After seven years of promoting a voluntary approach to pay transparency, the EU has proposed new binding measures for member states. The president of the European Commission, Ursula von der Leyen, put closing the gender pay gap on the agenda for her tenure, and the new measures were a campaign promise.
Mark Smith, Professor, Director & former Dean, Grenoble École de Management (GEM) ; Annick Masselot, Professor of Law, University of Canterbury ; Jill Rubery, Professor of Comparative Employment Systems, University of Manchester ; Petra Foubert, Professor of law, Hasselt University
The pay gap has remained stubbornly high in Europe for decades, and is currently at 14.1%. Will these new transparency measures help close it?
To answer this question, it helps to know where pay inequality comes from. The gender pay gap results from a number of interlocking factors. These operate at the household, organisational and labour market levels.
At the household level, an uneven division of care work and unpaid tasks constrains women's labour force participation and career advancement. At the organisational level, managerial practices and diverging pay levels are rarely challenged, yet are often a source of discrimination. And at the labour market level, women and men are segregated into differently valued jobs, organisations and sectors – child care workers, overwhelmingly female, receive very low pay, while the male-dominated engineering profession, for example, attracts high salaries.
Of these three categories, pay transparency measures are expected to have the greatest impact at the organisational level.
How pay transparency helps
There are a number of reasons why salary transparency may help to unblock the current slow progress in closing the gender pay gap.
Greater openness on how much individuals are paid will help individuals secure equal pay where they suspect they are unjustifiably paid less than their colleagues. Meanwhile, organisations, keen to protect their reputations, will be encouraged to audit and clean up their own pay inequalities. Transparency could also help reduce the inequalities that emerge from unequal starting salaries, secrecy agreements and other unchecked managerial decisions.
The European Commission first began promoting pay transparency in a 2014 recommendation, which encouraged EU member states to give employees the right to request information on pay levels, to ensure companies regularly report on pay and conduct audits, and to include equal pay in collective bargaining.
Although some member states responded positively to the recommendation – including Austria, Belgium, Denmark, France and Germany – many did not. Faced with limited progress, the European Commission has reasserted its commitment to pay transparency this year, proposing a legal approach that draws upon its earlier recommendation and new research.
The gender pay gap in Europe
This time, the commission is proposing a number of new measures.
Employers will need to provide greater transparency to job seekers about the criteria by which they set pay and will not be able to ask about a candidate's previous salaries during job interviews. Employees, meanwhile, will have the right to request information about pay averages in their firm for workers doing the same work or work of equal value. Larger employers will have to publish information on internal pay gaps and, where pay gaps exceed 5%, employer and employee representatives will have to assess the reasons behind them.