When are salaries actually fair? When one can pay for one’s living with it? When the individual person feels that he or she is being paid fairly? Or when a certain level is reached? Many women are not dissatisfied with their salary, but with the fact, that men are better paid for the same work. That’s why it’s time to start talking about the issue of pay equity and the related gender pay gap.
Women earn on average 18 percent less than men
In fact, it is not just a case of perceived pay inequity. As reported by the German Federal Statistical Institute (Destatis), the gender pay gap – the difference between the average gross hourly earnings of men and women – fell slightly in 2020, from 19 percent previously to 18 percent. This would mean that women would continue to lag well behind in terms of pay. However this could be a milkmaid calculation due to the Corona pandemic. The reduction is most likely due to the way the gender pay gap is calculated.
Significance of the Adjusted and Unadjusted Gender Pay Gap.
The gender pay gap is a figure based on statistical values. It can therefore only ever show, as an average, how high the income of women is in comparison to men. Two types of indicator can be distinguished:
- Unadjusted gender pay gap: In this indicator, the average earnings of all women are set in relation to the average gross hourly wage of all men. It does not take into account how the difference arises, for example, due to more difficult access to management positions or increased employment in sectors with poor earnings prospects.
- Adjusted gender pay gap: The adjusted gender pay gap, on the other hand, takes a wide variety of factors into account when examining the earnings gap. Specifically, it compares the earnings of women and men with comparable education, qualifications and occupations.
The Federal Statistical Office states that 71 percent of the gender pay gap in Germany can be explained by these factors:
- low proportion of women in management positions
- high incidence of employment in low-wage jobs and industries with low earnings opportunities (e.g., care)
- high part-time employment rate
The remaining 29 percent, on the other hand, is actually accounted for by wage differences that exist for no apparent reason. This is referred to as the adjusted gender pay gap, because women and men earn less money for the same work with comparable qualifications and activities.
The gap is shrinking – isn’t everything okay?
In 2005, the gender pay gap was still 23 percent; most recently, in 2020, it was only 18 percent. Something is happening – but much too slowly. Experts assume that the 18 percent figure is unintentionally glossed over because of the statistical calculation method and that equal pay is not in sight. The gender pay gap indicates the difference between the gross hourly wages of women and men. However, it decreases not only when women earn better, but also when men earn less. 2020 was the year of short-time work. But if women are sent home with often low wages, this has a smaller impact on the gender pay gap than if high-earning men are on short-time work. This reasoning raises at least reasonable doubts about the significance of the recent reduction in the gender pay gap.
Germany performs worst in international competition
Germany also fails to score in an international comparison. In Europe, Germany ranked fourth to last in 2019 with 19 percent. Only Estonia, Latvia and Austria presented an even more unfavorable gender pay gap at 20 to 22 percent. Pioneering countries such as Luxembourg, Italy and Belgium, where the gap is only between 1 and 6 percent, show that things can be different.
However, it is important to note the enormous difference in the employment rate of women. In Italy, for example, only around one in two women is employed, while in Germany almost three out of four are. As they are more often than average employed in underpaid jobs and sectors such as care, the high female employment rate has a negative impact on the gender pay gap.
But this is no reason to breathe a sigh of relief – even if you only compare Germany with countries that have a similar female employment rate, it doesn’t make up much ground. The pay gap is much smaller in northern European countries such as Denmark, Norway, Sweden and Finland. In Sweden, for example, more women are employed in percentage terms than in Germany – but the gap in earnings is only 12 percent.
Causal research: Why do women earn less?
The fact that the gender pay gap in Germany is so high can be attributed to a variety of possible causes:
- Family: One important factor is the influence of the family. Many women interrupt their careers to raise children or care for relatives and, due to their circumstances, tend to work part-time significantly more often than men. Almost one in three women works part-time, but not even one in ten men.
- Industry: Women are more often than average employed in industries and professions with low wage levels, such as healthcare (female share 79 percent).
- Underrepresentation in management: Women are less likely than average to make it into senior management, for example because they are passed over for promotion despite having excellent qualifications. In the 160 largest companies listed on the Frankfurt Stock Exchange, the quota of women on the executive board is just ten percent.
- Discrimination: Based on outdated role models, women’s work performance is actually often valued lower than the same performance of men. This is often due to gender roles anchored in childhood that show disdain for women.
Will politics fix it?
Other countries have already shown that the gender pay gap can be reduced. The first step is for policymakers to set the course. As early as 2014, the European Commission’s action plan against pay discrimination required member states to create national regulations. As a result, the Pay Transparency Act came into being in Germany in 2017. This gives employees a right to information from their employer. They can thus find out how wages are formed and how much comparable colleagues earn. However, this entitlement has been restricted by the legislator to such an extent that only a few employees can benefit from it. The Pay Transparency Act only applies to companies with more than 200 employees – but 97 percent of German companies employ fewer than 50 people. In the remaining three percent of companies, employees entitled to information still have to find six comparable colleagues of the opposite sex in order to claim information. The higher the career level, the rarer it is that all the requirements are met – and then the employee must also dare to insist on his or her right. Such a request does not leave a positive impression on the employer.
Other countries show how it can be done: In Denmark, employers with more than 35 employees are obliged to make their gender pay gap public. Anyone can see the salaries. This has apparently put a lot of pressure on employers – the gap has since fallen by 7 percent. Transparency is important – but it is imperative that legislators set the necessary course for this.
Gender pay gap: can employers help to shrink this difference?
But it would be wrong to shift responsibility to politicians alone. Employers are also called upon – and can make their contribution to reducing the prevailing wage inequity. HR software makes measures more transparent to implement and easier to monitor. Possible starting points include:
- Control: Employers should commit themselves to keeping an eye on important key figures relating to the gender pay gap. It makes sense here to define fixed reports that document and make visible the internal development of the gap. Here, not only should individual teams be scrutinized, but comparisons should also be made across departments and locations.
- Work with salary bands: If certain jobs are given a salary band that defines a minimum and maximum salary, this puts a stop to unequal treatment without ruling out performance-based pay.
- Flexible working models: With flexible working time models as well as home office and remote working, women benefit from a better work-life balance. This allows them to take care of their families without having to leave the workforce.
- Exposing grievances: The topic of salary is a taboo subject in this country – which makes it all the more difficult to expose prevailing grievances in the company. But that is precisely why it is important to talk about the issue.
Iceland has found a model solution: In contrast to the 12:2 split of parental leave in Germany, fathers and mothers there must take parental leave in equal parts if they do not want to let part of their entitlement lapse. As a result, fathers actually take on more responsibility at home and allow women to continue working.
This shows: Even small measures can help reduce the gender pay gap and thus help women achieve fairer pay.
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