The Gender Pay Gap

Progress has stalled on reaching pay equality between men and women, and years of experience have shown that legislation alone is not enough to close the wage gap. Gender segregation, motherhood penalties and outright discrimination all play a role in holding women back.

In the realms of healthcare and education, full gender equality may soon be in sight. The World Economic Forum has declared the health outcomes gender gap to be 96 percent closed, while the education gap is 95 percent closed.

But when it comes to economic opportunity, the gender gap is wide open, and 2017 figures show it is getting wider. On current rates, it will take 217 years for women to reach economic parity with men. The Middle East and North Africa region has the farthest to go, with its gender gap projected to close in 580 years, while in sub-Saharan Africa, economic parity is 66 years away.

A large part of this economic gap comes from basic pay inequality between men and women. On average, women earn 77 cents for every $1 men earn globally. Women tend to work fewer hours than men, often because of additional unpaid domestic and care responsibilities, but even when that is taken into account, a gender gap of 10 percent remains.

Similarly, salary inequality persists in many countries despite women as whole achieving higher levels of education than men. In Latin America and the Caribbean, the gender gap is largest for the population with the highest education levels, while research from the U.S. and the U.K. shows the gap is widest at the top, with senior and director positions in elite companies more likely to be better remunerated for men.

There is a strong business case for closing the pay gap. Reducing pay inequality has a significant impact on overall poverty rates. In sub-Saharan Africa, economists say, gender and income inequality is hampering GDP growth by up to 0.9 percent compared to faster-growing Asian economies. Pay inequality and lack of access to paid work are estimated to cost women in the developing world a collective $9 trillion.

Valuing Women’s Work

Why does the pay gap persist? One Australian study of pay inequality attributed 38 percent of the gender pay gap to sex discrimination, encompassing both direct prejudice and unconscious bias.

Women often start their careers being paid less than men, but the gap also gets bigger over time, and becomes particularly wide for women who have children. In all countries, the “motherhood gap” increases with every child a woman has, and is wider for women in developing countries. Men, on the other hand, often benefit from a “fatherhood premium.”

Another key issue behind the gender pay gap is the segregation of men and women into different industries. While women have made some inroads in higher-paid sectors such as finance, medicine and science, their dominance in lower-paid care work and the service sector means that overall, women are still being paid less as a group.

Evidence from the United States has demonstrated that when large numbers of women enter a sector, wages fall, which is what keeps salaries in industries such as childcare, service and welfare work low. Put differently, salaries are lower in female-dominated industries, partly because they are female-dominated, not because women choose lower-paid professions. Research also shows that the wage gap is larger for women of color.

The effects of gender segregation in the labor force are acute in the developing world, where wages are lower to begin with. The International Labour Organization has found that in Southern Asia and sub-Saharan Africa, 60 percent of working women are employed in agriculture, a sector characterized by underpaid or even unpaid work.

In Asia, the garment industry is a potent example of low pay in gender-segregated occupations. Women comprise 62 percent of garment workers in Thailand, Vietnam, Cambodia, Lao, the Philippines, Indonesia and Bangladesh. This an industry characterized by very low wages – workers receive less than $1 an hour on average – and even within the sector, men earn more per hour in all countries, with the exception of Bangladesh. In India, women in the garment industry are nine times more likely to earn a low wage than their male counterparts.

Closing the Gap

Equal Pay Legislation: While equal pay legislation is widespread, laws to prevent women earning less for doing the same work have not been effective in closing the pay gap. Iceland’s Equal Pay Standard, enacted in 2017, is the first to require companies to submit salary levels to the government for certification to ensure gender equality. Its impact remains to be seen.

Minimum Wages: Introducing a minimum wage can help close the gender pay gap at the lower end of the earnings scale, but does little to affect the widening gender gap for higher-income positions. And in developing countries, women are more likely to be employed in the informal sector, where such regulations often do not apply.

Pay transparency: There is preliminary evidence that pay transparency, which would allow employees to see their colleagues’ salaries, could help reduce some of the gender pay gap.

Parental leave: For a woman, having a child can increase the gender pay gap by 2–10 percent. The provision of paid maternity leave has been shown to help overcome the “motherhood gap” incurred by women who have children. Yet worldwide, 830 million working women lack access to maternity leave, almost 80 percent of them in Africa and Asia.