Equal Pay for Equal Work: How Companies Can Narrow the Gender Wage Gap

In an era where gender equality is increasingly recognised as not just a social imperative but also a key driver of economic success, understanding and addressing the gender wage gap has become crucial for businesses and societies alike. This article – by our senior sustainability consultant Dr Jonathan Boyd – delves into the latest findings from the European Institute for Gender Equality (EIGE), explores the insightful work of Nobel Laureate Claudia Goldin, and discusses both European Union instruments and practical steps companies can take to narrow this gap.

Dr Jonathan Boyd, Senior Sustainability Consultant | VESTA Consulting

Lithuania’s Gender Equality Landscape

According to new figures released by the European Institute for Gender Equality (EIGE), Lithuania is making strides towards gender equality, yet remains below the EU average. In EIGE’s 2023 Gender Equality Index – which indicates the differences in health, work, and empowerment between men and women within and across EU countries – Lithuania secured the 17th spot with a score of 64.1 out of 100, trailing the EU average by 6.1 points.

EIGE’s findings also highlight a noticeable wage gap between Lithuanian men and women: on average, women earn 1316 EUR monthly, compared to men’s 1549 EUR. This means that, on average, Lithuanian women earn 15% less than their male counterparts. Although this disparity is slightly better than the European average of 17.6%, there is clearly still work to be done to achieve wage parity.

Copy right: Marcus Spiske, Unsplash.com

Debunking Misconceptions: Understanding the True Causes of the Gender Pay Gap

It should be noted that there is quite a lot of misunderstanding around what, exactly, is the cause of the gender pay gap. One of the most common suggestions is that it is a result of women’s personal choices or behaviours. One typical example cited is the perception that women tend to be less aggressive during salary negotiations.

However, in truth, these individual choices are a relatively minor factor. Instead, there is a complex web of systemic issues that are the true culprits behind the gender wage gap, and the key to progress lies in discovering and addressing them.

No one has done more to do advance our understanding of these systemic issues than this year’s Nobel Prize in Economics recipient, Claudia Goldin, who has identified three main root causes of the gender pay gap.

Job flexibility

Goldin’s first significant finding is the impact of job flexibility on the gender pay gap. She found that occupations with a high demand for long, inflexible hours tend to have a larger gender wage gap. Meanwhile, jobs that allow for more flexibility in hours and don’t disproportionately reward individuals for working very long hours tend to have a smaller wage gap.

To get a better picture of this, consider the field of corporate law, a profession known for its demanding and inflexible hours. In such a setting, the expectation to work extended hours often and without prior notice can create a significant wage gap between men and women. For instance, in firms where long hours are rewarded with higher pay or rapid promotions, men may more frequently capitalise on these opportunities, while women, often juggling family responsibilities, might opt for fewer hours, leading to lower earnings and slower career progression.

„Women are predominantly the caregivers, with 35% taking on this role compared to just 21% of men. ”

In Lithuania, the social conditions that allow these scenarios to unfold is clearly apparent. Women are predominantly the caregivers, with 35% taking on this role compared to just 21% of men. Furthermore, the burden of domestic duties, including cooking and housework, predominantly falls on women, with 65% shouldering these tasks as opposed to only 29% of men.

Compounding the issue, men in Lithuania generally have greater job flexibility compared to women. While 39% of men are able to take an hour or two off work for personal or family reasons, this flexibility is available to only 29% of women, highlighting a significant disparity in workplace accommodations.

Copy right: Headway, Unsplash.com

Career interruptions

Secondly, Goldin highlights that career interruptions, notably those tied to family commitments, frequently lead to wage penalties for women. In Lithuania, where women tend to take far more extended parental leave than men, this factor becomes a particularly prominent contributor to the gender pay gap.

How exactly do career interruptions affect women’s wages?

  1. Missed Opportunities: When women take extended maternity or parental leaves, they often miss out on chances to grow professionally. In jobs where continuous work experience is key, this means losing ground to peers who haven’t taken breaks.

