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Equal Pay Around the World

On Thursday last week, I gave a talk at Nuffield College here in Oxford, titled “Workplace Practices and the Family:  Holding the Private Sector Accountable.”  My aim was to call attention to the third party in every household who constrains decisions about family and career:  the employer.  However, I also wanted to highlight something I feel we should all be really concerned about:  the worldwide gender pay gap.  These two items are related.

I began my Nuffield talk with a review of a new study analyzing the impact of the part-time work, parental leave, and child care policies typical of Western Europe since 1990, but not adopted in the US.  Francine Blau and Lawrence Kahn (2013) show that these policies drew women into the work force in significant numbers in the countries wherever they were adopted.  For instance, you can see in the chart to the left that, at the beginning of the enactment of family-friendly policies, Ireland had very low female labor force participation (about 45%), but Sweden and the other Nordic countries, which had these policies already in place, had labor force participation rates that were very high.  After twenty years, Ireland had increased its female labor force participation to 72%, approaching the levels in the Nordic countries at the beginning of the period.  In comparison, the United States female labor force participation was stable, as was Japan, because they did not change their policies.  All the other countries on this list had adopted these family friendly measures and experienced significant growth as a result. Notice, however, none lost more than a few points in the male participation rate.  So, growth and jobs for everybody.  Win win.

Interestingly, however, Blau and Kahn postulate that providing parental supports like parental leave and part-time work protection causes the employers to refuse to hire women because they might have children, thus will be too expensive and less productive. But somebody hired these women, as each of these countries posted substantial and sustained gains in the female labor force. What appears to have happened instead is that employers hired women, but discounted their pay in anticipation of the parental leave and part-time work requests.  We know that because the aggregate pay numbers for almost all these countries–including most of the Nordics– show a substantial gap in pay between men and women.

In the table above, wage equality for similar work is based on a survey of executives while estimated earned income is based on actual reported income.  I think both these measures are useful, both have their limits.  The estimated earned income is not adjusted for issues around part-time work or clustering in low-paid industries.  The wage equality for similar work report may be “subjective,” but it probably also reflects informal knowledge about what actual pay has been to people who are otherwise comparable.  And I suspect it reflects more closely what happens at the executive level, as these are the jobs the respondent would be most familiar with.

Blau and Kahn then do a simulation showing what the effect of these policies would have been on female labor force participation in the US.  What they find is that family-friendly policies would have significantly raised the labor force participation among women, even though the US started at relatively high levels (72%).  However, they can demonstrate that child care provision, as such, did not contribute significantly. Blau and Kahn further argue that the American women, since they didn’t have these supports, were able to compete directly with men and so must be advancing more rapidly and earning more money than their counterparts in countries with family-friendly policies.

This World Economic Forum survey demonstrated that every nation studied had a "leaky pipeline" in which women were inexorably squeezed out as they move up the corporate ladder. Note this continues to happen even above middle management, where the effect of infant care should have already been absorbed.

We do see, in the data provided by the World Economic Forum’s Corporate Gender Gap Report, that American women are employed at higher levels across all ranks than in most other countries (for a relevant comparison set, see the chart on the right). However, the US shows the same pattern of poor advancement that typifies other countries:  the farther you go up the ladder, the fewer women there are. And, as women advance, the pay gap widens.  In fact, the pay gap is widest at the top–when we might speculate that the effects of child-rearing have either been avoided or overcome.

Note that biggest gap between the top ranks and the middle is found in Norway, one of the Nordic countries so often lauded for gender-friendly employment policies. This, too, suggests to me that something other than infant care is going on here.

In the chart at left, OECD data show that the salary gap gets larger at the higher salary levels. Women who reach the top ranks should have come past the point that child-rearing is an issue. Japan has the largest overall gender gap–no big surprise there.  But the largest gaps in salaries between the middle and upper pay rates are actually Norway and Sweden. The United States has about the same overall pay gap as the family-friendly European nations.  It appears to me that, contrary to Blau and Kahn’s argument, family-friendly countries hired plenty of women, but paid them less–and so did the United States.

