And what do you earn – gender pay gap

Two days ago, on March 17, 2020, was Equal Pay Day. It symbolically marks the gender pay gap, which, according to the Federal Statistical Office, currently stands at 21% in Germany and has not narrowed in years. It was already 21% back in 1995! This is an important reason for us to take a closer look at the causes of the wage gap between men and women today.

The Origins of the Equal Pay Day Campaign

Equal Pay Day originated in the United States. In 1988, the American Business and Professional Women (BPW) launched the “Red Purse Campaign,” creating a symbol to represent the financial shortfall in women’s wallets. BPW Germany took up this idea and launched the “Red Bag” initiative in 2007, which laid the groundwork for the nationwide introduction of Equal Pay Day.

Inequality throughout one’s working life

The fact that women in Germany currently earn 20% less than men on average is an oversimplification, as researchers from the German Institute for Economic Research (DIW) and Freie Universität Berlin point out. Commissioned by the Bertelsmann Foundation, they compared lifetime earnings—and arrived at entirely different figures. According to their findings, women earn only about half as much as men over the course of their entire working lives. In western Germany, the expected lifetime earnings for women average around 830,000 euros, while men earn an average of about 1.5 million euros. In eastern Germany, the figures are estimated at around 660,000 euros for women and just under 1.1 million euros for men. Those who merely track the difference in gross hourly wages cannot capture the inequality over the entire working life. That is why labor market expert Manuela Barisic advocates for the “Gender Lifetime Earnings Gap,” which reflects the gap in lifetime earnings.

Reasons for the Pay Gap

Part of the massive wage gap can be attributed to so-called structural differences. Many women enter (social) professions that are lower-paying. For example, they are still more likely than men to become preschool teachers, geriatric nurses, and hairdressers. Women do not choose these professions out of naivety, but because they are skilled at them and wish to follow their calling. On the other hand, however, common gender stereotypes still influence women’s career choices. So there is a difference between whether girls are pushed into these professions by family and society or whether they choose them of their own free will and after careful consideration. But the bottom line is: Germany urgently needs to elevate the status of social professions and establish a minimum wage that is enough to live on! It is also a fact that women are less likely to hold leadership positions and more likely to work part-time or in mini-jobs. Yet even when these factors are factored out and we look at women and men working the same hours in the same industry and position, there is still an unexplained wage gap of 6% in Germany.

Is raising children a woman’s job?

Raising children and caring for family members always leads to a reduction in lifetime earnings—but almost exclusively for mothers and virtually never for fathers. This is because it is mainly mothers who take a break from the labor market. Furthermore, “part-time” work is the dominant form of employment for women of prime working age, between 30 and 50. Men, on the other hand, mostly worked full-time during this phase. These “gaps in employment” and the resulting barriers to re-entering the workforce result in long-lasting losses in wage and income growth, which carry over into the retirement phase.

All educational levels are affected

The underpayment of women is a problem across all educational levels and occupational groups. Studies also show that wages decline when more women enter fields that were previously male-dominated. Computer science used to be a field dominated by women and was comparatively low-paying; now it has become a very well-paid male-dominated field. If more and more women were to enter the IT industry again, wages would decline there as well. The profession of elementary school teacher used to be a typical and very well-paid male profession, allowing a man to provide very well for his family as the sole breadwinner. Now, however, the tide has turned again. Elementary school teachers today are primarily women, which in turn has led to falling wages in the teaching profession. A disturbing development!

Lack of transparency

Germany performs significantly worse than the rest of Europe, which has been taking action against discrimination for longer and with greater determination. Transparency is a key issue. In salary negotiations, women can only ask for a raise if they know what their male colleagues earn. The Pay Transparency Act does nothing to change this. The law was enacted in 2017 and is intended to enforce the principle of equal pay for women and men for the same or equivalent work. Employees at companies with more than 200 employees can therefore request information about the salaries of their male and female colleagues in comparable positions, as well as how their own salary is calculated. However, very few do so. On the one hand, because the law is simply not very well known, and on the other, because German law does not provide for sanctions against companies that violate the provisions. Furthermore, most companies are too small and thus exempt from the obligation to provide information, or there are not enough men in comparable jobs. Furthermore, women would always have to take the initiative themselves and are quickly labeled as “complainers.” Iceland, on the other hand, requires companies to prove that they pay men and women equally or that there are legitimate reasons for pay differences. Violations are subject to fines.

You don’t talk about money?

But we really should talk about money! More than 40% of Germans don’t know how much their partner earns. Henrike von Platen, patron of the “Equal Pay Day” campaign, advises: “Women and men urgently need to start talking openly about their salaries, both at the office and among friends. And not just in women’s or men’s cliques, but with one another! This can only happen if every individual takes the first step.” There are studies that also show that men and women ask for a raise with equal frequency—yet women are less likely to receive one. And yet, women don’t negotiate any worse than men. Strangely enough, the injustice starts with the allowance given to girls and boys: boys tend to get more allowance! If only boys live in the household, they receive more allowance on average than girls of the same age. Only in families where both girls and boys live is it fair. Here, both genders receive the same amount of allowance.

We still have a long way to go before we achieve pay equity. What is needed is both a cultural shift within companies and legal requirements. Federal Minister for Women Franziska Giffey (SPD) says: “Without them, we won’t make any progress on equal opportunities and equality, and if we do, it will be at a snail’s pace. But women deserve equality right here and now.” That’s right!

References

Werner, Katrin. 2020. What They Earn. In: Süddeutsche Zeitung No. 62, March 14–15, 2020.

Heidenreich, Ulrike. 2020. Interview with Henrike von Platen. In: Süddeutsche Zeitung, No. 56, March 7–8, 2020.