WUNRN
Oxford Analytica - Global Strategic
Analysis
Summary By: Elizabeth Cox, Regional
Program Director,
UNIFEM, Part of UN WOMEN in the
Pacific
EU
- GENDER PAY GAP IS HOLDING EUROPE BACK - ANALYSIS
9/17/2010
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.