Equal pay for equal work in Europe? The key may be transparency.

Henrike von Platen was intent on fighting gender discrimination, but she couldn’t shake the feeling that tools like unconscious bias training and diversity workshops were akin to “someone letting us play in a corner, doing kindergarten stuff.” A financial expert, she decided that the key to equality was increasing women’s wages, which consistently lag 20% behind men’s in her native Germany.

So when the German government passed legislation in 2018 requiring larger companies to tell women how their salaries stacked up against male employees’, on average – if they asked – it seemed like a win.

There was a problem, though. Two years later, only 4% of employees had made any such inquiries. Analysts had a hunch as to why: “It put all the burden on women’s shoulders – and many get stigmatized the minute they ask the question,” says Ms. von Platen.

She decided to invite CEOs to take part in a rigorous inspection of their pay structure that would – through transparency – ultimately establish their bona fides as fair payers. The willingness of growing numbers of companies to voluntarily get on board with the nonprofit she subsequently formed, the Fair Pay Innovation Lab, has catapulted the campaign to national acclaim, earning kudos from the German minister of labor.

“If we don’t close pay gaps, women will never reach the same level of power and decision-making as men,” Ms. von Platen says. “I really want to see that happen. Before I die.”

This growing sense of urgency, driven in part by the inequalities the pandemic has laid bare, is helping to usher in a wave of pay transparency measures throughout the European Union.

While the equality of men and women was a founding principle of the EU, the continent’s gender pay gap has long been stuck at 14% – and double that when pensions are taken into account.

This year, a spate of powerful new efforts by a number of member states to close the gender pay gap has culminated in European Commission President Ursula von der Leyen’s proposal for sweeping new legislation that would, among other things, compel companies throughout Europe to share salary data broken down by gender and prohibit them from asking job applicants their salary history.

Lack of pay transparency has long created a gray zone favoring the perpetuation of gender bias, Dr. von der Leyen argued in March. “Women must know whether their employers treat them fairly. And when this is not the case,” she said, “they must have the power to fight back.”

“Most bosses want to do the right thing”

As the EU’s first female president, Dr. von der Leyen has prioritized gender equality in a way her male predecessors haven’t, but she is also taking advantage of a shift in the societal zeitgeist surrounding the basic decency of equal pay.

It was a revelation from the highest levels of the BBC, the venerable news outlet, that helped catapult the issue into the public eye back in 2017, when – as part of its funding agreement with the British government – the company was compelled to make its salary data public. It turned out that just two of its top 14 earners were female, and that the top-paid man was earning more than 2.2 million pounds ($3.1 million), while the top woman – the 8th-ranked earner overall – was making some 450,000 pounds ($624,000). Two of the BBC’s international editors were shown to be making more than 50% more than their female counterparts.

Luis Vieira/AP

European Commission President Ursula von der Leyen speaks during a media conference in Porto, Portugal, on May 8, 2021. Dr. von der Leyen has made equal pay for equal wages a priority for her tenure as Europe's leader.

During a lawsuit brought by television presenter Samira Ahmed, who was making 12% of what a male colleague earned, BBC lawyers argued that their work was very different, since the man’s job required him to be like a “concert pianist in a concert hall,” while Ms. Ahmed’s role was like “someone playing piano to a ballet class of 10 children.” Ms. Ahmed won her lawsuit.

In an equally high-profile case still being fought, the U.S. women’s national soccer team used the transparency that comes with sports star earnings to sue the U.S. Soccer Federation. The players have accused the federation of discrimination over the discrepancy between their income and that of the U.S. men, who get paid more but have earned far less international success than their Women’s World Cup-winning peers. The campaign caught the attention of then-presidential candidate Joe Biden, who tweeted, “To @USSoccer: equal pay, now. Or else when I’m president, you can go elsewhere for World Cup funding.”

For Lasse Rheingans, founder and CEO of digital development firm Rheingans, the sense of injustice he felt in hearing about these cases collided with a practical outlet for clear action after he met Ms. von Platen at a conference in Berlin.

Discussing the gender pay gap with her over a high-top table in a hotel lobby, Mr. Rheingans recalls thinking, “I just can’t cope or understand it, how people can be so – perhaps, mean? – as to accept this.”

He had sold his shares in a former company in 2017 to start his own enterprise. Back then, he says, “I earned more money – but I managed to spend it all without being happier.”

In his new company, Mr. Rheingans wanted to try different ways of doing business around “how would we like to work and live in the future – what is important, and what really matters?”

To this end, he pioneered a 5-hour workday for his full-time employees, garnering considerable press coverage. In the process, “I got so many messages from managing directors at midsize companies being so thankful, because they realize that they’re not alone in questioning the status quo.”

When Ms. von Platen asked him if he would like to embark on an analysis of salaries in his company to check for gender bias, “I was like, ‘Yes!’ straight away,” says Mr. Rheingans.

His expectation is that “we don’t have any pay gap at all, because I don’t differentiate between men and women with regard to payment.” But Mr. Rheingans is also open to evidence to the contrary, acknowledging the countless studies showing that women tend to undervalue their skills, ask for less money, be more reluctant to negotiate and, when they do, be met with less success, largely because women who request – or, as it’s often put, “demand” – more money are often seen, consciously or unconsciously, as less likable than men who do the same, especially when they’re women of color.

