In August 2004, Tuulikki Petäjäniemi, a special commissioner appointed by the government to evaluate the adequacy of recent measures to promote equal pay for women and men, issued her report. The main findings are set out below.
A government-appointed special commissioner, Tuulikki Petäjäniemi, issued her report evaluating the adequacy of recent measures to promote equal pay in Finland in August 2004. She concludes that the gender wage gap needs to be addressed more fully, preferably within a tripartite framework. The report finds that occupational gender segregation remains strong and that the current pay determination system favours male-dominated sectors, though promising measures to address these issues are already in limited use. Measures that have effectively narrowed the gender wage gap include analytical job evaluation schemes and bringing male- and female-dominated sectors within the same collective agreements.
In August 2004, Tuulikki Petäjäniemi, a special commissioner appointed by the government to evaluate the adequacy of recent measures to promote equal pay for women and men, issued her report. The main findings are set out below.
Gender wage gap
In Finland, the employment rate (the share of persons aged 15 to 64 that are in employment) of women, at 65.7%, is among the highest in the EU and close to that of men (69.7%). There is also very little difference between the sexes in educational levels and in the amount of working experience. Nevertheless, the average total annual earnings of women continue to be almost 30% less than those of men. Among the causes is the fact that women have part-time and fixed-term jobs more often than men. They also do less overtime work and receive fewer increments, performance bonuses and profit-related payments. If such gender variation is disregarded and only average monthly earnings for regular working hours are considered, the wage differential drops to about 20%. About a half of this difference can in turn be explained by the fact that women work in occupations and branches in which wages are relatively low (FI0310202F). Importantly, women are over-represented in the public sector and men in the private sector, and wages have developed much more favourably in the latter.
After taking into account differences in tasks and background, part of the wage differential still remains unexplained. This can be explained by pay discrimination, given that all other contributing factors have been taken into account. The extent of this inequity varies and is the greater the higher the level of wages of the job in question. The Government Institute for Economic Research (Valtion Taloudellinen Tutkimuskeskus, VATT) recently conducted a study comparing wages between workers in the same company, holding the same position and doing equally demanding work. A very large number of factors were allowed for and the finding was that the unexplained gender wage gap was 6% among white-collar workers in industry, 3.5% among blue-collar workers in industry and 3.7% in private services. Another less intensive study has estimated the differential to be at its lowest, at about 2%-3%, in the public sector but concludes that comparisons between sectors are difficult due to varying ways of defining occupational categories and compiling statistics.
Equal pay structures through job evaluation
Wages typically consist of three components in Finland: a job- and task-specific part; a part based on individual competence; and a part based on results. The relationship between the three components is determined through collective bargaining. Most collective agreements state that the share of the job- and task-specific part should be something between 60% and 80% of the whole. This share has been falling since the early 1990s as the social partners have agreed to increase the scope of the other pay components, especially the share of performance-related pay (FI0309202F).
According to the equal pay principle, laid down in Finnish (FI0310202F) and EU legislation (the equal pay Directive 75/117/EEC), employers must pay their employees the same pay for work of equal value, irrespective of their gender. To achieve this, and thus to abolish discrimination in the job- and task-specific component of pay, systematic job evaluation has proved to be effective. In these schemes jobs are arranged in an order according to their content and requirements. Preferably the evaluation should be done analytically so that the overall requirements of the positions are divided into independent components that are to be specified beforehand in a fair manner.
Job evaluation schemes are currently used in Finland to determine the pay levels of 38% of wage earners. This figure is set to rise because of an amendment to the Act on Equality between Women and Men (FI0212108N) that will be presented to parliament in autumn 2004. This stipulates that the gender equality plan, which each employer with at least 30 workers must prepare annually in cooperation with is personnel, will in future include a pay survey that will necessitate some degree of evaluation of job requirements (TN0402101S). Nevertheless, job evaluation schemes will continue to be only partially effective due to their limited scope, as the schemes have thus far normally been specific to particular employers and collective agreements. It is not permitted for an employer to pay different wages for work of equal value, even when its workers are covered by different collective agreements. Nonetheless, it is not clear how much legal responsibility employers have to evaluate pay conditions across the boundaries set by collective agreements. In Sweden employers are already obliged to do so (SE0102179N) and the Finnish government is also committed to moving into this direction. However, there seem to be no measures forthcoming that will make the same pay surveys applicable to several companies and branches. Such plans have been strongly rejected by employers’ organisations.
