Understanding the gender pay gap: definition and causes

Source: European Parliament (EP) i, published on Thursday, April 8 2021.

Working women in the EU earn on average 14% less per hour than men. Find out how this gender pay gap is calculated and the reasons behind it.

Although the equal pay for equal work principle was already introduced in the Treaty of Rome in 1957, the so-called gender pay gap stubbornly persists with only marginal improvements being achieved in recent years.

What is the gender pay gap and how is it calculated?

The gender pay gap is the difference in average gross hourly earnings between women and men. It is based on salaries paid directly to employees before income tax and social security contributions are deducted. Only companies of ten or more employees are taken into account in the calculations. The EU average gender pay gap was 14.1% in 2019.

Some of the reasons for the gender pay gap are structural and are related to differences in employment, level of education and work experience. If we remove this part, what remains is known as the adjusted gender pay gap.

The gender pay gap in the EU

Across the EU, the pay gap differs widely, being the highest in the following countries in 2019: Estonia (21.7%), Latvia (21.2%), Germany (19.2%), the Czech Republic (18.9%), Slovakia (18.4%) and Hungary (18.2%). The lowest numbers in 2019 can be found in Poland (8.5%), Slovenia (7.9%), Belgium (5.8%), Italy (4.7%), Romania (3.3%) and Luxembourg (1.3%).

Interpreting the numbers is not as simple as it seems, as a smaller gender pay gap in a specific country does not necessarily mean more gender equality. In some EU countries lower pay gaps tend to be because of women having fewer paid jobs. High gaps tend to be related to a high proportion of women working part time or being concentrated in a restricted number of professions. Still, some structural causes of the gender pay gap can be identified.

Causes of the gender pay gap

On average, women do more hours of unpaid work, such as childcare or housework. Such a gender gap in unpaid working hours can be found in all EU countries, although it varies from six to eight hours per week in the Nordic countries to more than 15 hours in Italy, Croatia, Slovenia, Austria, Malta, Greece and Cyprus, according to 2015 figures.

This leaves less time for paid work: according to 2018 figures, almost one-third of women (30%) work part-time, while only 8% of men work part-time. When both unpaid and paid work are considered, women work more hours per week than men.

Women are also much more likely to be the ones who have career breaks and some of their career choices are influenced by care and family responsibilities.

About 30% of the total gender pay gap can be explained by an overrepresentation of women in relatively low-paying sectors such as care, sales or education. There are still sectors such as the science, technology and engineering sectors where the proportion of male employees is very high (with more than 80%).

Women also hold fewer executive positions: less than 10% of top companies’ CEOs are women. If we look at the gap in different occupations, female managers are at the greatest disadvantage: they earn 23% less per hour than male managers.

But women also still face discrimination in the workplace, such as being paid less than male colleagues having the same qualifications and working within the same conditions and occupational categories or being demoted after returning from maternity leave.

So, women do not only earn less per hour, but they also perform more unpaid work as well as fewer paid hours and are more likely to be unemployed than men. All these factors combined bring the difference in overall earnings between men and women to almost 37% in the EU (in 2018).

Closing the gap: fighting poverty and strengthening the economy

Reducing the gender pay gap creates greater gender equality while reducing poverty and stimulating the economy.

The gender pay gap is widening with age - along the career and alongside increasing family demands, while it is rather low when women enter the labour market. With less money to save and invest, these gaps accumulate and women are consequently at a higher risk of poverty and social exclusion at an older age. The gender pension gap was about 29% in the EU in 2019.

Equal pay is not just a matter of justice, but would also boost the economy as women would get more to spend more. This would increase the tax base and would relieve some of the burden on welfare systems. Assessments show that reducing the gender pay gap by one percentage point would increase the gross domestic product by 0.1%.

Parliament's actions against the gender pay gap

On 21 January 2021, MEPs adopted a resolution on the EU Strategy for Gender Equality, calling on the Commission to draw up an ambitious new gender pay gap action plan, which should set clear targets for EU countries to reduce the gender pay gap over the next five years.

In addition, Parliament wants to make it easier for women and girls to study and work in male-dominated sectors, to have flexible working time arrangements and also to improve wages, salaries and working conditions in strongly female-dominated sectors.

Find out more about what the Parliament does to tackle the gender pay gap and to promote gender equality in general

Find out more

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