Unmasking inequalities: Delving deeper into the gender pay gap

By Yashi Chowdhary

Since its launch in 2011, PwC's Women in Work Index has been released annually. Covering five key indicators – female labour force participation rate, gender participation rate gap, female full-time employment rate, female unemployment rate and the gender pay gap – the Index measures progress towards gender equality in the labour market across 33* OECD (The Organisation for Economic Cooperation and Development) countries. Its publication each year is an opportunity to celebrate progress – and reassess the pace of change.

On the bright side, the latest Index shows that the average OECD score has improved by approximately two points, from 66 in 2021 to 68 in 2022. This advance was largely propelled by an increase in the women’s labour force participation rate (from 70.8% to 72.1%), combined with a decrease in the female unemployment rate (from 6.4% to 5.3%).

That said, it’s important to point out that the average gender pay gap across the OECD widened slightly from 13.2% to 13.5% over the same period. In fact, it has shown only a gradual improvement since 2011, narrowing by just 3.3 percentage points through to 2022.

To put this pace of improvement into context, our analysis shows that – at the current rate of progress – it will take more than 50 years to close the average OECD gender pay gap entirely. This underscores the persistent disparity between men and women in terms of labour market returns, despite women’s increased participation in the labour force.

The countries that excel on our Index typically exhibit remarkably low gender pay gaps. Take top-ranking Luxembourg, for instance, which has the lowest gender pay gap across the OECD. Indeed, at -0.2%, the gap isn’t just low, it’s negative – meaning that, on average, women earn more than men at the median level of pay.

Or look at Iceland and Slovenia, which rank in second and third place respectively with minimal gender pay gaps. Their success in narrowing the gender pay gap can be attributed largely to their commitment to providing affordable, high-quality childcare and implementing favourable parental leave policies.

All three countries have implemented initiatives that contribute to reducing their gender pay gap. While Luxembourg benefits from a highly developed and specialised services sector, Iceland mandates gender budgeting for companies whereby gender equality considerations and impact assessments are applied to company budgeting processes, and Slovenia encourages flexible working arrangements to better suit the needs of parents like promotion of shorter working hours, part-time work, work from home, and adjustment of working hours to align with early childhood education (Kindergarten) hours.

We noted a similar trend in Australia. Since last year, it has risen seven places on the Index, showing improvements across all five indicators between 2021 and 2022. Particularly significant (and major contributors to the country’s improved ranking): a 4.3% decrease in the gender pay gap and 1.4% drop in the female unemployment rate. Advances in pay transparency legislation and an increase in proportion of women in management and upper pay quartiles have been recognised as important factors in this context.

In contrast, the UK, which experienced the largest annual fall on the Index, saw a marginal increase in its gender pay gap (increasing to 14.5% in 2022). It’s a persistent challenge for the UK that is likely driven by the country’s high cost of childcare relative to other OECD countries. This exacerbates the ‘motherhood penalty’ faced by women, which limits their ability to participate fully in the labour market.

Given this enduring gender pay gap, this year we’ve undertaken a detailed examination of drivers specific to the UK context. Our analysis delves into whether gender disparities persist even when factors such as ethnicity, age, and qualification levels, which influence pay, are taken into account.

Our results underscore the divergent levels of progress being made towards gender equality across the OECD. While strides have been made in the right direction, it's evident that not all women have reaped equal benefits in terms of labour market outcomes.

Without interventions, the risk of widening existing gender inequalities in the labour market remains significant. How, then, can we prevent the worsening of these inequalities and continue progressing towards closing the global gender pay gap?

Policymakers and businesses wield significant influence in driving change. And their understanding of the myriad factors and complexities that underpin gender disparities in pay is a critical first step towards addressing them and helping to create a more equitable workplace.

In the UK, for example, we’ve found that pay disparities differ and are often magnified when we look at the intersection of gender with factors like age, ethnicity, marital status and qualification levels. Measures that should contribute to tangible progress include collecting and reporting pay gap data to encourage transparency, enhancing parental leave policies, and cultivating a more inclusive work environment.

Over the past few years, countries across the OECD have had to grapple with periods of economic slowdown. And due to their disproportionate representation in insecure employment and low-paying sectors, women have often been most heavily impacted.

By exacerbating existing inequalities, downturns pose a monumental challenge to achieving gender equality at work. So why should we highlight these challenges and intervene? Because without prompt intervention, we risk an even more unequal future.

During times of economic upheaval, empowering women in the labour market can yield substantial benefits, including significant increases in earnings and GDP. In other words, fostering equal and inclusive workplaces isn’t just a moral imperative – it’s also a catalyst for economic growth and prosperity.

Visit our data explorer tool to explore the OECD-wide and country-specific findings of the Index. You can also explore a detailed examination of the drivers behind the gender pay gap specifically within the UK context.

*PwC’s Women in Work Index includes analysis of labour market results in 33 OECD countries. When we refer to the OECD in this article, we are referring to the OECD results for these 33 countries.

Last updated on 19 April 2024