(Bloomberg) -- It’s been six months since Iceland made it impossible for businesses to keep paying women less than men for the same job, and Gudridur Gudmundsdottir is already a little richer for it.
A part-time chef at Iceland’s National Land Survey, the 58-year-old grandmother got a 4.5 percent wage increase, equal to $80 a month, after her bosses found she was underpaid relative to a group of colleagues.
“They moved me up two wage brackets,” Gudmundsdottir said after serving lunch at the agency’s offices in Akranes, about an hour’s drive north of the capital Reykjavik. “Women need to work up the courage to ask for something, so it’s good to have legislation backing us up.”
Iceland has long blazed the trail in gender equality, bringing the world its first democratically elected female president and first openly lesbian prime minister. Now the island in the north Atlantic is taking on the pay gap like no where else on Earth, requiring companies with 25 employees or more to prove they don’t discriminate on gender, sexuality or ethnicity lines—or face fines of 50,000 kronur ($470) a day.
Iceland’s previous cabinet of seven men and four women passed the bill last year just as workplace sexism was thrust into the global spotlight by the #MeToo movement. Worldwide, at least 417 high-profile men have been outed for sexually harassing female colleagues, according to one study.
Other countries are already studying Iceland’s new pay-parity rules to see if they can replicate them, including Nordic nations, Germany, Switzerland and governments as far away as South Korea and Panama, according to the International Labour Organization.
Yet even in Iceland, ranked first on the World Economic Forum’s Gender Gap Index for nine years, it’s largely a man’s world.
It’s been illegal to pay women less than men for decades, but Icelandic men still earn 10-12 percent more than women for similar work, according to findings of BSI Iceland, the main consultancy policing the equal pay law. BSI performed audits on 100 companies that voluntarily tackled their pay gaps in the past six years.
“In most cases the discrimination is unconscious,” said BSI general manager, Arni Kristinsson, who explained part of the issue is men tend to oversell their skills in interviews while women are more modest. The new law puts the onus on employers to ensure this doesn’t happen.
After taking office in 2017, Prime Minister Katrin Jakobsdottir, a 42-year-old mother of three young boys, vowed to eradicate the gap by 2022. Iceland’s largest businesses with 250+ employees need to comply by year-end. Others have until 2020.
It will cost companies about $20,000 for the certification and thousands more in consultancy fees. Companies must prove to an external auditor any wage difference between roles of equal value is justified, otherwise discrimination is assumed. Employees are measured against colleagues on the skills and knowledge needed for the job, the working conditions, the responsibilities and physical and mental effort required.
Several businesses interviewed by Bloomberg were rushing to tweak job descriptions to explain discrepancies. But some excuses—like paying someone more for speaking multiple languages when they don’t use the skill at work—won’t cut it.
While other European nations are taking steps to boost transparency too (in Sweden anyone can call up the tax authority to find out how much their colleague or neighbor earns), the difference in Iceland’s case is enforcement. Its law is also bound to benefit foreigners and men on the shyer side who’ve been undercut on pay.
“Very often you have beautiful laws, but then problems arise because the implementation mechanism is left open,” said Manuela Tomei, the head of ILO’s Department on Conditions of Work and Equality.
Calling the process “complicated” and “expensive,” VSV, one of Iceland’s biggest Atlantic fisheries, has hired Deloitte LLP to help with compliance, according to head of human resources Lilja Bjorg Arngrimsdottir. A majority of its 350 employees are male. The local branch of Ikea, which almost eliminated its pay gap a few years ago, said gender-parity policies give it a leg up in recruiting staff.
Iceland’s push for gender equality took off after 1975, when women went on strike, including from all housework and childcare, on Oct. 24, paralyzing the country. On the same day in 2016, thousands of women walked out of their offices at precisely 2:38 p.m., the cutoff time when women stop getting paid relative to men.
It’s still better to be a woman in the nation of 350,000 than most places. Women must occupy 40 percent of company board seats by law, new dads get three months of leave and, at 89 percent, it has one of the highest ratios of females to males in the workforce.
“The gender gap won’t close by itself,” said Rosa Gudrun Erlingsdottir, the civil servant tasked with the equal-pay legislation.
Given its small size, Iceland is a great place to see how the tougher legislation will play out, and what the unintended consequences might be.
Centerhotels ehf, which runs three- and four-star hotels, pointed out at least one: it’s getting harder to recruit chefs during a tourism boom because it can’t pay more without adjusting everyone’s wage. More than two million tourists visited Iceland last year, many attracted by the frozen landscapes and volcanoes featured in Game of Thrones.
“This law gives you less leeway to react to market circumstances,” said Centerhotel’s human resources manager, Eir Arnbjarnardottir.
While enjoying the extra cash, Gudmundsdottir, the Land Survey cook whose pay was raised after it was compared with receptionists, is still more skeptical than most about the fate of the gender pay gap.
“We have been trying this so long, for the last century or even longer,” she said. “The gender wage gap will always exist.”
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