How to close the gender wage gap

Iceland owes its progress in narrowing the gender wage gap to a decades-long equal-rights movement and public policies.

Last year, a 24-hour women’s strike was organised to protest against Iceland’s gender pay gap and gender-based violence. Thousands gathered in central Reykjavík to demonstrate their solidarity.

For the 14th year running, Iceland (91.2 per cent) took top position in the Global Gender Gap Report 2023. It continues to be the only country to have closed more than 90 per cent of its gender gap. The Economist’s glass-ceiling index rates Iceland as the best place in the world for women in the workforce. Nevertheless, Icelanders firmly believe that any wage gap is too large.

Changed expectations

In her Nobel Prize-winning research, the Harvard economist Claudia Goldin offers crucial insight into the factors that shape women’s labour-market outcomes. For starters, she shows that changing expectations played a major role in narrowing the wage gap with men in the United States in the 20th century. Between 1967 and 1989, the share of young women expecting to be employed at age 35 skyrocketed from 33 per cent to 80 per cent.

Birth control helped considerably. By making it possible to delay marriage and childrearing, artificial contraception enabled women to devote themselves more fully to university education, envisage an independent future and formulate their self-image before starting a family. As Goldin has observed, if a young woman has more control over when and whether she has a child, and if she expects to have access to a variety of career opportunities, she will invest more in her own future.

But progress eventually stalled: in 2022, women in the US were earning an average of 82 cents for each dollar earned by men, and the gender wage gap among Americans with advanced degrees has remained broadly unchanged since 2005. In her 2021 book, Career and Family: Women’s Century-Long Journey toward Equity, Goldin offers an explanation.

Long-term data show that, during the first years of their careers, male and female university graduates in the US earn strikingly similar incomes and whatever gap exists can be attributed mostly to differences in their chosen fields of study and employment. Within a given field, women and men begin at virtually the same base pay and have very similar opportunities. It is only later in life—around ten years after entering the workforce—that a significant pay gap emerges, and women with at least two children do notably worse than their counterparts with one child or none. A major reason why, Goldin argues, is that progressing into higher-paying roles often requires significant overtime work and uncertainty—a difficult proposition for mothers of multiple children.

Blazing the trail

Fortunately, Iceland’s experience can offer important lessons on how to narrow the gender-based gap. Last year’s strike was not Iceland’s first by women. In 1975, some 90 per cent of Icelandic women participated in a similar strike—which was considered an extremely radical move at the time—to demonstrate just how vital they were to the country’s functioning.

In the half-century since, Iceland has taken great strides toward equality and we younger women can thank our mothers and grandmothers for blazing the trail. In fact, it was Iceland’s decades-long equal-rights movement that impelled the government to adopt policy measures that vastly improved women’s career prospects.

The first such measure was substantial investment in government-subsidised preschool education. Most families in Iceland can count on being able to enrol their child in a quality preschool by the age of two, at an out-of-pocket cost of some €200 per month.

Secondly, Iceland instituted 12 months of paid childbirth leave (amounting to 80 per cent of the average total wage), which is shared equally between the child’s parents. This policy has been vital to removing the barrier to hiring young women, as it ensures that new fathers will be outside the labour market for as long as new mothers. Representing the genders as equal also ensures that strong role models are a part of the household.

Thirdly, legislation was adopted to require companies listed on the Icelandic stock exchange (with at least 50 employees) to ensure that their boards of directors include at least 40 per cent women. Since the quota was introduced in 2010, the share of women on company boards has increased markedly.

Enduring inequalities

Nonetheless, Iceland has still not fully eliminated the gender pay gap. In 2019, the adjusted gap was 4.3 per cent. In other words, if men and women held the same jobs in the same sectors, women would be paid, on average, 4.3 per cent less than men, simply because of their gender. Moreover, whereas being married or having a partner has a positive impact on men’s pay in Iceland, it does not affect women’s pay. The number of children under the age of two in the household has no statistically significant impact on women’s pay and has only a marginal (downward) effect on men’s. Women are also much more likely to take the ‘third shift’ at home, which includes cooking and cleaning, and they experience far more gender-based violence. It is these enduring inequities that prompted Icelandic women to strike again last year.

Gender wage gap development in Iceland

This is a cause everyone should get behind. As the 19th-century philosopher John Stuart Mill pointed out, the subordination of women is not only ‘wrong in itself’; it is also ‘one of the chief hindrances to human improvement’. Denying women the same opportunities as men not only impedes the development of roughly half the population but also denies society the benefit of their talents. That is why we cannot rest until true gender parity has been achieved. We must strive for genuine gender equality and, once attained, we must be vigilant in maintaining it.

Republication forbidden—copyright Project Syndicate 2024, ‘How to close the gender wage gap’