5. Combating gender-based discrimination and enhancing women’s bargaining power within firms in Estonia
This chapter explores options to enhance women’s bargaining power within firms. After setting out the wage bargaining context, the chapter investigates ways to amend the Gender Equality Act to ensure compliance with the future EU Directive on Pay Transparency. The chapter also discusses approaches to secure employers’ observance of their obligation to report gender gaps as specified by law. It ends by looking at ways and means of equipping employers with the knowledge and skills to improve the situation of female job candidates and employees.
Traditional gender norms contribute to root the belief within firms that female employees, irrespective of their prevailing family obligations, cannot perform as well as male employees, not to mention at managerial- and executive-level positions. These norms also fuel many women’s lower assessment of their self-worth in the labour market, as reflected by their tendency to ask for lower salaries than comparable men. It is possible to mitigate the negative effect of traditional gender norms on the gender pay gap within firms if pay structures along a specific job classification system are negotiated through collective bargaining rather than at an individual level. However, this approach is hardly an option in Estonia that shows the lowest trade union density OECD-wide.
In a context where most wages in Estonia are subject to individual pay negotiations, implementation of pay transparency policies, i.e. policies that attempt to share pay information, appear as a promising way to counter gender-based discrimination and improve women’s bargaining power within firms. Yet, there is a widespread misconception among employers and employees in Estonia that pay transparency policies are not legal. In particular, although these policies rely on aggregate, not individual data, many employers and employees view them as conflicting with the obligation stipulated in the Employment Contracts Act to keep individual wages confidential (Sepper, 2021[1]; Aavik et al., 2020[2]).
This chapter explores options to increase pay transparency, notably by enshrining this policy in law as it was intended in the Gender Equality Act and Other Acts Amendment Act initiated in 2016 that ultimately dropped out of the legislative proceedings. After providing background on wage bargaining in Estonia, the chapter investigates ways to amend the Gender Equality Act to ensure compliance with the future EU Directive on Pay Transparency. This is followed by a discussion of approaches to secure employers’ observance of their obligation to report gender gaps as specified by law, and to equip them with the knowledge and skills to improve the situation of female job candidates and employees.
Renewal of the Gender Equality Act and Other Acts Amendment Act initiated in 2016 (but which never passed) could bring two major changes to ensure greater gender equality in the labour market.
First, to provide a complete picture of gender differences in the workplace, this amendment could mandate the reporting by employers of both the gender composition of the workforce and pay differentials between men and women.
This approach should induce employers to take action not only to close the gender pay gap by job category, but also help reduce horizontal and vertical segregation.
Importantly, reporting the gender composition on top of the gender pay gap may allow countering a potential perverse effect of pay transparency policies when they only focus on pay reporting. The latter policies may indeed create incentives for employers to refrain from hiring women in job categories with the largest gender pay gap: due to justified confidentiality and representativeness concerns, employers are typically not required to report gender pay gaps in job categories where the number of employees of either gender falls below a given threshold.
Of course, enshrining in the law the obligation for employers to report gender pay gap (on top of gender composition) will necessitate to also clarify what “pay” means, noting that a legal definition of pay is thus far absent from the Employment Contracts Act. Finally, mandating pay transparency policies also involves defining the share of the labour force that these policies cover. To ensure a sizeable effect on the overall gender wage gap, it seems appropriate to seek to comply with one of the key pillars of the 2014 EU Recommendation on Pay Transparency, i.e. making pay reporting compulsory for private and public companies with at least 50 employees. Still, a significant number of OECD countries (nearly one-fifth) rely on lower thresholds that vary between 10 and 35 employees.
Second, this amendment could operationalise the concept of “equal pay for work of equal value”.
The law should not limit itself to defining the concept of “equal pay for work of equal value”. The legal framework should also mandate that employers subject to pay transparency policies report gender pay gaps along gender-neutral job classification systems devised based on objective work-related characteristics, so that job categories used for reporting correspond to categories of work of equal value (as already the case in Belgium, Finland, France, Iceland, Portugal and Spain).
The design of such job classification systems should be validated and verified by a government body to avoid conscious and/or unconscious gender biases. This objective was already part of the draft of the Gender Equality Act and Other Acts Amendment Act that envisaged the creation of a Pay Competence Centre at the Labour Inspectorate in charge of monitoring equal pay reporting and implementation.
On top of sector- or firm-specific gender-neutral job classifications, the establishment by the Pay Competence Centre of a gender equal job valuation common to all sectors and firms should be encouraged. Indeed, mandating equal pay reporting including along a job classification which is the same for all employers would improve the comparability of their performance in terms of equal pay and hence facilitate peer pressure and emulation. This provision may be especially important in Estonia where collective agreements are scarce and thus where the emergence of sector- or firm-specific gender-neutral job classification may be difficult.
Effectiveness of pay transparency policies strongly depends on employers’ compliance with their obligation to report gender gaps as specified by law, which means that enforcement mechanisms to avoid failure to submit said information should be implemented.
Most of the 18 OECD countries that mandate some form of systematic, regular reporting on gender gaps in private sector firms do so by imposing financial penalties to non-compliers. Yet, this mechanism does not seem to lead to high compliance rates, potentially due to low fine amounts and/or to a lack of monitoring of pay transparency policies by government agencies (and thus low rates of fines issued).