  2. Bias: There’s a risk that employers might see women as less dedicated or more likely to take time off for family. This can unfairly influence decisions about who gets hired or promoted.

  3. Skills and Connections: Being away from work for a long time can mean skills become a bit rusty, and professional networks might not be as strong. This can make it harder to find good job opportunities or negotiate higher salaries later on.

  4. Challenges in Returning to Work: Coming back to work after a long break can be tough. Women might find themselves in roles that aren’t as challenging or well-paid as before, which can mean earning less over time.

Job segregation

The third main driver of the gender pay gap is, according to Claudia Goldin, the segregation of men and women into different industries and occupations – often with pronounced differences in salaries.

In many cases, industries and occupations that predominantly employ women tend to offer lower salaries compared to those dominated by men. This is not just a matter of individual choice; it often reflects deeper societal norms and educational trends that guide men and women into different career paths.

In Lithuania, this segregation is quite pronounced. Around 27% of women work in sectors like education, human health, and social work, which are typically lower-paying. In contrast, only 6% of men work in these sectors.This segregation leads to a scenario where the average earnings of women are lower than men not necessarily because they are paid less for the same work, but because they are overrepresented in lower-paying sectors and underrepresented in higher-paying ones.

Copy right: Marc-Stress, Unsplash.com

Strategies for Organisations: Reducing the Gender Pay Gap

Knowing all this, what role can organisations play in reducing the gender wage gap?

They can start by changing how jobs are structured and compensated, especially in terms of flexibility. Organisations that adopt practices that prioritise work-life balance, also effectively ensure more equal opportunities for women.

For example, three increasingly widespread workplace policies go a long way in levelling the playing field:

Flexible work hours allows employees to choose their working hours within certain limits, enabling them to better balance their professional and personal responsibilities. This can be particularly beneficial for women, who often bear a larger share of caregiving and household duties.

Remote work options can make a significant difference for employees who have young children, elderly parents, or other caregiving responsibilities, helping to level the playing field for women in the workforce.

Parental leave and caregiver support provides equal leave opportunities for both parents but also support employees who take on caregiving responsibilities for family members. This includes paid leave, flexible return-to-work options, and access to resources for caregivers, contributing to a fairer distribution of caregiving responsibilities and career opportunities between genders.

EU Regulations: Steering Companies Towards Gender Equality

The EU is also becoming active in encouraging companies to make strides towards reducing the gender pay gap.

For example, EU Directive (2023/970) adopted in May 2023 aims to strengthen the application of the equal pay principle between men and women through enhanced pay transparency and enforcement mechanisms. This includes provisions for employers to provide detailed information on pay structures, ensure non-discriminatory pay practices, and report on gender pay gaps, thereby promoting equal pay for equal work in EU member states.

Meanwhile, from 2025, the European Union’s new Corporate Sustainability Reporting Directive (CSRD) will require companies to be more open about their gender wage gaps and the steps they’re taking to close them. Included in what companies will need to report are:

  • The difference in pay between men and women (gender pay gap).

  • This pay difference broken down by job type or region.

  • How the pay difference stacks up between basic salaries and bonuses or other extra payments.

  • How many men and women took time off for family reasons.

  • The average hours of training for men and women.

  • How men and women are doing in training and skills-building.

In effect, these reporting standards will illuminate company practices, driving a stronger emphasis on gender equality within the workplace.

VESTA Consulting can help

Here at VESTA, we understand the causes of gender inequality, and the growing regulatory and reporting landscapes. More than that, VESTA stands ready to assist companies in devising actionable strategies to genuinely close the gender wage gap. By fostering an environment of transparency and proactive workplace policies, we believe businesses can lead the charge in creating a fairer, more inclusive future. Partner with us, and let’s work together to make gender equality not just an aspiration, but a tangible reality in the workplace.