Forcing companies to disclose gender-segregated wage statistics has shrunk the gender pay gap by 7% in Denmark, say economists from business school INSEAD and universities in Denmark and the US.
They found that men’s pay premium had shrunk to 17.6% from 18.9% over two years in approximately 1,000 Danish firms governed by 2006 legislation.
Wages across genders have increased over time, but men’s wages increased by less and women’s wages increased by more.
There was a however one negative consequence of the pay transparency legislation: a 2.5% decline in productivity.
But companies gained a 2.8% reduction in total wage costs, which could be seen as balancing out the loss of productivity.
Legislation to reduce the gender pay gap
A man earns $100 to a woman’s $78.5 in Germany, $79 in the UK and $83.8 average across the EU, according to Eurostat.
Now there is legislation requiring employers to provide pay transparency, by publishing gender-based wage statistics in an effort to promote equal pay.
In the UK, 10,000 employers with more than 250 employees have to publish gender-based wage statistics.
In Germany, employees in firms with more than 200 staff have the right to know the average salary of all employees in similar positions in the company.
In the US, President Donald Trump stopped an executive order that required large companies to report how much employees were paid by gender and race.
Pay transparency stops men negotiating higher salaries
INSEAD and the University of Copenhagen professor of economics Morten Bennedsen said: “A 7% reduction in the pay-gap may not sound impressive, but given the fact that only a limited number of firms in Denmark are governed by this legislation the effect is significant.”
He added: “Disclosure of wage statistics makes the gap between men´s and women´s pay very transparent to the outside world, and it seems that this makes firm managers able to halt exorbitant pay claims from male employees.”
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Columbia Business School Professor of Finance and Economics and chairman at the Finance Division Daniel Wolfenzon said: “What surprised us the most was the way in which this wage gap closed: women’s wages did not increase at a faster rate in treatment firms as we were expecting.
“Instead, we find that men’s wages in treatment firms grew slower relative to men’s wages in control firms.
“As a result, the total wage bill grew slower in firms that were required to report wage segregated statistics.”
Cornell University Associate Professor of Finance Margarita Tsoutsoura said: “We can´t tell for sure, why we see this decline in firm productivity.
“It could be that information on gender pay gaps simply lowers job satisfaction for female employees who find out, that they are paid below their reference group, or because male employees are dissatisfied with not getting the wage increases, they ask for.”
Executives with daughters have a lower gender pay gap at work
According to Glassdoor, men on average are more comfortable asking for higher salaries and bonuses and are more successful at negotiating wages.
But the group of researchers from INSEAD and Danish and American universities found a reduction in the gender pay gap was bigger in firms where company executives had more daughters.
They also saw more women promoted from lower positions in the hierarchy into senior roles after implementation of the law.