19 February 2019

In the US, Government-mandated reporting of gender pay discrepancies has been a subject of much debate in the last 5-10 years. Those arguing for legislation to require such reporting contend that it will help to address the persistent gender wage gap. Opponents insist that not only is that unlikely; it will also increase companies’ administrative burden and decrease profits. Until recently there has been no strong evidence to support either side.

However, a recent study by the Harvard Business Review provides the first empirical evidence of the impact of mandatory wage transparency. That study’s results suggest that disclosing disparities in gender pay does in fact narrow the gender wage gap. The focus of the study is Denmark, where legislation was passed in 2006 requiring companies with more than 35 employees to report on gender pay gaps. The study’s results showed that from 2003 to 2008 the gender pay gap at mandatory reporting firms shrank 7%, from 18.9% to 17.5%.

The UK is approaching its second public reporting deadline (late March/early April) which will see over ten thousand companies share their gender pay gap statistics publicly. It’s not expected that those reporting will show a dramatic reduction in gender pay gaps this year (last years mean pay gap was 14.8%).  But publicly disclosing figures has forced business leaders to understand what factors are causing pay gaps, such as male/female representation at senior levels,  the impact of family and caring responsibilities, and occupational segregation. Many leading employers have formulated action plans and set targets to address these issues which will undoubtedly take time to have impact.  But, without the legislation forcing the issue it is unlikely they would have made it as far up the executive agenda.

What’s interesting is that many of the UK companies required to report are global companies, and their CEO’s are asking why these challenges should not be addressed on a global basis. In fact more than 550 CEO's of the world’s leading companies have joined the pledge of the The CEO Action for Diversity & Inclusion™ in order to use their collective voices to advance diversity and inclusion in the workplace.   So it seems disclosing pay parity does drive action and not only in those jurisdictions mandating it!  

Posted by Ruth Thomas

Industry Principal, Curo.

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