Have a look at these numbers from the US Bureau of Labor Statistics. These show the pay gap between women and men for various jobs.  You can see that, even for stereotypically “male” or “female” jobs (security guard versus office clerk), there is almost no pay gap. Notice that “general manager” and even “physician,” where the gaps suddenly get much wider, are not necessarily stereotypically male occupations.  These are jobs that carry prestige, power, and pay.  And women, even when they get those jobs, get paid less. This is why education and achievement are not necessarily protective–if it’s discrimination, they don’t care how qualified you are.

At the bottom of the list, we see that the biggest gaps are in those occupations where you are dealing directly with money.  This speaks to a conversation I recounted when I opened the Nuffield speech.  Employers often give “poor negotiating skills” as the reason women are paid less.  What research actually shows is that employers resent women who try to negotiate for more money and that women, sensing this, hold back. It’s a cultural stereotype that says “women aren’t supposed to care about money.” That is why I think women are paid less in the last few jobs listed here:  these occupations all require, one way or another, asking for money.

Interestingly, in the World Economic Forum data, the respondents, a group of executives drawn from the top 100 employers in 30 countries, when asked what the biggest barrier to women’s advancement is, put patriarchal corporate culture at the top of the list.  In the chart left, the “comparison set” is the US, the UK, Canada, and Norway. Note that executives in these countries ranked child care and parental leave considerably lower as an obstacle to advancement.

Public, nation-level data shows that the gender gap in pay equality is substantial, around the world, no matter how it is measured, even in countries where it is illegal to pay women less for the same work. Yet, in the industrialized countries, the employers are all bound by laws that demand equal pay for equal work. The OECD graph below shows the amount of salary discrepancy attributable to the usual excuses–hours worked, education, and so on.  The part of the salary gap that remains unexplained by any of those variables I have highlighted in red.

Employers seem to feel it is an “economically rational” decision to pay any female less because children are a potential threat to their profitability.  It’s not that they think the well-being of families is a private matter or an individual choice.  On the contrary, as I have learned from many conversations lately, employers actually believe they have a legitimate prerogative to punish employees who have children by paying them less. (The AAUW study that recently shows female college grads making 18% less than males, even after all other factors have been controlled, suggests employers think they have a right to discriminate even on the basis that a new hire has a body with which she might have a baby.)

At the same time, I continue to be dismayed by the emphasis on early child issues in public policy when there are clearly other imperatives of care (adolescents, the elderly) that last much longer than the short time in which a couple has an infant to manage.  And, I am concerned that the data suggest there are other factors keeping women underpaid and underemployed yet the policy discourse merely circles around infant care in an unbroken and unproductive continuous loop.

Consider my friend’s story.  She was hired, at 55, for a high status job in another country. She was excited by the opportunity, but had little means to check what salaries were common there–and when she tried to negotiate, the new employer simply told her she wasn’t allowed to do that.  Two years in, she discovered she was being paid half what the men at her level were.  One response she got when she confronted them was that women are usually paid less because they have children.  Yet this woman had actually been past menopause when her employer hired her.  Damned if you do and damned if you don’t.

It is exactly this kind of thing I fear is happening.  The overall excuse for paying women less is that they have children.  But the data suggest strongly that this excuse is spread through a woman’s entire career, ultimately becoming a cover for just generally paying females lower salaries and promoting them less often, no matter what the circumstances. We should not accept that women just naturally fall behind when they have children and never catch up.  Someone actually may be stopping them from catching up; more likely, employers are forcing them to start several paces behind the men at every point in their careers, regardless of whether children figure into the picture.

Until society makes employers disclose their workplace practices, we will not be able to see what they are really doing–though we can tell from the aggregate data that they are very likely breaking the law on a grand scale.  The challenge is to make them accountable. This is where we should be focusing instead of obsessing over infant care.


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