The. pay gap. for women in decision-making positions: increasing responsibilities, increasing pay gap. Justice

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1 The pay gap for women in decision-making positions: increasing responsibilities, increasing pay gap Justice

2 Working Paper The pay gap for women in decision-making positions: increasing responsibilities, increasing pay gap European Commission s Network to Promote Women in Decision-making in Politics and the Economy Text completed in July 2011 The opinions expressed in this paper are the opinions of the Network members and do not necessarily reflect the opinion or position of the European Commission. Neither the European Commission nor any person acting on its behalf is responsible for the use which might be made of the information contained in this document. 1

3 Contents 1. Purpose of the working paper The pay gap for women in general The pay gap for women in decision-making in the public and private sector Public sector: Facts and figures Private sector: Facts and figures Three way comparison Reports on specific sectors, countries and groups Financial services in the UK MBA-graduates Law firms in the USA FTSE-100 companies Women in science and research Good practices Key points of advice ANNEX 1 Members of the European Network at meeting on 15 December ANNEX 2 List of reference materials

4 1. Purpose of the working paper The European Commission Network to promote Women in Decision-making in Politics and the Economy (hereinafter called the European Network) was established in It serves as a platform to facilitate European-level cooperation, exchange information and share good practices with its stakeholders, its members, partners and society as a whole. On 15 December 2010 the European Network discussed the following questions: 1. What is the situation on the pay gap for women in decision-making positions? Does the pay gap increase with increasing responsibilities? Are there any differences between the public and the private sector? 2. Do the causes for the pay gap for women in decision-making positions differ from those for the gender pay gap in general? 3. What are good practices to address the pay gap for women in decision-making positions in the public and private sector? Definitions The gender pay gap (GPG) is the difference between average gross hourly earnings of male paid employees and of female paid employees as a percentage of average gross hourly earnings of male paid employees within the economy as a whole. In 2008, the EU average is estimated at 17.5 % 2. The GPG indicator includes salaried employees at all levels. This working paper serves to present the main results of the discussions, to highlight good practices and to provide reference materials in order to contribute to further understanding of the issues. The paper is a reflection of the discussions and information shared, and as such does not include a complete or academic analysis of the issues. 2. The pay gap for women in general In every single EU-country women earn less than men. In 2008, the EU average is estimated at 17.5 % 3. This has an important impact on lifetime earnings and on tsiem040 3 See 2 3

5 women's pensions. Earning lower pay means having a lower pension which causes a higher risk of poverty for older women. The gender pay gap is the consequence of on-going discrimination and inequalities in the labour market. There are considerable differences between the Member States 4 with the gender pay gap ranging from less than 10% for example in Italy, Slovenia, Belgium, Romania, Portugal, Malta and Poland to around 20% in Finland and the Netherlands, to more than 20% in Slovakia, the United Kingdom, Lithuania, Cyprus, Greece and Germany. In Austria, the Czech Republic and Estonia the pay gap amounts to even more than 25%. The gender pay gap is not an indicator of the overall equality between women and men since it only concerns salaried persons. It must be looked at in conjunction with other indicators linked to the labour market such as different working patterns of women. In most of the countries in which the female employment rate is low (e.g. Malta, Italy, Poland), the pay gap is lower than average, which may reflect a small proportion of low-skilled or unskilled women in the workforce. A high pay gap is usually characteristic of a labour market that is highly segregated (e.g. Estonia, Slovakia) or in which a significant proportion of women work part-time (e.g. Germany, United Kingdom, the Netherlands, Austria). Institutional mechanisms and systems on wage setting can also influence the pay gap. Main causes The gender pay gap is linked to a number of legal, social and economic factors which go far beyond the single issue of equal pay for equal work. The most important ones include 5 : Direct discrimination In some cases women are paid less than men for doing the same job, although this factor only explains a small part of the gender pay gap, due to the effectiveness of the EU and national legislation. The undervaluing of women s work Women's competences are valued less compared to men's. Jobs requiring similar skills, qualifications or experience tend to be poorly paid and undervalued when they are dominated by women rather than by men. The national figures 5 4

