Understanding Gender Pay Gap

The gender pay gap is the difference between men’s and women’s median annual earnings from full-time, year-round work. The International Labour Organization (ILO) estimates that women on average continue to be paid about 20 per cent less than men across the world. There are large variations between countries, from a high of over 45 per cent to hardly any difference, please see the figures below for different economies.

The gender pay gap is a measurable indicator of inequality between women and men. Most governments are trying to guarantee equality of treatment between men and women in remuneration. Yet, the gender pay gap persists and the World Economic Forum estimates it will take 202 years to close the global gender pay gap, based on the trend observed over the past 12 years.

What causes the gender pay gap?

Under-representation in leadership: Far fewer women than men are in management and leadership positions, especially at higher levels. This brings down the average salary of female managers compared to that of male managers.

Working hours: The gender pay gap is often a consequence of the different patterns of workforce engagement by women and men. The ILO highlights that women work on a part-time basis more than men do. This is often linked to women taking on more of the unpaid family responsibilities.

Career breaks: Women more than men are likely to take career breaks from their employment in order to raise children or care for the family. This means that when they return to work, they are likely to have fallen behind in advancement and in remuneration.

Education: Women still lag behind men in STEM areas that are associated with higher paid jobs. Even when women are qualified in STEM subjects, it can be challenging for them to obtain and maintain a job in these areas because they are traditionally male dominated.

Feminized jobs: Occupational gender stereotyping results in certain jobs being held predominately by women, and that leads to “female jobs” being undervalued for purposes of wage rate determination.

Benefits of closing the gender pay gap?

The benefits of women earning the same as men include an increase in their purchasing power which in turn helps stimulate consumer spending and the economy. According to a research conducted by ILO, across all economies that increasing gender participation adds a significant amount. The ILO estimates that reducing the gap in participation rates between men and women by 25 per cent by the year 2025, could raise global GDP by 3.9 per cent, or US$5.8 trillion.

What can organizations do to close the gender pay gap?

As a first step, recognition of the business benefits of improved gender diversity at all levels is critical as well as commitment from top leadership. More specific actions can be:

• Promoting a gender-inclusive culture while adopting a holistic approach to equal remuneration for women and men for work of equal value.
• Making equitable salary offers to men and women.
• Undertaking a gender pay review to assess whether there is a gender pay gap and to what extent – conducting regular pay reviews can help a company keep on top of any inequalities.
• Making jobs more flexible so that more women access higher-level jobs and, therefore, higher pay.
• Ensuring that unconscious gender bias does not affect performance reviews. Selecting and applying a job evaluation methodology to assess the skills and responsibilities of the various jobs in the organization with a view to adjust job titles, contents and corresponding pay overtime.
• Sharing the effort, results and benefits with the stakeholders in the organization’s ecosystem and being an inspiring example for others.

Ref: This brief is based on findings from the ILO report on Women in Business and Management: The business case for change (Geneva, 2019)

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