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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.


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.


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.


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