Towards closing the gender wage gap in Europe?

In November 2002, the report of a European project entitled 'Towards a closing of the gender wage gap' was presented at a conference held in Norway. The objective of the project is to examine the gender pay gap in a broad perspective, against the backdrop of wage formation and pay systems, and to identify the most efficient tools with which to close the gap. We highlight the report's main findings.

On 17-19 November 2002, a European conference on the gender wage gap in Europe was held in Oslo, Norway. The conference was the culmination of a European comparative project entitled 'Towards a closing of the gender wage gap', which has looked at wage differentials between women and men in three occupations in six European countries. The overall objective of the project has been to 'examine the gender pay gap in a broad perspective, against the backdrop of wage formation and pay systems', and to identify the most efficient tools with which to close the gap. At the conference, the comparative report and six national reports were presented and discussed.

The equal pay project

Towards a closing of the gender wage gap is a European project on wage differences between women and men, funded by the European Commission’s Community Framework Strategy on Gender Equality 2001-5 (EU0007264F), as well as by the Norwegian authorities, the Norwegian Confederation of Trade Unions (Landsorganisasjonen i Norge, LO) and the Confederation of Norwegian Business and Industry (Næringslivets Hovedorganisasjon, NHO). Six countries have been involved in the study - Austria, Denmark, Greece, Iceland, Norway and the UK. The project has been administered by the Norwegian Centre for Gender Equality (Likestillingssentret).

As part of the project, a case study of three occupations - teachers, engineers and unskilled labourers in the fish and food processing industry - was carried out in each of the six participating countries. The purpose of the case study is to analyse the gender pay gap, and how the pay gap differs across countries and occupations. Based on the results of the national studies and the European Community Household Panel (ECHP), a comparative European-level analysis was also carried out by a team of researchers from the Institute of Social Research (Institutt for Samfunnsforskning, ISF) in Norway. The purpose of the comparative study is to give examples of how the gender pay gap differs across countries and occupations, and relate this to wage formation and pay systems at national and local level.

Findings

The project's report underlines the fact that no single cause can explain why the pay gap persists between women and men. However, the comparative report identifies two main sources from which the gender pay gap arises: first of all, the segregation of men and women across occupations, firms and positions; and second, wage differences that consistently favour male-dominated jobs. The study, however, finds no evidence to suggest that unequal pay among males and females in the same positions and in the same enterprise contributes to any significant degree to the gender pay gap. Nor can it be sufficiently explained by variations across countries in legal and organisational arrangements such as anti-discrimination legislation and public supervisory and monitoring bodies.

In the light of these two main sources of the gender pay gap, the project report identifies a number of mechanisms that may be seen to affect wage differences between women and men. Female labour market participation is one such mechanism. A high rate of female labour market participation tends to increase the gender wage gap, because the additional participants are made up mainly of women with a traditionally low labour market 'attachment' (education and work experience). Labour market segregation - ie differences in the types of jobs performed by women and men - is also high when female participation is high. The unequal distribution of women and men in different sectors, branches and occupations has a direct bearing on the gender wage gap. Are policies to increase female labour market participation thus detrimental to closing the wage gap? The answer in the report is that such policies will in the long term, if combined with policies that encourage 'family-friendly' working arrangements, increase the proportion of women willing to invest in labour market-related skills, thus allowing them greater labour market attachment. This argument is sustained by the study's finding that two of the countries with the highest wage gap also have the least family-friendly working arrangements.

The comparative study also finds that trade unions and bargaining systems play an important role in determining the nature of the gender wage gap, but only at the more general level. Union presence and bargaining centralisation tend to reduce wage differentials in general, and thus also the gender wage gap. However, although these factors are influential in producing a general wage compression, their influence on the gender wage gap within occupations seems, according to the report, to be limited. The occupation-specific studies carried out for the project indicate that the degree of centralisation of bargaining does not matter, because there are only insignificant differences in the wage gap between teachers (with a highly centralised wage and bargaining structure), and engineers (who on the whole have a highly decentralised and individually-oriented wage and bargaining structure) in all six countries.

The public sector is also seen as important influence on the general gender pay gap in Europe. As might be expected, the wage gap is lower in the public sector than in the private sector, which owes much to centralised bargaining structures and pay systems, as well as a strong union presence. However an interesting observation is that sectoral attachment seems to sustain the significant relationship between low pay and female labour market participation. There are more women working in the public sector in countries where the public sector pays less than the private sector, and vice versa in that more women work in the private sector in those countries where the private sector pays less.

A final important factor contributing to the gender wage gap is education, according to the report. The report supports the well-known fact that education is a source of higher pay in all countries, and as women on average now obtain the same educational levels as men, the overall gender pay gap is closing. The adjusted wage gap (the wage gap controlled for differences in 'human capital' factors) is also narrowing in that women with higher education have invested more in labour market skills, and the skills needed for jobs requiring higher education are now regarded as less gender-specific. However, this is not necessarily the case for the jobs located at the top of the career ladder, as they are usually out of reach for women wanting to combine family and work.

The case studies carried out at company level in order to examine the mechanisms and procedures that produce wage gaps, indicate that gender issues are not high on the agenda at this level. In these studies, the researchers focused on the interplay between pay systems/bargaining systems on the one hand and aspects of workplace practices on the other. Among other issues, the researchers looked into the organisation of vertical hierarchies and the division of work, employment contracts and working hours, training activity, recruitment and turnover. The question asked was if the interplay between these factors explained gender pay inequalities.

The studies revealed that 'task heterogeneity' was one main explanation for pay differences. For instance, in the food industry, men and women often had different tasks even if they worked at the same workplace, and male-dominated tasks (such as handling machines and tasks that involve heavy work) were better compensated than the typically female-dominated tasks. The report concludes that work tasks in these kinds of blue-collar occupation seem to be more split along traditional gender lines than is the case in jobs such as teachers and engineers. Another factor observed by the researchers was that men more often than women worked extra hours (overtime), which normally attract additional pay.

The report concludes that there are a number of important trends in European labour markets which work in opposite directions with respect to their effects on the gender wage gap. Continued increases in female participation rates, associated with more female part-time work and higher levels of occupational segregation, work in the direction of increasing the wage gap. However, despite the negative effects of increased participation on the gender wage gap, it may in the long term contribute to a narrowing of the wage gap if supported by policies that ease the combination of family and work. Union decline and less bargaining coordination, which affect the wage gap through their effect on overall wage compression, may also contribute to increasing wage gaps. The implications of these trends are increased wage differentiation between industries, establishments and maybe also occupations. However, individualised pay is not necessarily an impediment to closing the wage gap, at least within narrowly defined occupations. On the other hand, the development of human capital (through education and labour market attachment) tends to decrease the overall gender wage gap.

Commentary

The new study from the 'Towards a closing of the gender wage gap' project confirms that there are many complicated factors behind wage differences between men and women. Significant factors are gender segregated labour markets and the fact that wages in occupations dominated by women are systematically lower than in occupations dominated by men. Thus a central task in the efforts to achieve equal pay is to direct attention at how female-dominated occupations are viewed and valued.

The report also raises a thought-provoking point, in that improved gender equality in working life, measured as higher female labour market participation, does not necessarily contribute to a narrowing of the gender wage gap – at least not in the short term. It is also worth noting that, although the report finds that education has a positive effect on the wage gap, it is nevertheless rather weak (and there are also countries where there is no correlation at all). Hence, there is no easy path towards a gender-equal working life. (Håvard Lismoen, FAFO Institute of Applied Social Sciences)