BLOG: How far do women’s salaries lag behind men’s in the Netherlands?

Currently, there is considerable discussion in the Netherlands about the gender gap in the area of economic participation, particularly, about the fact that women’s salaries lag behind their male counterparts. Measuring the gap between men and women – and the salary differentials – is extremely difficult. However, the World Economic Forum’s Global Gender Gap Report 2016 has attempted to provide greater insight into this issue in a scientific way.

Annually, the World Economic Forum (WEF) compares the potential inequality between women and men in more than 140 countries on the basis of four key areas: economic participation and opportunity, educational attainment, health and survival, and political empowerment. Subsequently, on the basis of 14 indicators, it establishes the gender gap. In the Netherlands, only 76% of the gap between men and women has been closed, as a result of which we are now ranked 16th on Global Gender Gap Index. The indicators used by the WEF to arrive at this ranking are explained in detail below. However, firstly, we would like to summarise the WEF’s findings on income inequality, which is just one part of the economic inequality between the genders, but the part that has, naturally, attracted considerable attention both in the media and public debate.

What does the WEF say about salary differentials?

On the basis of a full-time job, the WEF estimated the annual salary of a woman in the Netherlands was USD 31,310, while for a man it was USD 65,446, a difference of 52%. This demonstrates that only 48% of the gap between men and women has been closed. This disparity is, however, largely explained by the fact that men tend to hold more senior positions than women.

Salary differentials between men and women with similar jobs in the Netherlands according to the WEF

Each year, the WEF carries out a survey in 144 countries; in these surveys CEOs and managers are asked to indicate whether they believe men and women are paid the same for similar work. On a seven-point scale, varying from significant salary differentials to equal salaries, it has for many years been obvious that managers in the Netherlands believe there is a reasonably high differential between men’s and women’s salaries. On a standardised scale, they indicate that 68% of the inequality gap has been closed; which means there is still a gap of 32%. We also concluded that this gap is much smaller in the countries heading the rankings. In respect of the pay gap, the Netherlands, therefore, scored badly.

Other research into salary differentials

Naturally, research has been undertaken in the Netherlands to analyse why women are paid less for similar work. Various research institutions, including Statistics Netherlands (CBS), have published reports on the level of gender inequality, particularly income inequality. In several sources – and in several countries – total income inequality (i.e. the public and private sectors together) is cited as being between 10% and 20%. However, different reports employ different methods, weightings, samplings, control variables, and measuring moments or, as the case may be, periods of time to which the collected data relate; these differences obviously affect the outcome of the level of income inequality.

The wage gap according to Statistics Netherlands

The report Equal pay for Equal work? (Gelijk loon voor gelijk werk? PDF) published by Statistics Netherlands looked in detail at the pay differentials between men and women. The report makes it evident that – without any correction for employees’ characteristics (such as education and experience), employers’ characteristics (such as the number of employees and the sector), and characteristics of the job (such as the occupation, full-time/part-time, whether or not managerial) – the wage gap was 20% in the business world in 2014. While men on average earned EUR 21 an hour in the business world in 2014, women on average earned EUR 17. The WEF Executive Opinion Survey similarly focused on the business world. However, in the public sector, the pay gap between men and women fell from 16% to 10% in the period 2008-2014.

The wage gap is greater after the age of thirty and in management positions

An employee’s age is also relevant when considering the pay gap. Data presented by Statistics Netherlands demonstrates that the gap in wages increases from the age of 30 upwards. Moreover, on the basis of this data, it can also be deduced that, in the business world, the pay gap between men and women is around 30% after the age of 48. This is comparable to the inequality gap of 32% cited in the Global Gender Gap Report 2016. If we look specifically at equivalent managerial positions, Statistics Netherlands concluded that, on average, a male manager earned EUR 43 per hour in 2012, while on average their female colleagues earned EUR 32 per hour, i.e. 34% less.

“...in the business world, the pay gap between men and women is around 30% after the age of 48.”

Statistics Netherlands’ November 2016 edition, based on 2014 data from the report “Equal pay for equal work?”, stated that: “In the business world, female supervisors earn considerably less than their male colleagues.” On the basis of this recent Statistics Netherlands report, there is a gap of EUR 6 between the hourly wages of male and female managers. Relatively, this difference amounts to approximately 27%.

