Enforcing ‘Equal Pay for Equal Work’ in the EU: What would it take?

Abstract

The European Parliament has approved new binding pay transparency measures to reinforce European Union´s commitment to the 1957 founding principle of `Equal Pay for Equal Work' at the workplace between women and men. In this paper, we shed new light on the prevalence of unequal pay for equal work, and its influence on the gender pay gap and the distribution of household income. We do so with harmonised microdata from the 27 EU countries, a novel estimation approach based on blocking with regression adjustments, and microsimulations to account for the interplay of tax-benefits. Our results suggest that, on average, women receive lower gross hourly wages than men performing similar work, with substantial cross-country variation. We also show that unequal pay is the main driver of the gender pay gap in most EU countries. Finally, we simulate a hypothetical upward shift of women's wages that would enforce this equal pay principle. This leads, ceteris paribus, to a substantial increase in household disposable income and government revenues (particularly strong in countries with low gender gaps at the extensive and intensive margin of labour market participation). We further discuss the implications of these distributional effects for income poverty and inequality. JEL Classification: J16, J31, J38, J78