Economic Policy ZEIT ONLINE op-ed column

Germany’s equal pay laws stuck in the Stone Age

This text was first published in German in  ZEIT ONLINE on January 13,  as part of the op-ed column “Fratzschers Verteilungsfragen“.

Women themselves are to blame for the fact that they earn less, and any laws governing equal pay would pose an unnecessary economic burden – right? Wrong.

Over the past few months, a contentious debate in Germany has been flaring up regarding the new “wage equality law” designed to help eliminate gender-based discrimination. Critics of the law argue that it is damaging to the German economy – and that no discrimination against women actually exists. ••

Both arguments are wrong and easily disproved by data. When it comes to gender equality, Germany is stuck in the Stone Age – especially in an international comparison with similar countries, such as those in Scandinavia. Germans finally need to accept that gender equality is not just about helping women, but rather about lifting up society on the whole, and that includes men. When women lose out, so does the economy, forfeiting massive potential for growth and prosperity in the process.

Germany has one of the biggest wage gaps between men and women in all of Europe. Women in Germany earn 22 percent less in average hourly wages than do men: that is, for every euro a man earns, a woman earns only 78 cents.

The EU’s average gender pay gap is five percentage points lower than it is in Germany (and in all of Europe, only the Czech Republic and Estonia have wider gender pay gaps than Germany does). As well, other European countries have experienced significant closures in their gender pay gaps, while Germany has not evidenced any noticeable reduction.

Critics of the wage equality law argue that the gender pay gap is less due to discrimination than it is to women’s own choices, such as the decision to work part-time, reluctance to take on managerial positions, and a tendency to work in poorly paid professions.

But do these factors really reflect women’s personal choices? It’s true that women are more likely to work part-time. Surveys show, however, that these women would like to work an average of 10 hours more per week but are unable to do so due to the difficulty of reconciling work and family and the lack of adequate care facilities for their children.

The fact that women are more likely to work on a part-time basis is therefore not necessarily due to their own choices, but rather the result of a still-inadequate education and family policy – even taking into account the fact that the past three federal governments have made great efforts in their family policy designs. ••

Women don’t choose to be paid less

It is likewise the case that women are much more likely to work in lower-paid professions such as those of office workers or retailers. But is this really up to women? A number of scientific studies show that wages are dropping or experiencing weaker growth in professions where the proportion of women is increasing. Women are not choosing to be paid less; rather, the jobs they choose have started paying less overall.

The third criticism and supposed justification for Germany’s gender pay gap – that women are less likely to choose to work in leadership positions than are men – is especially mind-boggling. Many studies show that women must systematically overcome greater obstacles than men do to land in leadership positions, even when they possess the same qualifications and motivation.

When it comes to women in leadership positions, it is clear that Germany is far behind in an international comparison and needs to catch up to other developed countries. DIW’s Women Executives Barometer indicates that the women’s quota for supervisory boards has yielded positive results thus far. However, Germany is still lagging when it comes to the share of women on executive boards.

€2,900 is no small difference

Critics of the wage equality law argue that when you take into account the higher proportion of women in part-time and low-paid professions as well as the low share female executives, Germany’s gender pay gap drops from 21 percent to seven percent – and that’s a significant difference.

But can we really ignore a seven-percent pay gap? In Germany, the average annual income from a full-time job is €41,000. A gender pay gap of seven percent thus means that a woman earns €2,900 less per year, on average. Can anyone really claim that €2,900 is insignificant?

The second critical argument against the wage justice law is that a wage convergence between men and women is economically harmful and would have a massive impact on businesses through both the administrative burden of implementing the law and the financial costs of raising the wages for women. This argument is both false and cynical.

The German economy’s greatest untapped potential

Women who are paid better and more fairly for their work not only have higher incomes and more spending power (which supports the economy), but they also have better incentives to join the labor market if they feel it is financially worthwhile and that they will be treated fairly.

The lower labor participation among women is Germany’s greatest untapped economic potential. Although the participation rates of women in West Germany have risen to those of women in East Germany in the time since reunification, many women still wish they had a job, worked more hours, or were able to take on more responsibilities in their current positions.

And yet, on average, women complete higher levels of education and training than do men. More women than men graduate from high school and successfully earn higher degrees. They do so in a shorter amount of time, with better grades, and they drop out less frequently. When women enter the labor market, however, the gap between men and women in Germany clearly widens, both in terms of wages and the amount of responsibility they take on in their professions.

All of this suggests how huge the economic potential is when government, society, and business remove the professional barriers women face in Germany. The discussion about the wage equality law unfortunately shows how far we are from really understanding that gender equality will benefit us all.

 

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