Pay Transparency? The way to close the gender pay gap.

Updated: Jun 15, 2021

Equal pay for equal work is one of the founding principles of the European Union. However. women across the continent still earn 14.1% less than their male counterparts for doing the same job, in the World Economic Forum’s Global Gender Gap Report for 2021. Western Europe came out on top in terms of gender parity in the study, where it must be noted there were large differences across the continent. The fact that women are often unaware of the pay discriminations going on in their place of work, often means that they are not in a position to make a proper assessment or negotiate.

On May 5th 2021, the European Economic and Social Committee held a hearing to discuss new pay transparency measures, first proposed in March of this year. These measures would foster more pay information for job seekers, such as the pay levels of other workers doing the same job and prospective employers would not be able to ask about pay history when discussing salary expectations. Further, they would have to provide data upon request, including specific data on the gender pay gap within their company. Ursula von der Leyen was clear that these new measures are a direct response to closing the present differences in how men and women are paid.

The reasons for the gender pay gap are deep-rooted and complex, and transparency over salary is just one facet in addressing the issue. However, it is definitely an important initial step in creating a more equal workplace, by providing individuals with the information they need to advocate for themselves. Like any other legislation, should it be passed its effectiveness will be proven with the test of time.

So why be so secretive over pay?

Many of us are uncomfortable talking about money, and some don’t even disclose their salary to their closest friends and family. This general unease about discussions around salary is also felt in professional settings, where not everyone is sure when or how they should bring up conversations regarding salary during the interview process, or how to renegotiate their salary after they are hired. As with many things we feel uncomfortable about, sometimes its easier to just not bring it up or to make compromises that avoid uncomfortable situations or conflict.

For many their job is linked to their self-worth, feeling productive and like they’re providing for their families, as well as the feeling of success. These feelings are somewhat diminished when a number is attached to it and this contribution is quantified in terms of money. We all like to feel like we are valuable in how we contribute and learning that our colleagues make more money that we do, even if there are valid reasons, could affect how we perform, overall job satisfaction and how we interact with those we work with. Employers choose not to readily volunteer this information and employees don’t discuss what they are each being paid.

What does pay transparency look like?

Many companies, particularly larger ones, already have some systems in place that control pay grade, where the scale is controlled by department or years experience and even sometimes job title. Notably, Starbucks adopted a system of pay scales which didn’t explicitly state the salary of its employees, but gave an expected range for each role. When implemented as part of job adverts for new employees it was found to generate positive publicity and increase employee satisfaction.

If figures regarding pay are published outwardly, employees can very easily look up what everyone member of the company is earning and can take this with them when they negotiate for themselves. It also allows people from outside the company to reference what people in certain positions are being paid, for example if you hold the same position in a different company.

Is this enough to close the gender pay gap?

Currently, here are 12 European countries that organise for a national Equal Pay Day, a day that marks the time in the year when women essentially start working for ‘free’ when represented in comparison with what their male colleagues earn annually. On average this marks around two months salary, so many choose the day as November 10th. It is a day to raise awareness and build upon longstanding efforts towards equal pay .

Several E.U. countries, including Italy, Austria and Spain, already have legislation in place that mandates equal pay for men and women. These countries still came out in the WEF study as having a significant gender pay gap, which leads to questions as to the efficacy of their enforcement. Without proper follow through and a commitment to time and money spent on the budget to do so, it can ring hollow and not fit for purpose. Proper consequences need to follow in order for any legislation to be effective.

In the perspective of the world at large, there are still many systemic issues within our society that allow for things like the gender pay gap to exist and while this step is in a positive direction, alone it will probably not be enough to close the gap completely. It comes down to generally valuing the contributions any individual can make, and their different perspectives and approaches.

What are the main beneficial outcomes?

By prioritising equality in the workplace, better transparency over pay can create more trust between employers and employees. This in turn can increase revenues and productivity to help businesses thrive. While the incentive behind this new move is to directly help close the gender pay gap, it should be noted that anyone is susceptible to being undercut if they are not aware how much other people in their workplace are getting paid.

Through being informed, women will be in a better position to negotiate for themselves and ensure that they are actually receiving equal pay. If they aren’t, the motion also includes further support for employees in disputes over pay. Governing bodies will also take a role in holding companies accountable in disclosing employee salaries by being able to enforce the hand over of data.

Are there any potential drawbacks?

In theory, pay transparency seems like an upfront and honest way to help create an even playing field, but it could potentially also lead to a more competitive and toxic workplace. The knowledge that you are being paid the same as all of your colleagues is reassuring, but the knowledge that you are being paid less than many of your colleagues, even if there are genuine reasons for that, can lead to resentment if your workload is similar or the same.

Some studies also show that greater transparency over pay, can potentially lead to lower salaries in general, known as pay compression. Alone, it also doesn’t address some of the other issues such as the fact that women generally hold lower paid positions than men, or are more likely to be in part-time work.

Should the legislation be passed, only time will tell what its effectiveness is and how it contributes to closing the pay gap. In any case it represents a step in the right direction in the crusade for gender equality, by giving the information necessary to make informed decisions.

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