The effects of pay transparency on the

gender pay gap

Ask an Analyst

Do reporting schemes work?

International Gender Reporting Schemes

Since 2010, countries such as Australia, the United States of America, Austria, Belgium and the United
Kingdom have introduced reporting schemes. However, it is early days: there is yet to be an international
consensus on how effective these measures are. The Australian Workplace Gender Equality Agency has
published a comprehensive summary of international gender reporting schemes, allowing for some early
judgements on the success of the legislation. Read here.

Analysis

Numbers dont tell the whole story (Apolitical reporting)

This article explains some of the risks posed by wage gap reporting schemes. For example, one worry is that
women will be deterred from entering sectors where they are disadvantaged - only reinforcing gender
segregation. Additionally, the creation of league tables allows companies to game the system. Companies
can outsource typically-female junior roles, excluding low-earning women from gap calculations and
maintaining the gap while appearing to close it. Another concern is that the schemes do not go far enough
into protecting minorities and those with disabilities. These risks are yet to enter mainstream debate over
reporting schemes, but if addressed at the policymaking stage could help to realistically close the gap. Read
more.

Academic Report: Equilibrium effects of pay transparency

This paper, written by two US academics at Harvard and Stanford, examines the more intricate effects of
pay transparency, and concludes that the method of achieving transparency is vitally important. When pay
transparency is achieved through permissive contexts - e.g. when information about salaries travels through
word of mouth - men are more likely to benefit than men than women. Two factors explain this. One is that
men are more likely to speak openly, and communicate with, other men about their salaries - and so will have
more information to negotiate with. Secondly, men are more likely to have high-value networks, which will
increase their chance of receiving bonuses and promotions. However, if the transparency is enforced
through full communication - e.g. published results in a table, or company records, this effect is muted and
the gender pay gap is likely to become smaller. You can find the methods of analysis and the full report here.

Financial Times: A Flawed Comparison

The Lex team at the Financial Times caution that gender wage gap numbers will offer a flawed comparison.
Instead, controlled gap data - which accounts for experience and job title - would be better. They cite
occupational segregation and the low number of men who take paternal leave as confounding factors.
Without more information, it will be difficult to guess the actual reason behind reported wage gap figures -
such as discrimination, unconscious bias, childcare policies, company structure or something else. The
article also contains interesting data from the first UK companies to report, and you can find it here.

Blog: Will gender reporting make any difference?

Dr. Duncan Brown of the Institute Of Employment Studies examines the initial literature surrounding
reporting schemes, as well as other methods of closing the pay gap such as child support and recruitment
strategies. Countries with higher pay transparency tend to have lower pay gaps. For example in Sweden,
businesses larger than 25 employees must create an equality action plan every three years, which has
contributed to the narrowing of the gender pay gap to only 3 per cent for women working in male-
dominated occupations. However, there are deep seated and inter-related social, cultural and educational
contributors to these gaps. While reporting schemes help, other efforts must be made to attack the
problem from all sides. Read on for some examples. Find Dr. Browns blog here.

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Reporting Schemes: Case Studies

Iceland passes worlds first law forcing companies to pay equally or face fines (Apolitical)
This year, Iceland became the first country to force employers to prove they pay equally or face fines. By
2021, all companies and government agencies with 25 employees or more will have to undergo audits and
receive certification to show that they do not discriminate by gender in setting salaries. Read the whole
story here.

UK forces 9,000 firms to publish salary data in bid to close wage gap (Apolitical)
The United Kingdom has mandated that all companies with 250 employees or more must publicly disclose
their gender pay gaps by April 2018. More than 9,000 companies, which together employ some 15 million
people, will have to measure and report how they pay their male and female employees. Read more.

What Now?

How to close the gender pay gap in five - difficult - steps

Many experts agree that while wage gap reporting is most likely to have a positive effect on closing the
gender pay gap, it is not sufficient on its own. There are many other factors that must be considered in order
for the gender pay gap to close, such as social pressures and availability of childcare. Here is a diagnosis of
the problem, and five - difficult - ways to close the gap.

Boston is training women to demand higher salaries (Apolitical)

Strategy: Training courses
An example of another way to tackle the gap: free salary negotiation workshops for all female residents.
These workshops involve negotiation strategy and style tips, role-playing, salary self-assessments, and
information about the gender pay gap. Over 5,000 women have taken part, and close to half the participants
either negotiated higher compensation for their existing job or achieved a competitive starting salary for a
new job.Read more.

USA: Salary privacy bills

Strategy: Prohibiting access to salary history
Employers asking for candidates salary history can perpetuate the pay gap for women and people of colour.
California, Massachusetts, Oregon, Delaware and Puerto Rico have all recently introduced legislation that
will protect candidates salary history. Read about recent wage gap legislation in the United States here.

Experts of Apolitical
To get in touch, log on to the Apolitical network and connect!

Janin Bredehoeft
Research and Education Manager, Workplace Gender and Equality Agency, Australia

Rsa Gurn Erlingsdttir

Senior Advisor, Department of Welfare, Iceland

Megan Costello
Executive Director, Boston Mayor's Office of Women's Advancement, United States

If you have any questions or suggestions for us, feel free to reach out to our community manager, Sean Long on the
platform or by email at sean.long@apolitical.co.