Economics Justice

Germany Is About To End Gender Wage Discrimination

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First a minimum wage, then a mandatory quota for women on corporate boards—and this just in the first few months of 2015. Germany’s grand-coalition government, which includes the centre-right Christian Democratic Union (CDU) and Christian Social Union (CSU) as well as the centre-left Social Democrats (SPD), has been busily reforming the labour market. Now a new bill would promote wage equality between men and women.

Germany’s cabinet is certainly replete with powerful women. These include the chancellor, Angela Merkel, and her defence minister, Ursula von der Leyen, often touted as a possible successor to lead the CDU. On the political left are Andrea Nahles, the labour minister, and Manuela Schwesig, the family and womens’ affairs minister. Ms Schwesig was a major backer of the corporate board quota for women, and it is she who is the driving force behind the wage-equality bill.

Supporters of such bills say that although women may enjoy power in German politics, private workplaces are a different matter. Women earn 22% less than men do, one of the worst rates in the European Union (the average is 16%). Sigmar Gabriel, the SPD leader and economy minister, calls the gap “drastic” and “a shame upon Germany”. German boardrooms and executive suites look like old-boys’ clubs. Ms Schwesig’s new bill would help women push for wage equality by providing anonymised data to employees about what different classes of workers earn, so that individuals could see whether they are being paid below the average in their groups.

The gender wage differential is often explained as a result of women taking maternity leave, and their tendency to choose family-friendly, flexible jobs. But these factors cannot fully explain the gap. A 2006 survey found a 22% gap in hourly, not just total, earnings in Germany, the sixth-worst result in the EU. And the difference persists well beyond the years when women might be taking care of young children: it is actually greater among older, better-qualified workers. Taking maternity leave early in one’s career could have long-lasting effects, but clearly old-fashioned attitudes about who should be promoted also play a role.

Will Ms Schwesig’s bill change anything on the ground? A 2006 EU directive already mandates equal pay for work of equal value, and all member states have some form of anti-discrimination law on the books. The trouble lies in proving that different workers’ work is of equal value. Relatively few cases have been brought before labour courts, and even fewer have been won. (A pair of cases were prosecuted under France’s stricter equal-pay law in 2013.) The bill to be considered in Germany is meant more as a nudge than a heavy hand, to encourage women to be tougher negotiators for higher pay.

Employers grumble that the new law would mean yet another bureaucratic burden, on top of the other laws already introduced under the grand coalition. Half of all workers must be paid less than the median, by definition. Making average wages known could encourage all kinds of workers to seek pay raises, whether on gender or other grounds, potentially starting a wage spiral.

Yet the arguments against providing workers with information about how much their peers are paid seem a bit underwhelming. Businesses ought to be able to explain to employees why they are being paid less than average, however uncomfortable such conversations might be. If they cannot, perhaps they are discriminating. Labour markets are markets, and markets are more efficient when everyone has access to complete information about prices, or in this case wages. For that matter, many economists argue that a bit of upward wage pressure in Germany would not be a bad thing.

In any case, action on the pay gap was agreed by the parties when they signed their coalition deal in 2013. The conservative and business wings of Ms Merkel’s CDU are disaffected, but sidelined. Voters want the kind of things the SPD has been promising. Gender equality in pay is morally compelling, but more important at the moment, it seems to be politically popular.

Learn more here http://register.consilium.europa.eu/doc/srv?l=EN&f=ST%2016516%202010%20ADD%202

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“Germany Is About To End Gender Wage Discrimination”