Following the UK example, obliging employers to publish their gender gap statistics on media available to both employees and the general public appears as a more promising enforcement mechanism than reliance on financial penalties. Such an approach also has the advantage of creating awareness around pay transparency policies and their objective.
To eliminate the administrative burden associated to pay reporting, one option could be to task a state public body with the responsibility of computing and publishing firm-level gender gaps based on administrative data. This novel initiative in international perspective (only Lithuania has adopted such approach thus far) would be relatively easy to implement in Estonia, based on the palgad.stat app based on the “payroll app” already managed by Statistics Estonia to report occupation-based gender composition and pay gaps at both the national and local (county) level. Accordingly, Estonia is developing a Pay Mirror app that, by 2024, will allow employers to automatically generate information on the gender pay gaps that prevail within their organisation, based on administrative data. Reliance on such digital tool brings several benefits, on top of increasing buy-in of pay transparency policies among employers.
First, this strategy ensures that the figures produced are accurate and comparable across employers. It therefore saves considerable oversight costs that are typically incurred to ensure that employers do not generate inaccurate information whenever the burden of providing gender-disaggregated statistics lies with them.
Second, this strategy improves the quality of reporting, noting that evidence shows significant quality differences in companies’ reporting within countries.
Public reporting of firm-level gender gaps provides organisations with strong incentives to improve their performance in terms of gender equality, because such progress allows them to enhance their attractiveness among job candidates, employees, customers and suppliers concerned by working with socially-responsible employers. However, public reporting will do little good if, as it is currently the case in most countries, employers are not concomitantly provided with guidelines and training on how to improve the situation of female job candidates and employees.
Evidence of what works when training HR staff and managers not to discriminate remains scarce. Nevertheless, the current state of knowledge suggests a list of good practices, noting that this list is consistently evolving, as new results from rigorous impact evaluations (including those that are currently being carried out in Estonia) are emerging.
Against this backdrop, the Ministry of Social Affairs could create online training courses directed at employers and devised along these good practices, in the framework of the Virtual Competence Centre that the ministry is developing with funding from the EEA and Norway Grants.
To further encourage employers to implement these good practices, a government-led certification programme could be put in place to reward employers who take a set of concrete actions to improve the labour market situation of women.
Chapter 4 outlined that improving work-life balance opportunities for men and women should limit not only voluntary, but also involuntary (or discrimination-based) sorting of women into lower-paying firms and into lower-level occupations, tasks and responsibilities within firm (Correll, Benard and Paik, 2007[3]; Petit, 2007[4]; Baert, De Pauw and Deschacht, 2016[5]). A more equal sharing of unpaid work between men and women should also improve women’s bargaining power with a given employer. It would also “expand the labour market” in which women search for a job or consider exit options, beyond firms located within a short commute distance or firms that provide more family amenities in exchange of less pecuniary rewards (Hirsch, 2016[6]; Le Barbanchon, Rathelot and Roulet, 2020[7]; Fluchtmann et al., 2021[8]).
However, the persistence of traditional gender norms constitutes an important barrier to the full elimination of gender-based discrimination and to the full equalisation of women’s and men’s bargaining power within firms. Indeed, these norms contribute to root the belief that female employees, irrespective of their prevailing family obligations, cannot perform as well as male employees, not to mention at managerial- and executive-level positions. Traditional gender norms also negatively operate through their internalisation by women, which fuels women’s lower assessment of their self-worth in the labour market, as reflected by their tendency to ask for lower salaries than comparable men, the so-called “gender ask gap” (Roussille, 2021[9]). Estonia is no exception. Evidence based on data from the Estonian electronic job-search site CV Keskus and CV-Online shows that women ask for lower wages than men, especially at the upper end of the wage distribution (Meriküll and Mõtsmees, 2017[10]; Räis, Täht and Unt, 2021[11]).
It is possible to mitigate the negative effect of traditional gender norms on the gender pay gap within firms if pay structures along a specific job classification system are negotiated through collective bargaining rather than at an individual level. However, this approach is hardly an option in Estonia that shows the lowest trade union density OECD-wide (Figure 5.1).
Beyond the minimum wage agreement that applies to all economic sectors, the terms and conditions of working time, rest time and remuneration are defined by collective agreement in only one sector in Estonia, i.e. health care (OECD, 2019[12]; OECD, 2017[13]).1 Overall, according to the 2019 edition of the European Company Survey, wages were set by collective bargaining in only 6% of establishments in Estonia, which is less than a tenth of the average in other OECD countries that are also part of the EU (Eurofound and Cedefop, 2020[14]).
In a context where most wages in Estonia are subject to individual pay negotiations, implementation of pay transparency policies, i.e. policies that attempt to share pay information, appear as a promising way to counter gender-based discrimination and improve women’s bargaining power within firms. In this regard, the web application developed by Statistics Estonia (in partnership with the Commissioner for Gender Equality and Equal Treatment and researchers at the University of Tartu and Tallinn University of Technology) constitutes a significant progress (Box 5.1). By helping women be more confident in salary negotiations and thus ask for higher wages, this application should contribute to reduce the gender wage gap. Indeed, field experimental evidence shows that, when female candidates are informed about the median wage offered by firms to similar (male and female) candidates, they revise the wage they ask upward, thereby driving the gender ask gap to zero (Roussille, 2021[9]). It is worth stressing that, following this change, female candidates do not receive fewer bids from employers than men do, suggesting they face little penalty for demanding wages comparable to those asked by men.