Scrutiny of all components of wages needed
A component of pay based on individual competence is characteristic of pay determination in Finland. It involves rewarding employees’ skills, knowledge and performance. Some collective agreements lay down a fixed model for the evaluation of personal competence while others merely specify how large a share of wages should be paid in such a way. The criteria for evaluation vary widely, but are connected in some way to individual work effort and abilities. In 2003, some 33% of private sector workers were subject to such evaluations, compared with 41% of central state employees and 14% of municipal employees. In 2004, all central state employees became subject to an evaluation of personal competence and the practice is also becoming general in municipalities. Evidence from studies conducted in Finland and Sweden indicates that women tend to perform at least as well as men in these evaluations. Their more prevalent use may therefore pose no problems in terms of the gender wage gap.
Partially related to payments for competence, the result-based component of wages has also become larger in recent years. It consists of profit-related payments on the one hand and performance bonuses for meeting production goals on the other. These are most common in the private sector, where 38% of employees are subject to them, while 25% of state employees and 7% of municipal ones also receive them. Women (20%) tend to receive result-based wages much more seldom than men (38%). Moreover, the bonuses received by women are much lower on average. This is due to the bonuses being more common and higher in the private sector compared with the female-dominated public sector. Furthermore, the bonuses are usually percentage shares of basic wages, and thus on average higher for men than for women.
From the point of view of equal pay, result-based payments pose a problem. Decisions over their adoption and formulation mostly take place at workplace or company level and the criteria behind them are very varied. Therefore, it is very difficult to assess the fairness of the payments between different groups. In any case, result-based pay systems should be based on a fair definition and measurement of performance. Their wider adoption in female-dominated sectors would promote equal pay.
In addition to the pay determination within the framework of collective agreements discussed above, a degree of bargaining takes place on an individual basis. This is especially common among higher-level white-collar employees. The problem with this bargaining is that, as several studies have indicated, Finnish women’s pay demands tend to be lower than men’s and they also ask for raises more seldom. Training of women to conduct pay negotiations may therefore be needed.
Occupational segregation a major problem
Occupational segregation by gender in Finland is among the strongest in the 'old' EU 15 (FI0310202F) - see the table below. To a large extent, this is caused by the fact that the jobs of many women are related to caring and nursing tasks that are performed for free at home in many Member States. Women also tend to hold lower positions than men at workplaces despite women’s long tradition of labour force participation and levels of education comparable to those of men. Only 26% of private sector managers are women, while in the public sector their share has risen to 47%.
| Sector | Women | Men |
| Social work activities | 91% | 9% |
| Human health activities | 85% | 15% |
| Hotels and restaurants | 72% | 28% |
| Financial intermediation and insurance | 70% | 30% |
| Education | 67% | 33% |
| Other public etc services | 60% | 40% |
| Real estate, renting and cleaning | 56% | 44% |
| Public administration and defence | 52% | 48% |
| Trade | 49% | 51% |
| Communication | 43% | 57% |
| Technical and business services | 39% | 61% |
| Agriculture, hunting, forestry and fishing | 34% | 66% |
| Manufacturing | 29% | 71% |
| Transport | 22% | 78% |
| Construction | 7% | 93% |
Statistics Finland (1995 sectoral classification).
Several measures have been introduced to tackle this segregation, though with rather limited success. Special emphasis has been directed to affecting young people’s choices of schooling, for example by encouraging girls to study maths and natural sciences so that they can gain entry to male-dominated technical sectors. 'Gender atypical' choices of careers and education have also been supported through labour market policy. Employer-induced measures have in some instances been effective in decreasing 'vertical' segregation. For example, in the state administration the number of female managers was effectively increased by a programme that promoted the networking of women in high positions, investigated what obstacles they encountered in the workplace and increased monitoring of the gender balance of managers. This successful example shows how important the role of employers is in dismantling occupational gender segregation. At the start of women’s working life, employers have an obligation to make their rise to higher positions as easy as it is for men, states the report.
Promotion of equal pay through collective bargaining
Centralised incomes policy agreements have since 1971 usually included provisions to grant higher rises for female-dominated and low-wage sectors (FI0408202F). Their economic effect has been modest but they have been important symbolically in that the social partners have thus recognised the importance of promoting equal pay. However, at sector level the social partners have normally decided to distribute the extra rises equally to all employees, so gender inequality within sectors has hardly been addressed. At present, the Confederation of Unions for Academic Professionals in Finland (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA) and both central employers' confederations would like to scrap these provisions. The former deems them ineffective in their present form because, it claims, they have not helped highly educated women enough. Meanwhile, the employers argue that labour costs in female-dominated and low-wage sectors have increased too much.