6 evaluation of performance, and hence pay level and career progression, may also be biased in favour of men. Segregation in the labour market Women often work in sectors where their work is valued less and lower paid than in the predominantly male sectors. Many women work in low-paid occupations. Traditions and stereotypes These may influence the choice of educational paths and, consequently, professional careers that girls and women take. There are fewer women working in scientific and technical jobs. Women are expected to reduce their working hours or exit the labour market to carry out child or elder care. Balancing work and private life Family and care responsibilities are still not equally shared. The employment rate of women decreases with the number of children, while the employment rate of men increases with the first and the second child. There is an evidence of a pay gap when looking at the differences in hourly earnings between parttime and full-time workers. Women have more career interruptions or work shorter hours than men. This can impact negatively on their career development and promotion prospects. Vertical segregation Women are under-represented in managerial and senior positions. Women represent around 32% of business leaders 6 within the EU and 12% of members of boards of the largest publicly listed companies in EU countries in The pay gap for women in decision-making in the public and private sector 3.1 Public sector: Facts and figures Eurostat data on the group of legislators and senior officials (ISCO 11) 8 were analysed. Since ISCO 11 does not include all employees in the public sector, the 6 Business leaders covers people who work as a director or chief executive of a corporation or as the manager of a small enterprise (Categories 121 and 131 of the ISCO-88 classification of occupations). Source: Labour Force Survey Eurostat International Standard Classification of Occupations, see 5

7 analysis is not complete but serves as an indicator. Some Member States do not provide complete data on ISCO 11 to Eurostat. Gender pay gap (ISCO 11) in Italy is exception to the rule Figure 1 contains the GPG for women legislators and senior officials in 22 9 EU countries in Across the EU the differences range from the lowest of minus 30% in Italy (IT) to the highest at 49% in France (FR). Italy is the only country where men get paid significantly less (30%) than women in this group. In Poland (PL) equity in pay has been reached. France recorded an exceptionally high GPG. Five countries, next to Italy, recorded a relatively small GPG, i.e. below 10%: Poland, Sweden (SE), Slovakia (SK), United Kingdom (UK) and Lithuania (LT). A significant GPG of more than 30% is seen in 5 countries: France (highest), Czech Rep (CZ), Finland (FI), Portugal (PT) and Germany (DE). Figure 1: GPG for women legislators and senior officials CL_ISCO88C&StrLanguageCode=EN&IntPcKey= &StrLayoutCode=HIERARCHIC 9 No complete data available for Belgium, Cyprus, Greece, Spain, Luxemburg. 10 Eurostat data for ISCO 11 and 12 only available for the year 2006; no average or total EU-27 data available on these groups. 6

8 In more than half of the countries the GPG for senior women in the public sector is larger than the GPG in general Figure 2 shows the comparison between the overall GPG and the GPG for the ISCO 11 group. In 12 out of 22 countries analysed the GPG for women in senior positions is higher than for women in the labour market in general. This is especially true for women in senior positions in France (+33% absolute difference), Portugal, Czech Republic, Bulgaria (BG) and Malta (MT); they are paid substantially less than their male counterparts in these positions. In Slovakia, UK, Austria (AT), Estonia (EE), the Netherlands (NL) and Lithuania, the pay gap for women in senior positions in this group is significantly lower than the average. The relatively small overall GPG in Poland (7.5%) does not exist for the senior women in the ISCO 11 group since parity is reached. Small differences between the general and ISCO 11 pay gap are recorded in: Romania (RO), Slovenia (SI), Latvia (LV), Hungary (HU) and Denmark (DK). Figure 2: Comparison GPG in general with GPG women legislators and senior officials

