If Iceland’s So Gender Equal, Then Why Has It Such A Large Gender Pay Gap?

,Iceland flag

Tim Worstall, CONTRIBUTOR | Forbes.com | April 5, 2017

Here is an interesting little conundrum about the gender pay gap. Iceland has just announced that companies will have to, as a legal obligation, explain why there is a gender pay gap in their pay structures. Well, OK, perhaps the gender pay gap is a result of some discrimination by employers and this requirement will allow us all to see that. However, that might not really be why there is a pay gap. For example, it’s easy enough to prove that mothers earn less than non-mothers, fathers earn more than non-fathers and pretty much all of the observable pay gap, once we’ve corrected for differences in part time work and so on, then cover the gap with those two points alone. Perhaps the discrimination is being done by parents themselves, changing how they live their lives after the arrival of the little ones? Wouldn’t be uncommon in a mammalian and thus viviparous species for this to be so.

Certainly my own belief is that the second explanation is at the very least predominant. But let’s put that aside, what actually is this cause, and consider instead what we’re told is the cause currently. The direct discrimination against women story is rather losing some of its power these days as people keep on pointing out that if women really do earn 20, or 30%, less than men for the same work for the same job then why aren’t employers specifically and only hiring the cheaper women? We know that this used to happen, this very direct discrimination, and we know that at least one person made a fortune out of it, Dame Stephanie Shirley. In the 1960s she specifically and deliberately went out to hire women programmers, especially those with children. Her business thrived, including doing the black box for Concorde.

We really do have proof of past direct discrimination about pay and one of those proofs is that someone was able to exploit it. The absence of such exploitation can therefore be, in part at least as the Nobel Laureate Gary Becker would have insisted, be taken as showing that there’s not such discrimination now.

So the story has moved on. To less visible forms of discrimination perhaps. Things like maternity leave, the ability to come back into the workforce after it, paid and non-familial child care, you name it there’s one or another reason for it. But this leads us to our conundrum. Iceland has absolutely all of those things which we are told should reduce the gender pay gap. In fact, it’s number 1 in the world for having all those things:

Iceland ranks first on the World Economic Forum’s 2015 global gender gap index, followed by fellow Nordic nations Norway, Finland and Sweden.

But the new law aims to close the wage gap between men and women in the island nation of more than 323,000 people, Viglundsson said.

But if we’ve got all that greater gender equality, number 1 even, then how can we be having this pay gap? And it’s a large pay gap too:

Thirty percent also happens to be the gap in average annual income for men and women in Iceland; for every dollar a man makes, a woman makes 72 cents (other ways of measuring the gender wage gap in Iceland yield smaller percentages, and the gap narrows when considering men and women who do the same sort of work).

In Iceland, for every dollar a man makes,

a woman makes 72 cents.

That’s the entirely raw pay gap there, equivalent to the U.S. 77 cents one. And there are indeed other methods of measuring the pay gap, the OECD, the EU. But the thing to note is that as long as we are consistent in our method Iceland, the number 1 country in the world for gender equity, has a very middling gender pay gap. It is, for example, distinctly (like well over twice) that for Turkey, which whatever the other pleasures of the place we’ll not be marking as high up in any league tables of gender equity.

Which is our conundrum, is it not? That all of the things which are currently lauded as contributing to gender equity, all those lovely things which the Nordic social democracies do so well, seem not to be closing that gender pay gap very much. If at all actually, that for Norway very low, those for Sweden and Iceland a little below the U.S., that for Finland above that for the U.S. And yet those four Nordics are the first four in our ranking of what is currently believed to be gender equality.

Hmm, maybe this gender pay gap is a little more complex than currently presented then? Even, that enacting all the currently fashionable policies, as those Nordics have done, won’t close it? As those policies haven’t there?


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