Germany’s Big Pay-Gap Problem
(Bloomberg) -- Germany has flourished under Chancellor Angela Merkel over the last 12 years, with record-low unemployment and robust economic growth. But that success hasn’t translated into better pay for women in the country, where one of the worst gender pay gaps in Europe looks unlikely to get better soon.
Despite having a woman running the government, a new law aimed at highlighting the issue lacks the teeth to boost women’s standing in the corporate sector. The so-called Wage Transparency Act, which took full force in January, puts the onus on individual employees to step forward and request information on wage discrepancies, while companies are given plenty of wiggle room.
“The law will practically have no impact on furthering pay equality,” said Hans-Georg Kluge, a lawyer who specializes in anti-discrimination cases. “Individual women who are willing to take their case to court will draw no benefit from this.”
That’s a far cry from other efforts, where the responsibility rests with employers. In the U.K., companies are required to publish their gender pay gaps annually, and initial reports earlier this year sparked public furor as well as the resignation of a senior BBC editor in protest. The French government plans laws that would require pay-gap tracking.
Despite Merkel’s status as one of the world’s most powerful women and German politics peppered with strong female leaders, the role of women in the corporate world is limited. While the #MeToo movement has drawn widespread attention to sexual harassment and assault, the pay gap is in many ways anchored in German culture, with the term “Frauenberufe” (women’s jobs) used to refer to lower paid careers such as social work, hairstyling and nursing.
Even in fields dominated by women, such as medical assistants, men can get paid 40 percent more. The lower pay, along with more part-time work for women, mean they earn about 50 percent less over their working lives than male peers, according to a 2017 study by the German Institute for Economic Research in Berlin.
Such discrepancies, along with shortfalls in childcare and social pressures, contribute to fewer women in the workforce — 78 percent of working-age German men were employed in 2016, compared with 70 percent of women, according to the country’s statistics office. That’s a missed opportunity for an economy battling a growth-sapping labor shortage. The Labor Ministry said in a report last year that it sees “significant potential”' in raising the volume of hours worked by women, but that for that to happen general conditions would have to improve.
Globally, closing the pay gap and promoting equal participation in the workforce could enrich the world economy by some $160 trillion, according to a World Bank study published last week. That’s about twice the value of global GDP.
“Working for women should be something totally normal, and that could also help companies to cope with capacity constraints,” said Gertrud Traud, chief economist of Helaba Landesbank Hessen-Thueringen in Frankfurt. “We have a labor-friendly market right now. This is also true for women, and they should use it to their advantage.”
The wage law isn’t Germany’s first effort to highlight gender discrimination. A 2016 initiative required large companies to appoint at least 30 percent women to their supervisory boards. While that has had some impact at the top of the corporate ladder, broader inequality remains.
When the law was passed in July 2017, the German government said it was an “important step towards more wage equality,” because companies need to report on plans to balance working conditions for women and men. In reality though, the final version serves more to tick boxes than to generate underlying change, according to Torsten von Roetteken, a retired judge at Frankfurt’s administrative court and the author of numerous books on German gender-equality law.
“The hurdles are extremely high and require the individual to have a high tolerance and capacity for conflict,” Roetteken said. “Even then, there is still the danger of open or hidden bullying.”
Unsurprisingly, the response has been lukewarm. Just one in eight respondents plan to ask their employers to explain pay differences, according to a survey conducted by consultancy EY. A third of those balking at requests cited concerns about negative repercussions as the reason.
Deutsche Bank AG, with some 30,000 employees eligible, received 134 inquiries during the first quarter, even though Germany’s biggest lender has ready-made forms on its employee intranet site. With the first few months of the law being in force, Bayer AG had fewer than 10 employees step forward, and BMW AG received 17 notifications across a German workforce of over 90,000.
“Whether the law is effective is not measured by the total number of requests for information,” Germany's Family Ministry said in a statement. “It is about those people asking questions who have reason to believe that they are disadvantaged or need better evidence for salary negotiations.”
The institutional challenges were evident in a rare pay-gap dispute last year before the new law took effect. A reporter with German broadcaster ZDF lost a discrimination suit against her employer after a Berlin court ruled that employment conditions of a better-paid male colleague weren’t comparable. Without legal backing, German women at best can hope for the goodwill of employers or support from works councils, which represent staff interests inside German companies
“Transparency is becoming a differentiating factor,’’ said Gernot Sendowski, Deutsche Bank’s director for diversity and inclusion. “People who join companies inquire a lot more about the reality behind the slogans.”
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