9 3.2 Private sector: Facts and figures Eurostat data on the group of corporate manager (ISCO 12) 11 were analysed. Since ISCO 12 does not include all managers in the private sector, the analysis is not complete but serves as an indicator. In half of the EU-countries women corporate managers have a pay gap of 25% or more Figure 3 contains the data on women corporate managers (ISCO 12). Only 3 countries recorded a score below 10% GPG: Romania, Cyprus (CY) and Bulgaria; Belgium (BE) reported 12.4%. This means that in almost 90% of 27 EU-countries the GPG for women corporate managers is more than 10%. The lowest GPG for corporate managers can be found in Romania (4.6%) and the highest in the Czech Republic with just over 40% (40.6%). In seven countries the pay gap is even more than 30%: Finland, Spain, Poland, Austria, Slovakia, Germany and Czech Republic. The graph shows that in 70% of the EU-countries women managers earn more than 20% less than their male counterparts. In half of the countries women managers have a pay gap of 25% and more. 11 International Standard Classification of Occupations, see CL_ISCO88C&StrLanguageCode=EN&IntPcKey= &StrLayoutCode=HIERARCHIC 8

10 Figure 3: GPG for women corporate managers 2006 GPG for women corporate managers in most countries higher than GPG in general Figure 4 provides a comparison between the overall GPG and the GPG for women corporate managers (ISCO 12). In 23 out of 27 countries (85%) the GPG for women corporate managers is larger than the overall GPG. In some countries it is even more than a double of the overall pay gap: Poland (8 vs. 32%), Italy (4% vs. 16%), Malta (5% vs. 16%) and Portugal (8% vs. 23%). In Luxemburg (LU), the GPG for women corporate managers is almost twice as large as the overall GPG (10.7% vs. 20.5). Cyprus records a significantly lower pay gap for women corporate managers than the overall average, but also Bulgaria, Estonia and Romania record lower than average pay gaps. In half of the countries the GPG for women corporate managers is 25% or more; this is in contrast with the fact that in only three countries an overall pay gap of 25% or more is reported, i.e. in Estonia, Slovakia and Austria. Nine countries report an overall and ISCO 12 GPG of 20% or more: Austria, Czech Rep, Germany, Estonia, Greece (EL), Finland, Netherlands, Slovakia and the UK. In Austria, Estonia and Slovakia both pay gaps are even more than 25%. 9

11 Figure 4: Comparison GPG in general with GPG women corporate managers Three way comparison Figure 5 compares the GPG for ISCO 11 and 12 groups with the overall GPG in 22 EU-countries 12. Only Estonia recorded a smaller than average GPG for women legislators, senior officials and corporate managers In 10 countries the GPG for women in decision-making in the public and private sector are larger than the average GPG: Czech Republic, Germany, Denmark, Finland, France, Hungary, Ireland (IE), Malta, Portugal and Slovenia. In the other countries, apart from Estonia, at least one of the GPG s is larger than the average. Estonia is the exception to the rule: GPG for women legislators, senior officials and corporate managers are all lower than the average pay gap. In Romania and Slovenia the 3 compared GPG s are below 15% and the differences between them are small. In France there is a significant difference between the pay gap for senior officials and legislators compared to the general pay gap and for corporate managers. Poland shows a sharp contrast between pay equality for women 12 No comparable data on ISCO 11 are available for Belgium, Cyprus, Greece, Spain and Luxemburg. 10

12 legislators and senior officials and the high GPG (more than 30%) for women corporate managers. Figure 5: Comparison of GPG in general with ISCO 11 and 12 groups Reports on specific sectors, countries and groups The following studies and surveys report contain relevant data supporting the main findings of the data analysis above. 4.1 Financial services in the UK The Financial Services Inquiry Report by the UK Equality and Human Rights Commission (2009) 13 provides data on the pay gap in the financial services sector in the UK. Although it includes jobs ranging from cashiers to investment bankers, its main findings are significant: Women working full-time in the financial sector earn 55% less per year than men working full-time (pay gap based on annual gross earnings irrespective of hours worked is even 60%). The gap between female and male full-time earnings is twice as large as the average gap across the economy as a whole (28%). (Pay gap based on annual gross earnings irrespective of hours worked is 42%). The impact of annual incentive pay (bonuses) is substantial: female full-time working employees receive on average only a fifth (20%) of the annual incentive pay of men working full-time in the sector; the GPG therefore stands at 80%)

