How to reduce your gender pay gap

Sometimes you come across counterintuitive facts that make you step back and wonder if everything you thought you knew was wrong, like America spending more per capita on healthcare than Britain or Stephanie Flanders not being head girl at school or Italy being the first country to eliminate its full-time gender pay gap.

Yes, that’s right, Italy. Not Finland, not Denmark, not some other bastion of female friendly social democracy but Italy.

Gender pay gap by working profile, %, 2011

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At least, that’s what the latest EuroStat data says.

For full-time workers pay gaps varied widely in the EU, by 20 percentage points, between the highest ones observed in Slovakia and Germany (20 %) and the lowest pay gap, actually no pay gap at all, in Italy (0 %).

So mind-blowing was this that I decided to check out the OECD’s figures for a second opinion. These show Italy having a slight gender pay gap for full-time workers but it is still the lowest in the group.

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It gets even better. We know that the gender pay gap increases when women get to their 30s and leave work to have children. This is the case, to varying degrees, across Europe. But according to a recent OECD survey, Italy is the country where motherhood has the least impact on pay levels.

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Not only is Italy’s gender pay gap relatively low but having children seems to make very little difference to women’s pay.

It all looks impressive. Last month, the Huffington post listed Italy as one of the countries putting the USA to shame on gender equality.

So how has Italy done it? Has it brought in strict laws on equal pay and strengthened maternity rights? Are employers in Italy complying with both the letter and the spirit of equality legislation in a way that happens nowhere else in Europe? Unlikely isn’t it?

Italy is 80th in the WEF’s Global Gender Gap Index. The countries at the top are the ones you’d expect to see: Iceland, Finland, Norway, Sweden. It’s the same story whichever gender equality index you look at. The Scandinavian countries are near the top and you have to scroll down quite a way to find Italy.

If it’s not due to equality legislation, then, what is the secret of Italy’s low gender pay gap?

The figures on employment rates give us a clue.

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Italy has one of the lowest rates of female employment in Europe. Furthermore, the inactivity rate among women in the 25-54 age group is also one of the highest in Europe – around 35 percent compared to 12 percent in Sweden and Denmark.

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Italy has a low gender pay gap and a low impact of motherhood on pay not because of its female-friendly policies but because many Italian women simply leave the labour force. As the Bank of Italy’s Roberta Zizza says, Italy’s low gender pay gap is due to positive sample selection:

When the cross-country comparison deals with the gender wage gap, Italy stands as one of the countries where the gap is lower. This is mainly due to a positive selection: in Italy the women who work are those whose characteristics are better rewarded by the labour market (for example, the more educated).

The high flyers who can hold their own in a male dominated labour force go back to work while many other women withdraw from the labour market.

A 2008 study by Claudia Olivetti and Barbara Petrongolo found a correlation between low female labour force participation and low gender pay gaps. When they corrected for the rates of labour force participation, the gender pay gaps in southern European countries looked less impressive.

Gender wage gaps in the United States and the United Kingdom are much higher than in other European countries, and especially so with respect to France and southern Europe. Although at first glance this fact may suggest evidence of a more equal pay treatment across genders in the latter group of countries, appearances can be deceptive.

[W]e note that gender wage gaps across countries are negatively correlated with gender employment gaps and we illustrate the importance of nonrandom selection into work in understanding the observed international variation in gender wage gaps.

This goes some way to explaining the paradox that the countries with the most female friendly laws and working practices have relatively high gender pay gaps, in some cases above the OECD average, while those of the more ‘traditional’ countries are low or even non-existent.

Even in enlightened Scandinavia, women still do most of the childcare so, as in the UK, they go back to work part-time or get lower paid jobs locally to be on hand for the school run. Encouraging women back into the workforce, then, has the paradoxical effect of raising a country’s gender pay gap. Countries like Italy, by contrast, take more women of child-bearing age out of the workforce completely, which removes them from the calculations and lowers the gender pay gap.

Now before you get shirty with me, I’m not actually suggesting this as a policy, though doubtless the removal of mothers from the workforce would find favour in some quarters. These nuances in the gender pay gap calculations are important for a couple of reasons though. Firstly, it shows just how far social norms and conventions impact on pay levels. The gender pay gaps in different parts Europe arise from varying assumptions about the role of women. Secondly, it shows how important it is to dig deeper when presented with what looks like solid statistical data. If something on a graph or report looks wrong it’s always worth looking a little closer. Italy’s gender pay gap isn’t really embarrassing America or any other country. It might look that way on a graph but, as so often, the truth is a little more complicated.

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5 Responses to How to reduce your gender pay gap

  1. Pingback: How to reduce your gender pay gap - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. IMO Women in Italy seem to have made a fine choice. With all the problems, pains, aggravations and dysfunctions inherent in the “modern” world of work, I’d not want to be in it if I had a choice. Although, of course, we all have a choice. I might be exercising mine (again) soon. :}

    – Bob

  3. hrmole says:

    Great post, call me a geek (most people do!) I do love a few stats especially digging underneath them. I work an industry with a big gender gap problem, I am a real believer in employers taking action locally through targeted projects providing support and assistance so that the impact on long term career prospects of time out of the office is minimised. I thin so much more could be done and it wouldn’t.t even cost that much. I think the hard part is getting money and time behind these things. Thanks again for the post.

  4. Bill Wells says:

    In the run-up to the 2015 General Election there is renewed interest in the pay gap between men and women.

    As someone who, when in the Civil Service, was responsible for some of the analytical work behind the Kingsmill Report I would suggest that it might be worth re-considering the results and perhaps replicating the analysis.

    Amongst its main conclusion was that there was little or no sign of direct discrimination in terms of specific jobs. By far the main reason for the difference between the overall averages for men and women was the occupational segregation amongst women. They tend, particularly if they are part time, to be concentrated in relatively few industries and occupations.

    One interesting result that did not get much attention is the final report was that the distribution of earnings for men was much wider than that for women. And, using shift share analysis it seemed that if the female distribution of earnings (by industry/occupation etc) was applied to the male distribution then this would have a substantial narrowing effect on the pay gap between men and women even if the earnings and the distribution of earnings for women was unchanged.

    I must admit that I tended to consider that this might be an indication that the labour market was becoming more individualistic (as males tend to be in areas of the economy which are less collective) and that this might indicate that the role an individual could play in the labour market was more important than whether they were a woman of a man. And that did seem to me to possibly be a positive sign associated with equal opportunities and also the potential for social mobility. [And might also have something to say about whether the occupational segregation is predominantly associated with choice rather than restricted opportunities.]

    If that were the case – and I would suggest replicating the analysis and removing restrictions to all people taking up higher paid jobs – then focusing too much on an objective of equality of AVERAGE earnings of men and women might lead you into policies that move you away from equal opportunities, social mobility and choice.

    Bill Wells

  5. Pingback: Will employers’ gender pay gap figures tell us anything new? | Flip Chart Fairy Tales

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