Note: Trade union density is defined as the share of workers who are union members. Data refer to 2020 for Canada, Iceland, Ireland, Mexico and the United States; data refer to 2019 for Austria, Belgium, Denmark, Estonia, Finland, Germany, Italy, Japan, Lithuania, Luxembourg, the Netherlands, Norway, Spain, Sweden, Türkiye and the United Kingdom; data refer to 2018 for Australia, Chile, the Czech Republic, Hungary, Korea, Latvia, New Zealand, the Slovak Republic and Switzerland; data refer to 2017 for Colombia, Israel and Poland; data refer to 2016 for France, Greece and Portugal; data refer to 2015 for Slovenia.
Source: OECD (2021[15]), Pay Transparency Tools to Close the Gender Wage Gap, https://doi.org/10.1787/eba5b91d-en.
Yet, despite its many strengths, this application is just one step on the path towards pay transparency. Indeed, there is a misconception in Estonia that pay transparency policies are not legal (Sepper, 2021[1]; Aavik et al., 2020[2]). In particular, although these policies rely on aggregate, not individual data, many employers and employees view them as conflicting with the obligation stipulated in the Employment Contracts Act2 to keep individual wages confidential. Consistent with this misconception, Estonia is characterised by the fourth smallest share (57%) of respondents in favour of publishing gender-disaggregated average wages per job type in the organisation or company where they work, just before Poland (54%), Lithuania (51%) and Latvia (42%). This is significantly less than the average support for pay transparency that prevails among OECD countries that are also part of the EU (Figure 5.2.).
The “payroll app” (palgad.stat.ee) developed by Statistics Estonia (in partnership with the Commissioner for Gender Equality and Equal Treatment and researchers at the University of Tartu and Tallinn University of Technology as part of the project InWeGe (Income, Wealth, Gender)) is based on administrative data. This application helps visualise common occupations in Estonia defined based on the International Standard Classification of Occupations, two critical items of information: (i) the number of men and women working full time; (ii) the distribution of gross monthly wages of men and women working full-time, clearly indicating their mean and median value.
As such this application allows creating awareness on the extent of horizontal segregation (the fact that unbalanced gender composition prevails in a significant number of occupations), vertical segregation (the fact that women are underrepresented in management occupations) and pay differences between men and women within occupation. Awareness on the latter dimension is further enhanced by the possibility for users to enter their gross wage. This information allows the application to compare this wage with the average wage of men and women working in the same occupation, and to convey this comparison in a striking way: “You earn X Euros more/less than women/men on average”.
Overall, this application stands out as a best practice OECD-wide. A close equivalent is the “Gender Atlas” portal in Mexico (http://gaia.inegi.org.mx/atlas_genero/) that is maintained by the National Institute for Statistics and Geography (Instituto Nacional de Estadística y Geografía (INEGI)) and its public social programme evaluation institution (Consejo Nacional de Evaluacion de la Politica de Desarrollo Social (CONEVAL)). This portal presents gender-disaggregated statistics, such as average employment rates and hourly labour earnings, computed for each of Mexico’s 32 federal entities. However, this information is not computed by occupation nor does it allow visualising trends over time.
Source: European Commission (2018[16]), Gender equality 2017, Special Eurobarometer 465 – June 2017, https://data.europa.eu/doi/10.2838/431877.
In this setting, the web application developed by Statistics Estonia may fail to generate strong support among the general public. It could even yield perverse effects by providing employers with essential information to further exploit their wage-setting power when negotiating pay with female job candidates or employees (Sepper, 2021[1]). To avoid such negative effects, it is critical to counter the popular view that pay transparency policies are illegal by enshrining these policies in law. Moreover, for these policies to be an effective and powerful instrument to close the gender pay gap, this legislative step could be complemented by a strategy to enforce these laws and to support employers in their efforts to close gender gaps in their workforce, through guidelines and training. These additional steps would allow Estonia to align with the proposal for an EU Directive on Pay Transparency3 published in March 2021. On top of making public pay reporting mandatory for private and public employers (including in job advertisements through the publication of the initial level of pay or range of pay), this proposal also puts strong emphasis on enforcement mechanisms (European Commission, 2021[17]).
Estonia is not part of the 18 OECD countries which mandate some form of systematic, regular reporting on gender wage gaps in private sector firms – noting that many of these pay reporting rules also cover the public sector (OECD, 2021[15]). According to the Gender Equality Act (Art. 11), Estonian employers are required to “regularly provide relevant information to employees and/or their representatives concerning equal treatment of men and women in the organisation and measures taken to promote equality”. However, this provision does not explicitly refer to an obligation to disclose gender pay gaps.
Yet, Estonia was once on a good track to mandate pay reporting by law. In 2016, the government prepared the draft of the Gender Equality Act and Other Acts Amendment Act that ultimately dropped out of the legislative proceedings for not having been adopted before the parliamentary elections of 2019. The draft imposed a legal obligation to both private and public sector employers to inform employees or their representatives at least once every two years about measures adopted in the organisation to foster gender equality. This information was explicitly supposed to include a comparison of average pay of men and women by groups or categories of jobs or public service positions.