13 Since incentive pay and bonuses are often part of salary packages for higher ranking employees with decision-making powers, this finding indicates that in this sector women in decision-making roles face a larger pay gap than lower ranking female employees. The Report indicates that bonuses are a significant part of take-home pay, but sometimes appear to be based more on an individual s readiness to ask for more than based just on their performance MBA-graduates Looking at women and men at the start of their careers, the Catalyst report Pipeline s broken promise (2010) 14 on MBA-graduates ten years in their careers provides valuable insights: On average women are paid $ 4,600 less in their first post-mba job than men. Men are more likely to take a first assignment at a higher rank with greater levels of responsibilities than women. Men were twice as likely to be at the CEO/senior executive level. Men experienced higher salary growth post-mba. These findings hold even when considering only men and women who did not have children and when considering only men and women who aspired to reach CEO level. 4.3 Law firms in the USA A study commissioned by the American Bar Association (2010) 15 found that as women lawyers become more senior, they experience an increasing shortfall in income compared to male attorneys. The median income of women lawyers is only 74% of that of male lawyers. The $ 2,000 annual gap between female and male associates at the start of their career accelerates to a $ 64,000 annual gap between male and female equity partners. 4.4 FTSE-100 companies A special analysis by AON Hewitt on its FTSE 100 Eurotop report 16 (2009) on salaries found that total direct compensation for the female executive and non-executive directors was lower than for their male counterparts Presented by Ms Brenda Broad, senior consultant at AON Hewitt; due to small sample size findings are merely an indication. 12

14 4.5 Women in science and research Higher pay gap than average Research on the pay gap for women in science 17 is only scarcely developed due to a lack of official data on gender income differences. In addition, in many institutions, wages are determined by rank and seniority and in some countries and cultures earned wages are not available. The report She Figures shows that there is no segment or country in which women in science earn the same as men despite legislation to impose gender wage equality for the same work. This pay gap is the result of the horizontal (fields of study) and vertical (women work in lower hierarchical positions even if they have equal qualifications) segregation. The pay gap for women in science and research in EU-27 was 25% in 2006 (against the GPG in general of 17.7%). The pay gap for women professionals in private enterprise decreased from 31% in 2002 to 29% in Within this group, the gap for women professionals in physical, mathematical and engineering science remained stable at 22%. A much wider gap was reported in the group of life science, health, teaching and other professionals at 33% in 2006 (decreasing from 36% in 2002). Figure 6: GPG for women scientists in private enterprises in EU Presented by European Network member Ms Brigitte Mühlenbruch, president of the European Platform of Women Scientists Table 3.4, p. 88 SheFigures report 13

15 Figure 7: GPG for women scientists in public enterprises in EU It is noted that in general the pay gap for women scientists in the public enterprise is wider than in the private sector; the pay gap of 38% for professionals in the public sector is even 9% higher than for women in the same occupations in the private sector. This finding is surprising since it is widely believed that a strong accumulation of women in the public sector protects them against discrimination. In many cases wages in the higher education and government sectors are fixed based on seniority and not subject to negotiations. However, premiums, bonuses or other advantages added as a supplement to fixed wages often generate gender differences. Figure 8: GPG for women scientists in public and private enterprise by age group 21 The gender pay gap is the widest among the age group of year old at 38%, closely followed by the group of year old at 37%. Summary The pay gap for women scientists is the widest in those occupations that are most open to high level female researchers. Although the gender pay gap is wide all across science and research, even more so in public enterprise, it also widens as the age of researchers increases. This illustrates the working of a glass ceiling that women hit during their career in the academic hierarchy. There is no spontaneous reduction of the gender pay gap over time, a conclusion that holds up for all gender inequalities. 20 Table 3.5, p.89 SheFigures report 21 Table 3.7, p.91 She Figures report 14

