Iceland and the Gender Pay Gap

June 20, 2017
Editor(s): Dominic Fischer
Writer(s): Tharaka Segar, Oskar Dobrowolski, Max Ruan

After several decades of gradually bridging the gap between men and women’s average weekly salary, the world continues to witness the effects of industry based segregation with family and societal factors. The gender pay gap is the difference between men and women’s full time earnings, with the current Australian average hovering at 16.0% (WGEA, 2017). The world’s pay gap is estimated to sit as 23% which is now paralleled with the 2008 financial crisis (Treanor, 2016). In 2015, the World Economic forum predicted it would take 118 years for the pay gap to close (Grimley, 2015). Suddenly in 2016, they reported it would take 170 years to achieve equal pay, increasing their previous prediction by a whopping 52 years. (Treanor, 2016). Several contributing factors comprise of occupational and industrial differences between men and women, lack of women in senior roles and lack of part time or flexible senior positions. Women are less likely to undertake full time employment due to unpaid caring responsibilities (WGEA, 2017).

The struggle for equal pay gained prominence in 1918 where women tram and bus conductors started protesting (Anitha and Pearson, 2013). During WWI, in the UK women took on the men’s jobs when they were deployed to war, yet received less wages than men whilst being expected to perform the same role. This continued in the 1920s and 30s, where UK policy dictated that women were entitled to lower pay rates and unemployment benefits. However over in the US, the National War Labor Board decided that men and women should be paid the same for doing the same job (Alter, 2015). This continued during WWII, where equal pay was celebrated by trade unions and protestors. After the war ended, several legal wins for female workers, including the Civil Rights Act of 1964 have paved the way towards equal pay. Yet 120 years after this issue was brought to light, equal pay continues to remain a fantasy to be desired.

Around the world, the education gap is predicted to close in 10 years, with an increase in women going to university (Treanor, 2016). 68 countries now have more women in skilled professions than men however despite this increase, only Fiji, the Philippines and Colombia have more women than men in leadership positions (Grimley, 2015). In Australia, the financial industry has the largest gender pay gap of 33.5%, which is more than $52,000. (IFA, 2017). Amongst senior positions, only a quarter of board directors and a sixth of chief executives are female (Smyth, 2017). The movement towards gender equality throughout history has spurred the narrowing of the gap in leading countries such as Norway, Finland and Sweden whilst underdeveloped countries such as Yemen, Syria and Egypt are amongst the lowest on the spectrum. Out of 145 countries, only 4 African countries show to have more women than men in the workforce. Following the 1994 genocide, the push of women in politics has caused 64% of politicians to be female in Malawi, Mozambique, Rwanda and Burundi which is an exception to this (Grimley, 2015).

There are two versions of the gender pay gap statistic published. The unadjusted figure is the raw difference in earnings between all men and women. This can be then adjusted to account for the difference in education, occupation, working hours and parental leave. In Australia, the unadjusted gender pay gap has fluctuated between 15% and 19% for the past two decades. It peaked in 2014 at 19% and reached the bottom at 14.9% in 2004. Even though women are represented in every occupation, there are ones that are particularly popular and more attuned to the abilities to communicate effectively, reach female consumer power and extract employee commitment. Jobs that are dominated by women are PR, human resources management, and communication. However, to be chosen for a senior management role, firms require having diverse experiences across different divisions in a firm (“Why there are so many women managers, but so few women CEOs”, 2015).

Many governments currently have laws in place to ensure there is equality between gender to combat this such as The Equal Pay Act 1963 in the US and the Workplace Gender Equality Act 2012 in Australia. It very difficult to monitor whether firms, especially private, are ensuring that employees are paid correctly. To implement this for example in the UK large firms have had to publish their wage gap between mean and median earnings by gender annually since 2016 (Holmes, 2017). Authorities also sent out gender audits to analyse the effectiveness of certain gender equality programs. Recently, Iceland offered an even stronger response through its passing of legislation that has made it mandatory for both public and private firms to pay all employees equally, regardless of gender, ethnicity, sexuality or nationality. (Kilpatrick, 2017). Despite the difficulty to check this, these firms now need to illustrate and prove that they pay employees equally. In fact, Iceland is already ranked the highest in the world for gender equality and has continued to improve the issue through a 40% quota for women on company boards with 50+ staff. Iceland aim for their vision of equality to be fully achieved by 2022.

One of the biggest factors for the gender pay gap is parenthood and how it can impact each gender’s time commitment on the job. Once women begin to change their priorities towards starting a family, we see that many tend to exit the labour force. Of course, this impacts men as well, but child-bearing creates this imbalance. Hence, Dixon (2017) says there are initiatives that involve maintaining current female participation in addition to incentivising those who are not in the labour force. In some countries such as the US, organisations do not have to provide paid maternity, childcare or paid sick days. Business leaders such as outdoor clothing retailer, Patagonia, has responded by providing 4 months of paid leave to new mothers and 3 months to new fathers, emphasising the role and responsibilities that both will have in the early stages of parenthood (Dixon, 2017). Firms have also provided on-site childcare, which relieves part of the burden on mothers. Consequently, female employees are incentivised to stay and work through the facilitation of the career advancement, even for those who have family care obligations.

In many ways, the gender pay gap is also influenced by organisational culture and the biases that organisations and employers have towards women. This has led to corporate firms to incorporate establishing gender equality as an integral part of the company strategy and culture (The European Commission, 2013). This will involve having business units understand the rationale behind gender equality and having HR provide advice and implement further processes to reduce bias that may prevent female talents from being recruited. Some countries have even addressed the issue by comparing pay with the value of work, not position (Holmes, 2017). For example, the Canadian Human Rights Act states that wage differences between genders performing equal value work is discriminatory. The act outlines that the value of work is assessed on 4 factors, skill, effort, responsibility and working conditions.

Subsequent to several decades of struggling for equal pay, Iceland’s step closer gender equality has sparked a contentious debate in the media discerning whether the rest of the world should follow in Iceland’s footsteps. With the gender pay gap narrowing each year, analysts attribute these improvements to an increase in education and social awareness. As the introduction of new laws and regulations around the world are instilled to support women in the workforce, people can expect these trendsetters to create a wave of employee benefits and incentives for women to work. With all these new implementations in mind, it is still hard to predict when the pay gap will close.

The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.