It is of tremendous importance that, as planned to ensure compliance with the future EU Directive on Pay Transparency, Estonia persists with these efforts to amend the Gender Equality Act and enshrine pay transparency policies in law. Following the 2014 EU Recommendation on Pay Transparency, a new amendment could bring two major changes to ensure greater gender equality in the labour market. First, to provide a complete picture of gender differences in the workplace (and also avoid perverse effects), the new amendment could mandate the reporting by employers of both the gender composition of the workforce and pay differentials between men and women. Second, the new amendment could operationalise the concept of “equal pay for work of equal value” by mandating the creation of a gender-neutral job classification system devised based on objective work-related characteristics.
5.3.1. Both gender composition and pay reporting
Mandating the reporting of both the gender composition of the workforce and pay differentials between men and women, organisation-wide and by job category within the organisation, is a promising way to engage employers in gender equality. Among the 18 OECD countries which mandate pay reporting, nine also require employers to produce statistics on gender composition: Austria, Chile, Finland, France, Israel, Italy, Japan, Korea and Norway (OECD, 2021[15]). This approach should induce employers to take action not only to close the gender pay gap by job category, but also to mobilise against horizontal and vertical segregation that drive gender pay gaps across job categories. Indeed, measuring the proportion of men and women in each category of employee, as stipulated by the 2014 EU Recommendation on Pay Transparency, facilitates creating awareness on the extent of horizontal segregation, and notably the fact that women are concentrated in certain jobs, such as the “5 Cs” (cleaning, catering, cashiering, caring and clerical work), characterised by low pays. Moreover, this measure also permits drawing attention on the extent of vertical segregation, i.e. the fact that women are underrepresented in job categories, such as management positions, featuring high levels of tasks and responsibilities. Importantly, reporting the gender composition on top of the gender pay gap may allow countering a potential perverse effect of pay transparency policies when they only focus on pay reporting. The latter policies may indeed create incentives for employers to refrain from hiring women in job categories with the largest gender pay gap: due to justified confidentiality and representativeness concerns, employers are typically not required to report gender pay gaps in job categories where the number of employees of either gender falls below a given threshold.
Of course, enshrining in law the obligation for employers to report gender pay gaps (on top of gender composition) will necessitate to also clarify what “pay” means, noting that a legal definition of pay is thus far absent from the Estonian Employment Contracts Act. In particular, it would be useful to determine whether the remuneration that should be considered in the calculation of the gender pay gap only includes the basic wage or salary, or whether, as is the case in France for instance, it also comprises other benefits and supplementary benefits paid, directly or indirectly, in cash or in kind. The latter include severance pay, retirement pay, bonuses for special hardship not related to the employee, seniority bonuses, accommodation or overtime pay.
Mandating pay transparency policies also involves defining the companies, and the labour force covered by these policies. To ensure a sizeable effect on the overall gender wage gap (while maintaining a degree of anonymity), the 2014 EU Recommendation on Pay Transparency suggest to make pay reporting compulsory for companies with at least 50 employees in both the private and public sectors. A significant number of OECD countries (nearly one-fifth) use a lower threshold: at least 35 employees (35+) in Denmark, 30+ in Finland, 25+ in Iceland, 20+ in Lithuania, and 10+ in Canada and Sweden. For small-size companies, i.e. those that comprise between 10 and 49 employees, reporting rules can be adapted. For instance, these firms could be required to report less detailed statistics, such as gender gaps aggregated at the organisation level rather than disaggregated by job category within the organisation.
5.3.2. Operationalising the concept of “equal pay for work of equal value”
Given that the main purpose of pay reporting is to measure the wage of men and women in a comparable work situation, it is important that the concept of equal pay for work of equal value be defined in national law as enshrined in European treaties since 1957.4 More precisely, the legal framework could clarify that equal pay for work of equal value implies that men and women should be paid the same amount in two situations: (i) if they do identical or similar jobs; (ii) but also if they do completely different work that can be shown to be of equal value, when based on “objective” criteria. The latter point is important to help correct for the historical undervaluation of jobs and sectors that have typically been considered “women’s work”. In Spain for instance, the Supreme Court found that, although housekeepers and bartenders in the same hotel were not doing the same job, it was not justified that housekeepers (mostly women) were underpaid relative to bartenders (mostly men) since these jobs were related to work of equal value (Spanish Supreme Court No. 2328/2013).
In Estonia, like in a large majority of OECD countries, the concept of gender-based wage discrimination is applied to men and women doing the same work or work of equal value (Gender Equality Act 6(2)5). However, contrary to most of these countries, Estonia does not envision in its legal framework a classification that would describe which jobs correspond to the same work or work of equal value. Yet, for operationalisation purposes, it is important that the law does not limit itself to defining the concept of “equal pay for work of equal value”, but also ensures that employers subject to pay transparency policies do report gender pay gaps by job categories that correspond to categories of work of equal value.
