conjunction with enforcement to be effective,” says Minna Cowper-Coles, a fellow at the Global Institute for Women’s Leadership at King’s College London.
One concern Cowper-Coles raises is that most of the legislation today targets companies, which shifts the onus away from governments. Politicians should be doing more to tackle structural obstacles to women’s advancement in the workplace, she says, including expanding the supply and lowering the cost of child care.
Addressing the problem that women’s work is undervalued—especially in professions that are overwhelmingly female such as nursing, elder care and education—would also do more to reduce the gap than individual companies’ pay efforts, Cowper-Coles says. “At the end of the day, we’re talking about much more than individual companies paying women less,” she says. “It’s a systemic societal issue that requires systemwide answers.” —With Jeff GreenRead next: Getting an MBA Closes the Gender Pay Gap—for a Little While
©2023 Bloomberg L.P.