16 5. Good practices During the meeting of the European Network good practices to prevent and address the gender pay gap in decision-making positions were shared. Addressing the gender pay gap in organizations compensation systems: o Create transparency in performance expectations and the measurement methodology. Competencies and behavior should be balanced for masculine and feminine traits. o Carry out adverse impact studies of both performance results and compensation since pay gaps do not happen overnight. Find the very first instance pay discrepancies surface and look for the root causes of the origin. o Ensure equity between women and men in initial placements. o Promote an active role of senior leadership in ensuring the integrity of the hiring process and giving equal opportunities for women and men for stretch assignments for their development. o Conduct a self-audit to ensure policies and practices are unbiased. o Analyze self-advocating behaviors for women and provide specific trainings for women where needed. Develop a process that does not penalize women for self-advocacy. o Continuous benchmarking and monitoring. o Provide for negotiation training for women, including for remuneration packages. o Ensure diversity in compensation committees. 6. Key points of advice The findings indicate that, in general, women in decision-making positions are even less financially rewarded compared to their male counterparts than in the labour market in general. For women, an increase in responsibilities comes with an increase in pay gap. Since women are already seriously underrepresented 22 in decision-making positions, their efforts and willingness to reach senior positions could become compromised by the prospect of an increasing pay gap as shown in this first analysis. 22 On average (EU-27, data collected in 2010) 12% of board seats at Europe s largest listed companies are held by women: 33% of highest administrative functions are taken by women: 15

17 Therefore there is a need to investigate if the reasons behind and causes for the pay gap of increased responsibilities are similar to or different from the ones underlying the general pay gap for women in the labour market. In addition, there is a need to investigate whether the current policies, aimed at combating the GPG for all women in the workforce, are also effective to address the pay gap of increased responsibilities; new instruments may need to be developed for this target group. Last but not least, it is important to recognize that the right amount of responsibility needs to be placed on women for the position they are in, but without reinforcing stereotypes; this is a delicate and sensitive balance. A clear and consistent definition of the target group women in decision-making positions in the public and private sector needs to be developed. ISCO categories 11 and 12 could form the basis after review for inclusion of all relevant groups. Regular analysis of these data over a longer period of time should be done in order to provide more reliable insights into the development of the GPG for this specific group. An inventory of good practices on preventing and addressing the pay gap of increased responsibilities could be developed for sharing among Member States. 16

18 ANNEX 1 Members of the European Network at meeting on 15 December 2010 Name and function Organization Website Jocelyne Bougeard, President Helena De Felipe Lehtonen, President Sophia Economacos, President Tytti Peltonen, Member Sonja Lokar, Coordinator South East Europe Office Brigitte Mühlenbruch, President Maud Pagel, Member Bola Olabisi, Director Myriam Schevernels, Project Coordinator Brigitte Triems, President Marijo Bos, President Mirella Visser, Independent expert Committee of Women Elected Representatives of Local and Regional Authorities (Council of European Municipalities and Regions) Association of Organizations of Mediterranean Businesswomen Eurochambres Women's Network European Women Lawyers Association CEE Network for Gender Issues European Platform of Women Scientists Global Summit of Women European Women Inventors and Innovators Network Femanet - Eurocadres European Women's Lobby European Professional Women s Network Centre for Inclusive Leadership cee_network_for_gender_ issues

19 ANNEX 2 List of reference materials More women in senior positions Key to economic stability and growth, by the European Commission, January 2010: The EC gender pay gap website: Strategy for Equality between Women and Men ( ), September 2010: She Figures report 2009, by the Directorate-General Research of the European Commission: Database on women and men in decision-making, European Commission, DG Employment: European Network to promote Women in Decision-making in Politics and the Economy: Economy Financial Services Enquiry Report, by the Equality and Human Rights Commission in the UK (Sept 2009): t.pdf Pipeline s broken promise, by Catalyst (2010): New Millenium, Same Glass Ceiling? The Impact of Law Firm Compensation Systems on Women, by J.C. Williams and V.T. Richardson (2010): 18

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