No account is taken of non-recurring remuneration

Another factor related to the pay gap that is primarily, but not exclusively, relevant to managerial positions is what the concept ‘pay’ actually consists of. In the Statistics Netherlands’ report no account is taken of special, non-recurring remuneration or fringe benefits. Just as in other countries, women in the Netherlands are lagging behind men as far as bonuses and allowances are concerned.

Furthermore, the Statistics Netherlands’ report also states that “equal pay is not an unequivocal concept”. In other words: establishing income inequality is a complex process. However, by putting this to senior managers who understand the situation in their companies, it is possible to tackle this complexity. Furthermore, as the Global Gender Gap Report also put this question to managers of companies in other countries, international comparisons can easily be made.

Eurostat

Eurostat data illustrates that the sector is also an explanatory factor affecting the income inequality between the genders. For example, this data shows there was a 28.3% wage gap between men and women in the financial and insurance sector in 2014. The Netherlands’ financial sector is relatively large within the context of the Dutch economy, and women are relatively underrepresented in this sector as they only account for approximately 42% of the workforce. However, in 2012, the average hourly wage was around EUR 28, which was relatively high compared to other sectors in the Netherlands. Comparatively, a relatively large sector has a greater impact on national scores, such as income inequality.

More research is required

A word of caution is the order of the day. In its report, Statistics Netherlands states that the findings provide an “important indication of the existence of unequal pay for equal work”, but it modifies this by adding: “however, on the basis of this research, the extent to which the pay is in fact unequal cannot be determined”. Nor is our intention to imply that a specific part of the Global Gender Gap Index, i.e. income inequality, offers a better indication than other reports. Further in-depth research into the background and conclusions of various reports on the level of income inequality between the genders would offer further insight into why the degree of disparity can vary.

“...there are significant differentials in the salaries paid to men and women for equivalent activities, but the precise differentials are hard to establish.”

In brief, there are significant differentials in the salaries paid to men and women for equivalent activities, but the precise differentials are hard to establish. And, although various studies have demonstrated that the disparity is slowly closing, more action and transparency is still required. Currently, the UK is preparing legislation that would make it compulsory for companies to report on their Gender Pay Gap.

Moreover, research into these salary differentials should be given higher priority; in this context consideration could be given to employing certain remuneration systems (for example the Hay system), which would enable the equivalence of men’s and women’s qualifications to be established. It is impossible for the WEF, which covers 144 countries, to attempt to undertake such in-depth research given that recent income data is generally unavailable. However, such research is essential if greater substance is to be given to the discussions within the Netherlands.

Other indicators of the Gender Gap

The income differentials between women and men only form one element of labour force participation. As well as presenting income differentials, the 2016 report also demonstrated that 74% of all women were active in the labour market compared to 86% of all men; this implies that 74/86 or 87% of the gap has been closed. In addition, women held 26% of the leadership positions (management, judiciary) and 49% of the professional and technical jobs.

To establish the gender inequality gap in respect of economic participation, the WEF employed four hard indicators based on external sources and one soft indicator based on a survey of CEOs and managers. The findings illustrate that compared to leading countries, such as Iceland, Finland, Norway and Sweden, there is still a large gap in the level of female participation in the Dutch labour force.

Gender gap

To establish the gender gap the WEF took account of the following indicators; a comparison of the labour force participation rates of women and men aged between 15 and 64. (Source: Key Indicators of the Labour Market, ILO), a comparison of the numbers of women and men in senior positions (Source: ILOSTAT database), a comparison of the number of women and men in technical and professional positions (Source: ILOSTAT database), a comparison of the estimated annual salary of women and men based on GDP, population, labour force participation, average nominal monthly salary per economic activity (the method used by the United Nations Development Program) and the perceived pay gap between men and women for similar activities (Source: Executive Opinion Survey WEF).

As well as labour force participation, the WEF analysed three other key areas. Consequently, the World Economic Forum’s Global Gender Gap Report could demonstrate that in the Netherlands there is virtually no gender gap in respect of educational attainment  and health and survival, but that there is a considerable gender gap in respect of political empowerment (only 40% of this gap has been closed) and labour force participation (66% of the gap has been closed).

Henk Volberda, on behalf of the INSCOPE researchers: Research for Innovation, Rotterdam School of Management, Erasmus University (RSM), the host institute for the World Economic Forum in the Netherlands.

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