To that end, the legal framework could endorse the use of gender-neutral job classification systems devised based on objective work-related characteristics, whose adoption by employers would be mandatory, as it is already the case for the private sector in Belgium, Finland, France, Iceland, Portugal or Spain (OECD, 2021[15]). Such job classification systems should not factor in the characteristics of workers most likely to hold a given job, such as their gender, but focus instead on the objective characteristics necessary to perform the job. These objective characteristics include “the skills needed, the amount of responsibility involved, the necessary education level, working conditions that apply, the degree of leadership called for, the accuracy required, and so on” (International Labour Office, 2008[18]; European Commission, 2017[19]). Yet, the design of such job classification systems may still be subject to conscious and/or unconscious bias against women. Therefore, it seems desirable that the law also mandates that the job classification systems used be checked and verified by a government body for gender biases, and that penalties for non-compliance be enforced and sufficient to ensure companies fulfil their obligations (Wagner, 2020[20]). This objective was already part of the draft of the Gender Equality Act and Other Acts Amendment Act that envisaged the creation of a Pay Competence Centre at the Labour Inspectorate in charge of monitoring equal pay reporting and implementation.
As an alternative to sector- or firm-specific gender-neutral job classifications, the Pay Competence Centre could foster a gender equal job valuation common to all sectors and firms, such as the International Standard Classification of Occupations that already underlies the “payroll app” (Box 5.1). Indeed, mandating equal pay reporting including along a job classification which is the same for all employers would improve the comparability of their performance in terms of equal pay and hence facilitate peer pressure and emulation. This provision may be especially important in Estonia where collective agreements are scarce and where the introduction and enforcement of sector- or firm-specific gender-neutral job classification may be difficult. In France for instance, since 2019, public and private employers with at least 50 employees must publish, among other indicators, the average pay gap between men and women, by age group and category of equivalent positions, noting that, by default, the job classification for these categories is the French “socio-professional category (SPC)” system which applies to all employers regardless of size and sector.
Effectiveness of pay transparency policies strongly depends on employers’ compliance with their obligation to report gender gaps as specified by law. This means that enforcement mechanisms to avoid failure to submit said information (and, if possible, to avoid the submission of false information) should be put in place. Most of the 18 OECD countries that mandate some form of systematic, regular reporting on gender gaps in private sector firms do so by imposing financial penalties in case of non-compliance. However, this mechanism does not seem to lead to high compliance rates, potentially due to low fine amounts and/or to a lack of monitoring of pay transparency policies by government agencies (and thus the limited number of fines imposed). In fact, very few OECD countries which rely on financial penalties are able to report what share of employers were non-compliant and which were actually fined (OECD, 2021[15]).
Obliging employers to publish their gender gap statistics on media available to both employees and the general public appears as a more promising enforcement mechanism than reliance on financial penalties. For instance, the United Kingdom adopted a “name and shame” approach in which a company’s overall gender pay gap or failure to report is published online, on both their organisation’s website and on the UK Government website. This approach has led to 100% reporting compliance in the first two years of the pay reporting requirement programme directed at large firms (more than 250 employees). Such an approach also has the advantage of creating awareness around pay transparency policies and their objective. In the United Kingdom, the release of gender pay gap statistics receives considerable media attention each year and encourages an ongoing public debate about gender equality in the workplace and beyond (Blundell, 2021[21]).
Although a recent study estimates that the pay reporting cost to companies is well under EUR 1 000 annually (Eurofound, 2020[22]), the most commonly-cited barrier to effective company pay reporting by OECD countries is the administrative and/or economic burden for employers (OECD, 2021[15]). To eliminate the administrative burden associated to pay reporting, one option could be to task a state public body with the responsibility of computing and publishing firm-level gender gaps based on administrative data. This novel approach in international perspective has already been implemented in Lithuania where the Social Security Fund is in charge of reporting gender-disaggregated labour earnings in firms where the number of insured persons is at least eight (of which more than three are women or more than three are men). This approach would also be easy to implement in Estonia, based on the palgad.stat already managed by Statistics Estonia to report occupation-based gender composition and pay gaps at both the national and local (county) level (Box 5.1). Accordingly, Estonia is developing a Pay Mirror app that, by 2024, will allow employers to automatically generate information on the gender pay gaps that prevail within their organisation, based on administrative data. Reliance on such digital tool brings several benefits, on top of increasing buy-in of pay transparency policies among employers. First, this strategy ensures that the figures produced are accurate and comparable across employers. It therefore saves considerable oversight costs that are typically incurred to ensure that employers do not generate inaccurate information whenever the burden of providing gender-disaggregated statistics lies with them. Second, this strategy improves the quality of reporting, noting that there are significant quality differences in companies’ reporting within countries. Even countries with relatively advanced and longstanding auditing systems – such as Finland and Sweden – report that some companies are doing the bare minimum to meet reporting requirements, let alone advance an action plan to combat their firm’s gender wage gap (OECD, 2021[15]).
An alternative but less ambitious approach could consist of leaving the responsibility of computing the gender pay gap with firms while assisting them in doing so. For instance, the Federal Office for Gender Equality (FOGE) in Switzerland has developed an online tool, called Logib, that the Equal Pay International Coalition (EPIC) has recognised as “an EPIC good practice” (See https://www.equalpayinternationalcoalition.org/whats_new/logib-is-epics-1st-good-practice/). Logib, which is available free of charge on the FOGE website (See https://www.ebg.admin.ch/ebg/en/home/services/logib-triage.html), is an Excel-based programme that allows firms with more than 50 employees to proceed to a quick and easy assessment of their gender pay gap.
