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

03 April 2017

The fifth annual update of the PwC Women in Work Index shows a continued positive trend towards greater female economic empowerment across the OECD, but is this the case across the board?

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 in our Index. This was driven by a falling female unemployment rate and an increasing share of women in full-time jobs. Meanwhile Norway has retained its position amongst the top 3, but an increase in female unemployment has meant that its absolute Index performance has slipped.

The theme of this year’s International Women’s Day is #BeBoldForChange to achieve gender parity. And one of the key areas for change 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. But 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, although some countries could achieve parity much earlier.

Figure: Time to close the gender pay gap

Women in Work infographic 1 - 2017

Source: PwC analysis using OECD and Eurostat data

So 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 gender pay gap. A study by Glassdoor has shown that, once the unadjusted pay gap (ranging 10%-20% for a sample of high income countries) is controlled for occupation, education, experience, location and company, the resulting adjusted pay gap falls to less than 10%.[1] This 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. Indeed, many studies[2] have already highlighted the benefits from increasing diversity in leadership positions.

Policies that directly address these patterns can therefore have a substantial impact on the gender pay gap and government has an important enabling role. For example, increasing the availability of affordable childcare can help narrow the gap by enabling greater female participation in the workforce. Our research shows that higher performing countries in our Index 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 of 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 action in the business community. 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).

To reinforce the business case for pay equality, our analysis has identified substantial economic gains from closing the 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 gender pay gap.

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

 

[1] Glassdoor (2016) “Demystifying the gender pay gap: evidence from Glassdoor salary data”.

[2] See for example: Harvard Business Review (2012) “Why boards need more women”.

Yong Jing Teow and Shivangi Jain   
  Tel: 020 7804 4257 or 020 7213 4596

 

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