“Today, we have so many jobs that are so specific and – I’ve experienced it myself – I have no clue sometimes what I should pay. It’s nothing I do with bad interest. If a woman asks for 40,000 euros and a man asks for 50,000, I didn’t set out to pay a woman less,” says Mr. Rheingans. “This is the good thing about this process – you can find things that you do unintentionally. Maybe we haven’t found out about it yet – perhaps we’ll find out about it soon.”

Most companies believe they’re paying their employees fairly, and are surprised to learn, in fact, they’re not, Ms. von Platen says. “That’s the main culture, I’d say – most bosses want to do the right thing, not suck the last honey out of a person for as little as they can get it.”

The jolt they get when they discover that they are part of the gender pay gap problem is what inspires many companies to make a change, she adds. “You have this moment where they’ve done the analysis, and the figures for the pay gap come up on a power point slide. I’ve had one experience where a CEO goes, ‘Stop – that’s not possible!’ It’s great. This is really what you want – that moment.”

The effects of transparency

Such moments may be coming for growing ranks of companies. Between 2018 and 2020, the number of national laws requiring employers to take legislative steps towards reducing the gender pay gap has more than doubled, from 6 to 13 countries, including France, Ireland, the Netherlands, Portugal, Spain, and Switzerland.

Pascal Rossignol/Reuters/File

A woman holds a sign during a protest demanding equality on International Women's Day in Paris, March 8, 2020. The sign reads "More empty words than equal pay."

The common thread running through all the measures is a requirement that firms with anywhere from 50 to 150-plus employees carry out a gender pay gap analysis and report it to the government – though this information is not always made public, according to PwC research. Other countries, including the United Kingdom and Germany, do not impose any financial sanctions for noncompliance.

France’s new legislation took effect in March 2019, for example, requiring firms to publish their global score against a 100-point scale “gender equality index.” The year after the law took effect, the average score among businesses with more than 1,000 employees increased from 83 in 2019 to 87 in 2020; those with 250 to 1,000 workers saw their index scores rise from 82 to 85. Roughly 2% of businesses scored 100 points. The higher the score, analysts argue, the more attractive a company will be to employees.

And the better paid women will be. This is in line with U.S. studies that conclude that women in states like California that have transparency measures – for example, outlawing demands that employees not discuss their salaries, under threat of termination – have higher earnings.

Even seemingly small increases in women’s wages have outsize benefits, according to the EU’s Joint Research Center, which calculates that a 3 percentage point drop in the gender wage gap would substantially decrease the poverty risk for single-parent households.

Such considerations are particularly urgent amid the pandemic, when women have taken on the bulk of caring responsibilities prompted by the closure of schools and fear of nursing homes, “endangering hard-fought progress towards gender equality,” the European Commission warns.

At the same time, the crisis has “exposed the deep-rooted bias behind wages for professions dominated by women, with carers and cleaners recognized as ‘essential’ despite being amongst the lowest paid,” notes Esther Lynch, deputy general secretary of the European Trade Union Confederation, which represents 45 million European workers. “It breathed life back into the old demands of equal pay for work that is massively undervalued.”

“We can no longer ignore the bad state of affairs”

Beyond basic decency, analysts add, there’s a mercenary argument for companies as well: Research shows that employees are more productive when salaries are transparent.

In the past, Maxi Jaschinski felt undervalued by employers. “I saw hierarchies, stereotypes, gender pay gaps – to put it in a nutshell, you are often not that respected when you are a young woman,” she says. “You have to work much harder than your male colleagues to reach your goals. That’s frustrating.”

When she learned that Rheingans, her current employer, would be taking part in the Fair Pay Innovation Lab’s audit, “This felt like another step for gender equality,” she says. “It’s not only talking about how we’re all equal, that we share tasks and responsibilities – but we also share money.”

Today, Ms. Jaschinski says she feels more than well-compensated. “I feel really, really inspired.”

Companies’ response to inequities revealed through transparency can help them stand out – or not. When the U.K.’s reporting requirements revealed that budget airline Ryanair had a gender pay gap of 72% – with women making up 3% of the top quarter of earners – the all-male senior management board responded that this was simply due to the fact that most pilots are men and that, hopefully, more women would apply in the future.

By contrast, Ryanair rival EasyJet, whose 45% pay gap had also attracted widespread criticism, pledged that at least 1 in 5 of its new pilot recruits would be women by 2020, and embarked on a series of staff surveys. These revealed that while most male pilots had decided on their careers by age 11, with much encouragement, women didn’t receive similar childhood cheerleading. The airline announced a partnership with a girl scouting organization to sponsor an aviation badge.

With an eye on the bottom line, EasyJet’s CEO also took a $48,000 pay cut to match the salary of his female predecessor.

Despite the stereotypes of mercenary corporations out to save a buck, Mr. Rheingans argues that a younger generation of CEOs, in addition to running successful businesses, are actually interested in issues like equality and fairness.

“To bring about long overdue change, we can no longer ignore the bad state of affairs – we have to clearly call it out,” he says. “I’m willing to give profits towards making it so my employees are healthier, happier, and stay on board longer,” he adds. “It’s way better than having the next 1,000 euros in my account.”