Opinion & Analysis

Can the Pay Transparency Directive close the gender pay gap?

Today, our thoughts go out to all women who have had to flee Ukraine to escape horror and to save their children, and to all those women who have remained behind  to help defend their homeland. To those men and women who have the chance to live in (still) peaceful EU countries, we want to recall that gender equality remains a top priority. In the EU, major progress has been made in advancing women’s rights over the past 25 years but challenges still remain, especially on the labour market. The gender pay gap is definitely not yet closed.

Despite progress over the past few years, women in the EU are still paid less than men for equal work of equal value. In 2018, the gap was on average 14 %, and it is likely to have increased during the pandemic. In 2019, President von der Leyen put gender equality among the six priorities of her new Commission. In March 2021 the Commission published a proposal for a Directive to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms.

Is pay transparency important to close the gender pay gap? The short answer is yes. Over time women have been closing gaps relative to men in education, labour market participation, and attitude; areas which typically (used to) explain the gap. Yet pay differences persist. New research points to within-company dynamics as one of the most significant contributors to the pay gap. The directive proposes to address it through transparency and information sharing. This is expected to reduce the gender pay gap, even though the implementation, and in particular the operationalisation of the concept of equal work, will pose challenges to companies, and eventually can negatively weigh on the overall benefits.

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