Now that time’s up on the gender pay gap in Iceland, here’s how other countries can follow suit

A major turning point in the global fight for gender pay parity was marked on 1 January 2018 when a new Icelandic law on pay certification came into force. This landmark piece of legislation will make Iceland the first country in the world to truly enforce equal pay between women and men.

The law requires companies with 25 or more employees to obtain certification on the basis of an equal pay standard to prove that they offer equal pay for work of equal value, regardless of gender. Amongst other things, the equal pay standard (adopted by tripartite consensus) assesses a company’s pay policies and classification of jobs according to equal value and wage analysis on the basis of the classification.

In cases where a workplace has not acquired certification, unions and employers’ organisations can report it to the Centre for Gender Equality. The Centre can then impose on the workplace a formal demand to rectify the situation, failing which it can levy fines of up to 50,000 Icelandic krona (€400) a day. This legal power to sanction firms is a real game-changer.

In many parts of the world, the principle of equal pay is well-defined in national constitutions, labour and anti-discriminations laws, and in collective agreements. Yet one of the most persistent barriers to women’s economic empowerment and inclusive growth remains unequal pay. One of the causes of this is the construction and implementation of equal pay laws. For example, many legal systems depend on individual women to enforce equality by bringing court claims. Although unions often fund these cases, the individual nature of equal pay litigation still poses a major problem, especially for women workers in unorganised sectors.

The Icelandic law is so radical precisely because it collectivises the responsibility of ensuring gender pay parity.

The truth is Iceland has always been at the forefront of the fight for equality. For the past nine years, it has placed top in the World Economic Forum’s Global Gender Gap Report, which measures differences between women and men in health, economics, politics and education. However, Icelanders are not happy that their gender pay gap adjusted for working hours (the measure of the difference between men’s and women’s average earnings across an organisation or the labour market expressed as a percentage of men’s earnings) remained at 14 per cent, albeit well below the OECD average. While there are many causes of the gender pay gap, including occupational segregation and unequal caring responsibilities, paying women less than men also contributes to it. This is one of the main reasons why Iceland took the bold step of instituting equal pay certification.

So, what is the secret of Iceland’s success? It definitely is not down to just one factor, but high trade union density (80 per cent) and collective bargaining (90 per cent) rates have certainly helped.

For example, job evaluation schemes were created as part of the collective bargaining system decades ago with the aim of creating gender-neutral pay mechanisms.

Research has shown that the gender pay gap is lowest in countries where overall equality is higher and in countries where collective bargaining coverage is high. Amongst other things, estimates suggest that a 1 per cent increase in social dialogue coverage reduces the gender pay gap by 0.16 per cent. In fact, collective bargaining is generally an effective way of promoting gender equality. Even when it comes to equal pay litigation, there is evidence to suggest that without formal pay structures associated with collective bargaining, claimants’ law firms would not be in a position to adequately fight equal pay or back pay claims.

Although primarily a socio-economic policy issue, the Icelandic example shows that the law can play a huge part in the fight against gender pay disparities. However, a holistic approach must be taken as gender pay gap and wage transparency reporting without sanctions is simply insufficient. If countries really want to emulate Iceland, they must also repeal restrictive trade union and labour laws that stifle union organising and collective bargaining. In fact, equal pay legislation can be used to empower the social partners to find ways to reduce and eventually eliminate wage disparities.

Time’s up. Let’s end the scourge of unequal pay.