Public reporting of firm-level gender gaps provides organisations with strong incentives to improve their performance in terms of gender equality, because such progress allows them to enhance their attractiveness among job candidates, employees, customers and suppliers concerned by working with socially-responsible employers. These reputational effects may be particularly strong among multinationals, to the extent that the international competition they are exposed to force them to care more about their external image. However, foreign-owned firms in Estonia have a substantially larger gender wage gap than domestic-owned firms, presumably because they tend to reward employees (often men) able to provide temporal flexibility (24/7 availability for job purposes) at a disproportionately higher rate (Vahter and Masso, 2018[23]; REGE, 2019[24]).
However, public reporting will do little good if employers are not concomitantly provided with guidelines and training on how to improve the situation of female job candidates and employees. Across the OECD, the lack of guidance is widespread and may help to explain why pay reporting requirements have thus far led to reductions6 in the gender wage gap through a decrease in men’s wages, rather than an increase in women’s wages (OECD, 2021[15]; Blundell, 2021[21]; Bennedsen et al., 2019[25]). Evidence to identify what works when training HR staff and managers not to discriminate remains scarce. However, the current state of knowledge suggests that this training should include the following three steps in order to reduce discriminatory attitudes and behaviours (Devine et al., 2012[26]; Chang et al., 2019[27]):
Informing participants about conscious and unconscious bias against women that underlies prejudice and stereotyping, and about how this bias can result in discrimination if uncontrolled;
Making participants aware of their bias by means of implicit association tests (IAT) like the IAT “Gender-Career” and the IAT “Gender-Science” developed by Harvard University (https://implicit.harvard.edu/implicit/selectatest.html) to test the strength of automatic associations between “women”/“family” and “men”/“career” on one hand, and between “women”/“liberal arts” and “men”/“science” on the other hand;
Familiarising participants with human resource management strategies that deny conscious and unconscious bias the chance to operate, noting that the list of these strategies is consistently evolving, as new results from rigorous impact evaluations (including those that are currently being carried out in Estonia) are emerging (Box 5.2)
The Estonian Ministry of Social Affairs could create online training courses directed at employers and devised along the aforementioned steps in order to reduce discriminatory attitudes and behaviours in the workplace. Indeed, the unique large-scale randomised control trial in a multi-national organisation that has been conducted thus far has shown that even a brief (one-hour long) online training can change attitudes and behaviours towards women in the workplace (Chang et al., 2019[27]). This e-learning could be provided through the Virtual Competence Centre (https://eeagrants.org/archive/2014-2021/projects/EE-LOCALDEV-0004), an online one-stop-shop aimed at raising awareness and promoting gender equality among key stakeholders that the Ministry of Social Affairs is developing with funding from the EEA (European Economic Area) and Norway Grants. Employers could be directed to these resources via the Pay Mirror App that is being developed to help them easily produce payroll reports and thus identify pay gaps in their midst.
To further encourage employers to implement actionable strategies to combat gender-based discrimination presented in the online training, a government-led certification programme could be put in place. In Estonia, the Diversity Charter (https://humanrights.ee/en/topics-main/diversity-and-inclusion/charter/) and the Diverse Workplace label (https://humanrights.ee/en/topics-main/diversity-and-inclusion/mitmekesise-tookoha-margis/) already allow showcasing companies or organisations that engage in actions to value every employee irrespective of their gender, ethnic background, skin colour, age, disability, sexual orientation and religious or political views. However, it could be useful to complement these general equality seals by a label that specifically focuses on gender equality and rewards employers who take a set of concrete actions, like those highlighted in Box 5.2, to improve the labour market situation of women. This label could be viewed as an extension of the “family-friendly employer” label that was awarded by the Ministry of Social Affairs between 2017 and 2020 (with support of the European Social Fund) to praise employers who develop an organisational culture that helps employees with young children or caring for an older relative balance their working and family life.
In addition to informing participants about the specific underlying psychological processes believed to produce discriminatory outcomes, and to make them aware about their own biases, non-discrimination training should familiarise HR staff and managers with the strategies to recruit and manage staff in an objective manner.
Regarding recruitment, these strategies include:
Drafting a job profile that clearly describes the tasks related to the position to be filled (which is preferable to a long list of skills and requirements that may intimidate some candidates, chief of which women known to have lower self-confidence than men notably due to their internalisation of traditional gender norms);
Selecting applications based on an assessment grid that focuses on the skills needed for the tasks described in the job profile;
Formalising the conduct of the job interview. This formalisation involves that the same questions be asked to all candidates, in the same order and by the same interviewer(s), with the sole purpose of determining whether candidates have the required skills. Without a consistent protocol, recruiters tend to let their prejudice and stereotypes become self-fulfilling: when their bias is positive, recruiters are more likely to begin the interview with the candidates’ strengths, which increases candidates’ chances of excelling, and vice versa. A number of studies confirm that a consistent interview protocol ensures skills-based recruitment (Bohnet, 2016[28]). For example, students’ performance in the United States at the end of their first year of university is not correlated with their entry ranking when this ranking is based on an oral admissions procedure that varies from one panel to another. More specifically, the results show that a non-standardised interview is no more effective than a selection procedure based on random selection of eligible students (DeVaul et al., 1987[29]).
These strategies could be complemented by approaches aimed at broadening the recruitment pool. For instance, field experiments recently conducted by Kantar Emor (the Estonian branch of Kantar, an international data, insight and consultancy company) with the support of the Estonian Ministry of Social Affairs revealed the importance of writing job ads in an inclusive way in order to diversify the profiles of job applicants. In fact, explicitly stating that both men and women are expected to apply when the job ad concerns a position that is typically male-dominated allows significantly increasing the share of female job applicants.
