In the labor market, men’s and women’s wages differ. The gender pay gap is largely due to men and women holding different kinds of jobs and the norms prevailing in society. One of the major explanatory factors is the impact of having children on men’s and women’s careers and pay development. COVID-19 has deepened the challenges in the pay gap, but on the other hand, the increase in remote working may have a positive impact on narrowing the gap. The gender pay gap was the subject of a discussion at IZA World of Labor interview with Etla’s research director Antti Kauhanen who is specialized in the issue.

There are several factors behind the gender pay gap. One of these is labor market segregation, as men and women typically tend to work in different industries, occupations and firms. The pay rates differ among these fields creating gender wage differences. Another reason can be found in the different educational backgrounds and work experience of men and women.

 

Etla’s research director Antti Kauhanen and IZA World of Labor Editor-in-Chief Daniel S. Hamermesh discussed the gender pay gap in a virtual interview. IZA World of Labor is an online platform providing comprehensive and reliable information resource for decision makers and others who are concerned with labor market issues worldwide.

Etla’s Kauhanen has studied the gender pay gap, and according to him, the gender wage gap is largely due to having children.

Recent research has looked earnings of men and women before and after the birth of the first child. Earnings of men are not affected by the birth of the child whereas women experience big drop in their earnings. The effect is also persistent, Kauhanen says during the interview.

The magnitude differs a bit across countries, but dynamics are the same. In the Scandinavian countries the long-term motherhood penalty is about 20 percent, whereas in U.S. it is about 30 and in German speaking countries 60 percent.

Even economists emphasize the role of the norms

The gender pay gap can also be explained by norms in our society. The norms are still very traditional, and women tend to take the greatest responsibility for childcare. Nowadays even economists emphasize the role of the norms explaining the gender pay gap. Women are typically staying at home with children, which explains the big impact childbirth has on the careers and earnings of men and women.

– The norms prevailing in society change very slowly. If now suddenly norms changed, it would take several decades to work through the labor market. Research results have also been obtained from this, Kauhanen points out.

An Austrian study has shown that all policy decisions related to parental leave and childcare since the 50s and 60s have not had an impact on gender wage differences. This is an indication of the strength of the impact of norms.

Increased remote working has helped combining work and family life more flexibly. If remote work becomes more common it might have a positive impact on the gender wage gap, says Antti Kauhanen.

COVID-19 partially deepened the challenges in the gender pay gap

The economic impact of COVID-19 has been very different to many other recessions, as the pandemic has hit women harder. This is explained by occupational segregation. The recession has hit hardest to the service sector where women are more represented. Also, possible closings of schools have increased studying at home and created new educational requirements at home which have largely fell on women.

The pandemic has thus deepened some of the challenges in the gender pay gap, but Etla’s Kauhanen also sees a possible silver lining in it.

– For example, increased remote working has helped combining work and family life more flexibly. If remote working becomes more common that might have a positive impact on the gender wage gap, Kauhanen ponders.

Professor Daniel S. Hamermesh was interested in whether the situation in the gender pay gap could be different in thirty years, for example. Kauhanen does not believe that men and women would be completely equal, even though the gender wage gap will have narrowed considerably. However, norms are changing slowly, he notes.

 


ETLA Economic Research is based in Helsinki, Finland. IZA World of Labor was launched in 2014. Academic online platform is part of IZA Institute of Labor Economics which is leading international network in labor economics.