Pay transparency is unaffordable for businesses and employees

A misguided way of fighting the gender pay gap...

The new EU Commission president Ursula von der Leyen has promised to move closer to closing the gender pay gap. The new instrument she intends on using is pay transparency—big mistake.

The European Commission works on creating pay transparency in the European Union. To fight the gender pay gap (which exists if you do statistics wrong on purpose), it wants to lay open the salaries of employees to check for discrepancies. Whether that would mean that businesses have to openly declare their contracts to the government or actually have to publicise salaries and other invoices remains unclear, however, some legislation already exists on the matter.

In Austria, a two-year reporting duty applies to private companies with at least 150 employees. It requires income reports to show gender-segregated mean or median pay in full-time equivalents per job category and qualification level indicated in the collective agreement and the number of male and female employees per job category.

In Belgium, the two-year pay reporting duty, introduced by the Gender Pay Gap Act 2012, is limited to the private sector but addresses companies with at least 50 employees. The data to be reported entail gender-segregated mean basic pay and allowances per employee category, job level, job evaluation class (if applied), seniority and education level.

France requires companies with 50 or more employees (and, in a more detailed form, companies with at least 300 employees) to annually draw up so-called ‘comparative equality reports’ concerning the situation of men and women employed, in terms of qualification, recruitment, training, pay, working conditions and work-family balance. Pay refers to the average monthly wage per job category.

Suppose the European Union decides to iron out the gender pay gap through pay transparency actively. In that case, it will create perverse effects inside companies, killing the incentive to ask for a raise.

Let’s say you write newspaper articles (close to home) and renegotiate the rate you receive per article. You end up receiving that raise. As this creates a gender wage gap within the company you’re working for, all female staff needs to get your raise as well, and – as the balance then tilts the other way – all the other male staff will also receive more.

If the company cannot afford to increase the rates of everyone, it is more likely not to give a raise at all. Ironically, if the company hires ONLY men, then that would be completely legal.

The idea that companies should not discriminate purely based on gender is a correct one. It is an arbitrary principle that has no place in a civilised society. The idea that statistical nonsense of gender wage gap statistics is proof of structural misogyny is utterly ridiculous. Women and men make different choices when it comes to education and the workforce — differences that are not accounted for in these statistics.

Therefore, the European Union’s policy on pay transparency is profoundly misguided and should not be implemented.