Regarding staff management and promotion, a growing literature is emerging that identifies approaches to limit gender-based discrimination in performance assessment and/or promotion to high managerial position. For instance, changing the scale of a quantitative rating of performance from a 1-10 to a 1-6 scale hinders managers’ tendency to give men higher performance ratings than women, even when their qualifications and behaviours are identical (Rivera and Tilcsik, 2019[30]). Indeed, a 6/6 is less associated by individuals to extraordinary performance than a 10/10, which means, in a context where traditional gender norms lead to reserving labels like “superstar” and “genius” for men, that the 6-point scale limits the expression of gender bias more than the 10-point scale does. Similarly, a longer shortlist increases the consideration of female candidates at executive-level positions (Lucas et al., 2021[31]).
References
[2] Aavik, K. et al. (2020), Kuidas vähendada soolist palgalöhet? Ülevaade mitmetasandilise kvalitatiivuuringu pohitulemustest., RASI Tallinna Ülikool, https://www.tlu.ee/sites/default/files/Instituudid/%C3%9CTI/RASI/2020_mitmetasandiline%20kvalitatiivuuring_l%C3%BChi%C3%BClevaade%20p%C3%B5hitulemustest.pdf (accessed on 21 March 2022).
[5] Baert, S., A. De Pauw and N. Deschacht (2016), “Do Employer Preferences Contribute to Sticky Floors?”, ILR Review, Vol. 69/3, pp. 714-736, https://doi.org/10.1177/0019793915625213.
[25] Bennedsen, M. et al. (2019), Do Firms Respond to Gender Pay Gap Transparency?, National Bureau of Economic Research, Cambridge, MA, https://doi.org/10.3386/w25435.
[21] Blundell, J. (2021), Wage responses to gender pay gap reporting requirements, Centre for Economic Performance Discussion Paper No. 1750.
[27] Chang, E. et al. (2019), “The mixed effects of online diversity training”, Proceedings of the National Academy of Sciences, Vol. 116/16, pp. 7778-7783, https://doi.org/10.1073/pnas.1816076116.
[3] Correll, S., S. Benard and I. Paik (2007), “Getting a Job: Is There a Motherhood Penalty?”, American Journal of Sociology, Vol. 112/5, pp. 1297-1339, https://doi.org/10.1086/511799.
[29] DeVaul, R. et al. (1987), “Medical school performance of initially rejected students.”, JAMA, Vol. 257/1, pp. 47-51, http://www.ncbi.nlm.nih.gov/pubmed/3783902 (accessed on 14 February 2020).
[26] Devine, P. et al. (2012), “Long-term reduction in implicit race bias: A prejudice habit-breaking intervention”, Journal of Experimental Social Psychology, Vol. 48/6, pp. 1267-1278, https://doi.org/10.1016/j.jesp.2012.06.003.
[22] Eurofound (2020), Measures to promote gender pay transparency in companies: How much do they cost and what are their benefits and opportunities?, https://www.eurofound.europa.eu/publications/article/2020/member-states-are-dawdling-on-gender-pay-transparency (accessed on 18 November 2021).
[14] Eurofound and Cedefop (2020), European Company Survey 2019: Workplace practices unlocking employee potential, European Company Survey 2019 series, Publications Office of the European Union, Luxembourg, https://doi.org/10.2806/030551.
[17] European Commission (2021), Proposal for a Directive of the European Parliament and of the Council to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52021PC0093 (accessed on 17 November 2021).
[32] European Commission (2020), Evaluation of the relevant provisions in the Directive 2006/54/EC implementing the Treaty principle on ‘equal pay for equal work or work of equal value’, https://ec.europa.eu/info/sites/default/files/swd-2020-50_en.pdf (accessed on 18 November 2021).
[16] European Commission (2018), Gender equality 2017, Special Eurobarometer 465, June 2017, https://data.europa.eu/doi/10.2838/431877.
[19] European Commission (2017), Pay transparency in the EU - A legal analysis of the situation in the EU Member States, Iceland, https://op.europa.eu/fr/publication-detail/-/publication/329c3e47-2bd8-11e7-9412-01aa75ed71a1 (accessed on 18 November 2021).
[8] Fluchtmann, J. et al. (2021), “The Gender Application Gap: Do men and women apply for the same jobs?”.
[28] Harvard University Press (ed.) (2016), What Works: Gender Equality by Design, http://search.ebscohost.com/login.aspx?direct=true&db=ecn&AN=1575235&site=ehost-live (accessed on 14 February 2020).
[6] Hirsch, B. (2016), “Gender wage discrimination”, IZA World of Labor, https://doi.org/10.15185/IZAWOL.310.
[18] International Labour Office (2008), Promoting Equity: Gender-Neutral Job Evaluation for Equal Pay: A Step-by-Step Guide.
[7] Le Barbanchon, T., R. Rathelot and A. Roulet (2020), “Gender Differences in Job Search: Trading off COMMUTE AGAINST WAGE*”, The Quarterly Journal of Economics, Vol. 136/1, pp. 381-426, https://doi.org/10.1093/qje/qjaa033.
[31] Lucas, B. et al. (2021), “A longer shortlist increases the consideration of female candidates in male-dominant domains”, Nature Human Behaviour, Vol. 5/6, pp. 736-742, https://doi.org/10.1038/s41562-020-01033-0.
