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05 May 2017

Women in Work – The potential $2 trillion prize from closing the gender pay gap

Authored by Yong Jing Teow and Shivangi Jain

The fifth annual update of the PwC Women in Work Index shows a continued positive trend towards greater female economic empowerment across the OECD. Our index combines five key indicators of female economic empowerment: the equality of earnings with men; the proportion of women in work, both in absolute terms and relative to men; the female unemployment rate; and the proportion of women in full-time employment.

Half of the countries on the Index have maintained their position in the rankings from the previous year. Some have made significant improvements – Poland in particular, stands out for having achieved the largest annual improvement, rising from 12th to 9th place. This was driven by a falling female unemployment rate and increasing share of women in full-time jobs. While Norway has retained its position amongst the top 3, an increase in female unemployment has meant that its absolute Index performance has slipped.

One key area critical to achieving gender parity is the gender pay gap. Our research finds that the gender pay gap across the OECD is gradually closing, from 19% in 2000 to 16% in 2015. However, there is still a lot more progress to be made – a simple extrapolation of historical trends suggests that the gender pay gap across the OECD might not close fully for almost a century, with some countries achieving parity earlier than others.

Figure 1: Time to close the gender pay gap

Figure1

 

Source: PwC analysis using OECD and Eurostat data

What are the causes of the pay gap? Although direct discrimination (women getting paid less than men for the same work) is a factor, it does not fully explain the global gender pay gap. A study by Glassdoor showed that once the unadjusted pay gap (ranging 10-20% for a sample of advanced countries) is controlled for occupation, education, experience, location and company, the resulting adjusted pay gap falls to less than 10%. This global study shows that although direct discrimination is nevertheless an important factor driving the pay gap, other factors are also at work, namely the lack of female representation in higher paying jobs and industries.

Policies that directly address these factors can therefore have a substantial impact on the gender pay gap. For example, increasing the availability of affordable childcare can help narrow the gap by enabling greater female participation in the workforce. We show that higher performing countries are also associated with lower costs of childcare. Encouraging greater sharing of caring responsibilities, such as shared parental leave can also help more women return to work earlier following the birth or adoption or a child. Countries like Sweden have also taken it a step further by introducing “use-it-or-lose-it” entitlements, which have greatly increased take-up by fathers.

However, government policy alone cannot solve the problem, and must be supported by on-the-ground action by the business community to create change. Creating flexible working opportunities and making them more widely available can enable employees to manage their family commitments around work. This can also open up channels for female career progression where traditionally performance is measured based on inputs such as working hours, rather than outcomes. “Returnship” programmes also help women as well as men transition back into the workplace post-career break (for example, to care for children).

Many studies have already highlighted the benefits from increasing diversity in leadership positions. To reinforce the business case, our analysis has identified substantial economic gains from closing the global gender gap: achieving pay parity across the OECD could increase total female earnings by almost US$2 trillion. The multiplier effects from this additional spending could generate an even larger boost to GDP. With such a large prize on offer, there is a clear incentive for governments and businesses to work together to address the deep-rooted causes of the global gender pay gap.

For details on our analysis and full report, please go to our website: pwc.co.uk/womeninwork

Teow Yong Jing Teow is an economist in the Economics & Policy practice within PwC Strategy& where she specialises in measuring economic impacts and advising clients on the impact of public policy. As a young female professional, she has a close personal interest in ensuring that all professional women are able to achieve their career ambitions and realise their full potential. She is the lead author of the Women in Work Index, PwC’s annual assessment of female economic empowerment across OECD countries, where she applies her impact assessment experience to articulate the gains from improving economic empowerment for women.
Jain Shivangi Jain is an economist in the Economics & Policy practice within PwC Strategy&. She has experience in macroeconomic analysis and in economic impact assessment and public policy development across a range of sectors including transport and health. She has co-authored the latest two annual editions of the PwC Women in Work Index. She believes that while opportunities for women in the workplace have been growing, albeit more rapidly in some countries than in others, there is still a long way to go in achieving gender equality in the workplace. This can be advanced through further research in this area.

Comments

Gender Pay gap should be abolished worldwide, equal pay for equal work.

Good work from you guys. Keep the fire blazing.

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