Does gender pay legislation actually reduce wage differences between women and men?

Johannes (Joop) Smits Director, People and Organisation, PwC Switzerland 31 Jan 2019

We are proud to announce the first update to our Global Gender Pay Compass, where you can now find information about the status of legislation in nineteen additional countries. But is gender pay legislation enough to close the gender pay gap?

Legislation regarding gender pay is spreading - but what effect does it have?

We have updated our Global Gender Pay Compass and you will now be able to find information about gender pay legislation in 88 countries around the globe. We have added information about the status of gender equality legislation in Cambodia, Chile, Democratic Republic of Congo, Ghana, Honduras, Korea, Laos, Liberia, Madagascar, Malawi, Moldova, Nicaragua, Pakistan, Portugal, Rwanda, Turkey, Ukraine, Venezuela and Vietnam.

Since we published the Global Gender Pay Compass in mid-2018, we have seen several countries developing or introducing gender pay legislation (e.g. France, Portugal, Switzerland). These regulations mainly focus on reducing the pay differences between women and men that are providing equal work or work of equal value. This development leads to the question whether the increase of such legislation will indeed lead to reduced gender related pay differences. In fact, is there any evidence that gender pay legislation actually has a measurable impact in reducing gender pay differences?

To try to answer this question, we turned to the Global Gender Gap Report (GGG) of the World Economic Forum (December 2018).

Drawing from WEF GGG reports since 2008, we looked at how the scores for each country in our Compass have developed over the last decade for two key aspects of equality: first, the overall ‘economic participation and opportunity’ score, which itself includes a range of relevant sub-measures relating to women’s position in the workforce; and second, the ‘wage equality for similar work’ score, which is closest to specifically measuring the equal pay for equal work or work of equal value.

We then organised the countries in three groups; (1) countries with no specific law or sanctions relating to gender equality (No legislation), (2) countries with overall gender equality law only, or gender pay law without sanctions (General legislation), and (3) countries with specific gender pay laws that include sanctions (Stronger legislation). From this analysis we found some interesting insights.

Average WEF GGG country scores and improvement

Observation 1: Having legislation reduces the gap in ‘economic participation and opportunity’ three times faster

We found that countries with gender equality legislation (General or Stronger legislation) reduced their gap on the ‘economic participation and opportunity’ score on average three times faster than those countries with No legislation. However, even at that faster rate, it would still take another nine decades to eliminate this gap fully.

Observation 2: Countries with No legislation have seen their gender pay differences increase on average

For the group of countries with No legislation we actually saw their ‘wage equality for similar work’ gap increase by more than 5 percentage points on average over the last decade.
Our first two observations seem to support governmental decisions for gender pay legislation if countries are serious about reducing wage inequality. Without action, the gender pay gap seems liable to increase.

With no legislation, you can expect your pay gap to widen

Observation 3: Stronger legislation but slower improvement?

Overall, we found that countries with Stronger legislation, despite having smaller gaps to close on average, have made less progress in closing their gap on the ‘economic participation and opportunity’ score than countries with General legislation.

Further analysis leads to two important additional observations: Firstly, most of the Stronger legislation has come in to force only very recently and it may be too soon to see the results reflected in the data yet. One should consider the lead-time before legislation is implemented and before its effects are reflected in economic data. Secondly, in most cases the countries with Stronger legislation are those with rather narrow gaps left to close. Perhaps the cases of Canada (which closed just 1.6% of their remaining gap since 2008) and New Zealand (which actually saw their gap widen by 8% during the same period) serve to indicate that the 'final stretch' in closing gender wage differences is the most difficult to conquer?

Legislation is one part of the solution

For us, the biggest lesson here is that legislation can indeed have an impact on gender pay differences but should not be considered a ‘magic bullet’. Creating the right content of gender pay legislation is a matter that should not be taken lightly and in our next article in this series, we will highlight the different types of gender pay legislation in place.

On a final note, we believe that the power to further reduce gender pay differences is in the hands of employers. They need to understand the gender pay differences in their organisations, analyse the root causes and then address these appropriately. This often means a necessary shift in people management practices and organisational culture, which will not only serve to comply with respective gender pay legislation and reduce gender pay differences but ultimately will also lead to a more empowered, more equal and higher performing workforce.

In light of the above, we are very pleased that PwC Switzerland recently received the EQUAL-SALARY Certification.

Summary
  • Countries with gender equality legislation reduced their gender gap on ‘economic participation and opportunity’ three times faster than those without.
  • Countries with no legislation saw their ‘wage equality for similar work’ gap increase by more than 5 percentage points on average over the last decade.
  • The smaller a country's remaining pay gap, the more difficult it is to make progress in reducing it.

 

Contact us

Johannes (Joop) Smits

Johannes (Joop) Smits

Director, People and Organisation, PwC Switzerland

Tel: +41 58 792 91 64

Alexander Skumiewski

Alexander Skumiewski

TLS Senior , PwC Switzerland

Tel: 058 792 92 94

Pauline Nicod

Pauline Nicod

TLS Assistant, PwC Switzerland

Tel: +41 58 792 9397