[10] Meriküll, J. and P. Mõtsmees (2017), “Do you get what you ask? The gender gap in desired and realised wages”, International Journal of Manpower, Vol. 38/6, pp. 893-908, https://doi.org/10.1108/ijm-11-2015-0197.
[15] OECD (2021), Pay Transparency Tools to Close the Gender Wage Gap, OECD Publishing, Paris, https://doi.org/10.1787/eba5b91d-en.
[33] OECD (2020), Financing SMEs and Entrepreneurs 2020: An OECD Scoreboard, OECD Publishing, Paris, https://doi.org/10.1787/061fe03d-en.
[12] OECD (2019), Negotiating Our Way Up, OECD, https://doi.org/10.1787/1fd2da34-en.
[13] OECD (2017), “Collective bargaining in a changing world of work”, in OECD Employment Outlook 2017, OECD Publishing, Paris, https://doi.org/10.1787/empl_outlook-2017-8-en.
[4] Petit, P. (2007), “The effects of age and family constraints on gender hiring discrimination: A field experiment in the French financial sector”, Labour Economics, Vol. 14/3, pp. 371-391, https://doi.org/10.1016/j.labeco.2006.01.006.
[11] Räis, M., K. Täht and M. Unt (2021), “Do desired wages explain the gender wage gap in Estonia? An examination of desired wages in job applications”, International Journal of Manpower, https://doi.org/10.1108/IJM-11-2015-0197.
[24] REGE (2019), Solide palgalõhe kirjeldamine ja seletamine, Tallinna ülikool, https://www.tlu.ee/sites/default/files/Instituudid/%C3%9CTI/RASI/2019_RASI%20toimetised%20nr%2010_soolise%20palgal%C3%B5he%20kirjeldamine%20ja%20seletamine.pdf (accessed on 18 November 2021).
[30] Rivera, L. and A. Tilcsik (2019), “Scaling Down Inequality: Rating Scales, Gender Bias, and the Architecture of Evaluation”, American Sociological Review, Vol. 84/2, pp. 248-274, https://doi.org/10.1177/0003122419833601.
[9] Roussille, N. (2021), “The central role of the ask gap in gender pay inequality”.
[1] Sepper, M. (2021), “Does more information on wages equal pay transparency?”, Peer Review on “Reducing the gender pay gap through pay transparency: legislative measures and digital tools targeted at employers”, European Commission, https://ec.europa.eu/social/main.jsp?langId=en&catId=1070&furtherNews=yes&newsId=9924 (accessed on 17 November 2021).
[23] Vahter, P. and J. Masso (2018), “The contribution of multinationals to wage inequality: foreign ownership and the gender pay gap”, Review of World Economics, Vol. 155/1, pp. 105-148, https://doi.org/10.1007/s10290-018-0336-2.
[20] Wagner, I. (2020), “Equal Pay for Work of Equal Value? Iceland and the Equal Pay Standard”, Social Politics: International Studies in Gender, State & Society, https://doi.org/10.1093/sp/jxaa032.
Notes
← 1. In other sectors than health care, collective agreements occur at the firm level, but, unsurprisingly given the weak unionisation rate, their coverage is low (less than 10% of Estonian employees). According to the Estonian Trade Union Confederation (EAKL), the main central federation of Estonian employees, there were only 102 ongoing firm-level collective agreements in 2021. This number represents a negligible fraction of the 7 447 firms with more than 10 employees – of these 7 447 firms, 6 157 are small-size (10-49 employees), 1 115 are medium-size (50-249 employees) and 175 are large (more than 250 employees) (OECD, 2020[33]). There is little prospect that coverage of workers will increase in the immediate future. A recent decision by the Supreme Court of Estonia questions, in a context of low trade union density, the constitutionality of extending a collective agreement between a federation of employers and a union of employees (or between a central federation of employers and a central federation of employees) to non-signatory employers and their employees. For further information, see https://www.riigikohus.ee/et/lahendid/?asjaNr=2-18-7821/71.
← 2. Article 28(13) of the Employment Contracts Act stipulates that employers are forbidden to disclose to a third-party information about wages without the employee’s consent or without a legal basis.
← 3. The exact name of this proposal is “Proposal for a Directive of the European Parliament and of the Council to strengthen the application of the principle of equal pay for equal work or work of equal value between men and women through pay transparency and enforcement mechanisms”.
← 4. Equal pay for equal work or work of equal value is one of the European Union’s founding principles. The principle of equal pay between women and men has been enshrined in the Treaties since 1957 (Article 157(1-2)). Article 4 of Directive 2006/54/EC implements the principle of equal pay by providing that, for the same work or for work of equal value, direct and indirect discrimination on the grounds of sex is prohibited in all aspects and conditions of remuneration (European Commission, 2020[32]).
← 5. According to the Gender Equality Act, the law deems as discriminatory “conditions for remuneration or conditions for the provision and receipt of benefits related to the employment relationship which are less favourable regarding an employee or employees of one sex compared with an employee or employees of the other sex doing the same work or work of equal value”.
← 6. These reductions are observed in countries where enforcement mechanisms of pay transparency policies and/or wage gap visibility are strong enough, as it is the case in Denmark or the United Kingdom. In other countries, pay transparency policies seem to have had little effect.