In the negotiations over the current 2003-4 central incomes policy agreement (FI0212103F), there were discussions over increasing the coordination of equal pay programmes across sectors. Agreement was not reached but the social partners have nonetheless been involved in following up centrally the progress of both job evaluation schemes and personal competence pay determination. This has taken place through a bilateral working group called TASE (Työnarviointijärjestelmien seurantaryhmä) which has been in operation since the mid-1990s. The group is seen by both sides as doing valuable work and there are plans for establishing it as a permanent arrangement. The social partners have also cooperated in the formulation of job evaluation criteria since 1989.
At sector level, social partner organisations have in recent years begun to conduct evaluations of the gender effects of collective agreements. This is now done in nearly half of the branches covered by the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK). The results of this expanding practice have included improvements in areas such as family leave, arrangements to care for sick children and the position of same-sex couples. However, no improvements to pay or working time conditions have been made through these evaluations. A less common recent feature in sectoral bargaining has been the adding of clauses to some collective agreements that aim to promote equal pay. These have included obligations for employers to introduce gender equality plans at workplace level.
Some positive results have been achieved through combining the collective agreements for female- and male-dominated sectors into a single agreement. In the chemicals industry, for example, in 1996 technical (mostly men) and industrial (mostly women) white-collar employees were brought under a common pay structure, based on new titles and analytical job evaluation. Their separate collective agreements were combined in 1998. As a result of these changes, the pay structure appears to have become more equal. The basic wages of female employees under the new collective agreement grew by 24.8% over 1995-2001 while the growth of men’s wages was only 17.3%. There has been widespread satisfaction with the new pay structure. The estimated costs of its introduction were 1%-2% of the wage bill.
Equal pay programme needed
The report by Ms Petäjäniemi concludes that, on the basis of the current gender equality situation and the measures that have thus far been introduced to promote it, an equal pay programme is needed to improve the situation. The programme could be formulated by the government jointly with the social partners, she states. All the trade union confederations have welcomed the proposal and are willing to take part in drawing up the programme. Moreover, the Finnish Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK) has proposed that the work should begin as soon as possible so that the programme could be included in the incomes policy negotiations later in 2004. The employers’ confederations have been less enthusiastic. They first want to wait and see whether the proposal for amending the Equality Act will be welcomed by parliament in autumn 2004 and only then commit themselves to new measures.
Commentary
Gender segregation of jobs remains the main reason behind the wage disadvantage of women in Finland. One way of addressing this problem is to affect the career choices that both sexes make. The major limitation of this approach is that any such changes happen very slowly. The gender division of labour has existed and will exist for a very long time. Efforts should nevertheless be made to change it gradually by affecting gender-based attitudes and opportunities. However, in the short term the main issue should be to bring the wages in female-dominated sectors and occupations closer to those of male-dominated ones. Analytical pay evaluation schemes and combining collective agreements seem to be very promising options for achieving this. The wider the scope of their application the more effective they would be in promoting equal pay. The example of the chemicals industry has demonstrated this.
Ultimately, however, it is political limits that determine the possibilities of these policies. Employers’ organisations have expressed their opposition to pay evaluation structures that cross the boundaries set by companies and branches of industry. Neither would they be likely to agree to combine many collective agreements, on the grounds that this may decrease the flexibility of the labour market. Likewise, trade unions in male-dominated sectors may reject these policies because they could lead to their relative financial disadvantage, and the union confederations have a very limited mandate over these matters. Therefore, developing the equal pay programme within a tripartite framework, as proposed by Ms Petäjäniemi, may prove rather ineffective. If the government wishes drastically to reduce gender-based pay inequality it may ultimately have to act unilaterally. What makes the government's task challenging, however, is that pay determination is increasingly fragmented to the workplace level and depends on market-related issues such as the solvency of companies. Gender equality in result-based payments, for instance, is hard to envisage as long as men constitute the majority in well-paid private sector jobs. (Aleksi Kuusisto, Labour Institute for Economic Research)
Eurofound recommends citing this publication in the following way.
Eurofound (2004), Measures to narrow gender wage gap evaluated, article.
