IZA World of Labor

Equal pay legislation and the gender wage gap

Despite major efforts at equal pay legislation, gender pay inequality still exists in the developed economies. How can this be put right?

State University of New York at Binghamton, USA, and IZA, Germany

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Elevator pitch

Despite equal pay legislation dating back 50 years, American women still earn 22% less than their male counterparts. In the UK, with its Equal Pay Act of 1970, and France, which legislated in 1972, the gap is 21% and 17% respectively, and in Australia it remains around 17%. Interestingly, the gender pay gap is relatively small for the young but increases as men and women grow older. Similarly, it is large when comparing married men and women, but smaller for singles. Just what can explain these wage patterns? And what can governments do to speed up wage convergence to close the gender pay gap? Clearly, the gender pay gap continues to be an important policy issue.

Gender pay gap and childcare
                        enrollment

Key findings

Pros

Policies promoting greater day care utilization reduce the male–female wage gap.

Policies aimed at increasing women’s lifetime work can reduce the gender 
wage gap.

The gender wage gap is smallest (2.8%) between single men and single women.

The gender wage gap is decreasing in most countries.

Cons

Audit studies designed to “catch” employers in the act find little evidence of gender discrimination.

Impact studies of the effects of antidiscrimination policies find little effect on reducing the gender wage gap.

The gender wage gap is largest (greater than 25%) between married men and married women with children.

Equal pay legislation may well be missing its target.

Author's main message

Equal pay policies based on wage outcomes have had little effect on the gender wage gap. Policies women’s work, such as marriage taxes, increase the gender wage gap. Strong evidence supports the idea that accumulated human capital narrows the gender wage gap. The gender gap is already decreasing in most countries because changing demographics led to increased women's lifetime labor force participation. Nevertheless, effective policies could speed up wage convergence. However, economic policies that promote even greater lifetime work for women can successfully reduce the gender wage gap further.

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