Gender Equality: Bridging the EU’s pay gap


 Yet another divisive legislative initiative is currently on the agenda of the EU’s institutions. At its June plenary session, the European Economic and Social Committee (EESC) adopted an opinion, in response to the European Commission’s recent proposal for a Directive 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. This is also known as the ‘Pay Transparency Directive’. 

Commission President Ursula von der Leyen’s Agenda for Europe - in her election manifesto and political guidelines for a new Commission - promised a number of actions in the area of social affairs.

Two of the highest-profile actions concerned pay, namely binding pay transparency measures and a legal instrument to ensure that every worker in our Union receives a fair minimum wage.

“We believe there are more efficient and proportionate measures than binding legislation to address these issues, without increasing the administrative burdens and costs for companies”

Yet even with these commendable goals, the consensus is proving difficult to reach on both of these issues. Despite there being no legal basis for such action, there is also a risk of interference in wage formation in the Member States. 

The principle of equal pay for men and women for equal work or work of equal value is one of the fundamental rights and principles of the European Union. It was laid down in the Treaty of Rome and has since become enshrined in the European Pillar of Social Rights.

In 2006, this principle formed part of the recast Gender Equality Directive prohibiting direct or indirect sex discrimination concerning pay for the same work or for work of equal value.

To address current gender pay gaps as a form of discrimination, the Commission’s proposal for a Directive focuses on two things: access to information and access to justice.

Access to information is to be achieved by giving employees the right to comparative pay information, while also requiring gender pay gap reporting by employers with more than 250 employees. Access to justice is to be accomplished by introducing various procedural rules to facilitate litigation, including shifting the burden of proof and legal costs, extending limitation periods and regulating compensation.

While we acknowledge the Commission’s efforts to increase pay transparency and to strengthen the enforcement of the equal pay principle, we believe there are more efficient and proportionate measures than binding legislation to address these issues, without increasing the administrative burdens and costs for companies, in particular SMEs.

The greatest shortcoming of the proposed Directive is that it does not take sufficient account of the diverse national social and industrial relations models or existing judicial systems and legal traditions in the Member States.

Pay structures and wage-setting are an essential part of collective bargaining and social dialogue and should be properly respected. Furthermore, there is no consideration given to the fact that wage formation is also shaped by the demand and supply of skills in the labour market at any given time, as well as the available resources. 

Countries where we see strong trends of increasing gender equality in their labour markets, including diminishing gender pay gaps, also have track records of long-term strategic measures.

Examples include the expansion of care services for children and the elderly, regulatory frameworks to reconcile the demands of work and family lives, such as compensation for parental leave and individualised taxation.

These in turn have been underpinned by changes in social norms and values affecting people’s choices over education and professional careers.

Therefore, focusing solely on bureaucratic measures, with a view to increasing litigation, will have a limited effect. Indeed, in countries where binding pay transparency measures exist, it is not evident that these measures have significantly reduced the gender pay gap.

“The principle of equal pay for men and women for equal work or work of equal value is one of the fundamental rights and principles of the European Union”

Pay discrimination only explains a minor part of the gender pay gap. Binding pay transparency measures will not address the major root causes, which lie in issues such as horizontal and vertical labour market segregation, full-time versus part-time work, unpaid care-related constraints and tax-related disincentives to women’s employment.

In the workplace, the most important measures for achieving gender equality are working consistently and for the long term on recruitment, skills development, corporate culture, work organisation and management and gender-neutral wage setting. It goes without saying that wages should never be set on the basis of sex goes.

To summarise, we find that the Commission’s proposal on pay transparency in its current form is disproportionate and runs counter to the principle of subsidiarity. Accordingly, it needs to be reworked or reconsidered.

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