Waging War On The Gender Pay Gap: U.S. v. Iceland

If Title VII of the Civil Rights Act of 1964 prohibits gender discrimination in the workplace, Iceland has now officially gone a step above and beyond: on January 1, 2018, it enacted a law that requires companies with 25 or more employees to pay men and women equally. The risk of non-compliance? A $500/day fine. The hurdle? Seeking equal pay certification from the government.

Many women’s rights activists have been celebrating this milestone, but when we asked U.S.-based CEOs how confident they felt that a similar law in the United States would help eradicate the gender wage gap, most said it was unrealistic at best, rating its likelihood of success 4.49 out of 10.

The Case for Meritocracy
“This is insanity,” commented one of the chief executives in our survey.

The main pushback, CEOs told us, is expecting companies to pay everyone the same salary if they are doing the same job. “Pay should not be the same for doing the same job,” commented the CEO of a mid-sized tech company who, nevertheless, believes the likelihood of success of a similar law in the U.S. is good. “Pay should be the same if the results are the same and the experience is the same…Those that deliver the results are more valuable employees and should be paid more.”

The concept of equal pay for equal results, rather than equal responsibilities, was not foreign to the Icelandic government when it drafted the law. Even under the new law, the country’s employers maintain the right to base pay on experience, education, technical skills, performance, or any other factor deemed appropriate. They are, however, obliged to demonstrate the fairness and non-discriminatory nature of their decisions. After all, paying everyone the same isn’t fair to anyone either, and companies risk losing their top performers if results aren’t rewarded.

“the great majority of those who responded to our survey are against such measures, mainly because they are a logistical nightmare and that markets—not government—should dictate compensation.”

So, what the law has done, in reality, is force employers to be proactive by proving their pay structure is not discriminating based on gender. While one CEO remarked that if mandatory audits have made their way into legislation, it is “because business won’t do what they should until forced [and fined],” the great majority of those who responded to our survey are against such measures, mainly because they are a logistical nightmare and that markets—not government—should dictate compensation.

“It’s extremely difficult to compare candidates and pay structures even among the same gender,” explained the CEO at another mid-sized tech company. “Enforcement of such a law appears difficult to impossible.”

The Work-Arounds
If defining “similar jobs” or finding comparables is one of the most apparent challenges of Iceland’s law, we can’t forget the possibility of loopholes, as in any regulation. And in a climate where leaders and business owners are pushing for less regulation, adding new laws would be perceived by many as another obstacle to growing a profitable company or, at the very least, a step back to the current deregulation trend.

Some CEOs also hinted at more unscrupulous work-arounds, like the idea that Iceland’s rule may result in numerous new creative job titles for similar work or pay packages with varying perks and benefits. Discrimination in hiring practices may also ensue, which in turn could backfire as companies battle lawsuits and grow apprehensive of hiring women.

“Government meddling will not eradicate the issue,” concluded the owner of a small professional services firm who rated a gender pay equality law in the U.S. as not at all likely to yield positive results. “Transparency of wages will. That effort is well on its way to standard best practice. When presented with sound reasoning and a solid structure for calculating wages, employees accept there will be differences.”

The Stigma
But what happens when those differences in wages are based on a worker’s ambitions? “The wage gap is really a life choice gap,” wrote the chairman and CEO of an upper middle-sized wholesale corporation.

“In general, pay gap is not dependent on gender but on qualifications and level of commitment,” echoed the chair of a small industrial manufacturing firm. “[Wage equality] already is close because of additional time and consideration for women’s needs.”

“I believe most of the wage gap is due to women taking off work and focusing on family,” added the chairman of a mid-sized wholesale company.

Gender aside, should an employee’s salary be reflective of their level of commitment to advancing their career? Is parental leave or work-life balance perceived as a lack of commitment?

Not so fast, says a female CEO in the male-dominant field of high technology. “There are many factors for the wage gap. Women are still playing catch up in many areas, including but not limited to education, lack of professionalism, not taking risks, etc. Plus, there remains an overall bias against women in the workplace.”

The Real Story
So, is there a solution? Some say no, because there is no real problem. Studies have shown the gender pay gap isn’t in respect to pay within a given role, but rather based on the fact that there are fewer women being considered—and pursuing—higher-paying positions.

“Women now have equal opportunity and in fact are now becoming even better educated than men. They are moving into the lower rungs of leadership positions, but it will still take some time for large numbers of them to get the experience that will qualify them for the top tier and achieve equal outcome.”

In the end, as the president of a mid-sized retail organization put it: “You can’t legislate fairness and ethical behavior, nor can it be enforced.” Eradicating the gender wage gap first requires consensus on its existence. Only then can we begin talking about compensation practices.

This data is from Chief Executive Group’s January 2018 CEO Confidence Index survey. 

SHARE
Melanie C. Nolen
Melanie is research editor for Corporate Board Member and Chief Executive. She has more than ten years of experience writing for the corporate and financial industry across Canada and the United States. She is based in Nashville, Tennessee.

PARTNER CENTER