How can we fight the gender pay gap?

Former Director of the Doctoral School and then Dean of Grenoble School of Management, Mark Smith led a European project on the social and economic impact of pay transparency measures as a means of closing the gender gap. Now Director of the Business School at the University of Stellenbosch in South Africa, he answered all our questions about pay transparency and how useful it is in closing the pay gap.

Equal pay is already a legal obligation, so why do we still get these figures that show it is not the case in practise?

Mark Smith: Yes, despite legal obligations - since 1975 in the EU - the gender pay gap continues. The main reason for this is that pay inequalities are linked to cultural and societal processes that lead men and women to make different choices. Making choices is not illegal and cannot be regulated.

In your work you talk about “vertical segregation” and “horizontal segregation” to explain the gender pay gap. What are they?

M. S.: Vertical segregation is the fact that men move up faster in companies. Women are less considered for management positions because of unconscious bias. For instance, the idea that a manager must meet certain characteristics that are generally found in men. Or because men have more linear career paths. They work all their lives, whereas women are more likely to take time off to look after children, for societal reasons. There is the so-called “mommy track” which is based on the stereotype that a working mum is not interested in her career and career advancement.

Horizontal segregation refers to the fact that men and women do not work in the same sectors or in the same positions. And it is a choice that is made at school. For instance, in engineering schools, there is always an over-representation of male students compared to female students. In business schools, parity is better. But as soon as you look at specialties, you see the same disparities. For instance, HR modules are much more chosen by women than by men. Whereas in finance, it's the opposite. It is not a question of interest but of integrated socialisation processes that push women to choose careers or professions that are deemed more compatible with family life. However, these decisions taken at the training stage have long-term consequences on wage inequalities.

In an article on gender pay inequality in Europe, you pointed to “the decentralisation of wage systems”. What is this and why?

M. S.: Centralisation of wages refers to a system where wages were set by collective agreement at national level. Since then, we have moved to a decentralised system. Therefore, the choice is up to the company and its managers. This gives companies much more agility, but as it could be more opaque, it creates wage inequalities. So, one solution is to put transparency back into the company to counter the negative impacts of decentralisation while keeping the good ones.

In fact, the European Union has proposed a plan for salary transparency. How can this measure help reduce gender inequalities?

M. S.: This European Union proposal requires companies with more than 250 employees to report on wage differentials and to be transparent about these data. When recruiting, candidates could therefore ask to have this data. Furthermore, if the gap is greater than 5%, the company is obliged to take action to reduce the pay gap. This is the first impact of such a measure.

Secondly, salary transparency brings salary differences to light. And that can be a bit embarrassing: it forces you to react. Knowing that at the end of the year, a report on pay differentials is published can allow managers to reflect on these decisions and ask themselves the right questions.

You emphasise the role of managers. Is this because the issue of pay inequality is played out at the time of wage negotiations?

M. S.: Yes, absolutely. When I was a teacher at Grenoble School of Management, I explained to my students that by the time they left school, they would already have a salary gap in mind depending on their gender. A gap of around €2,000. So obviously, young graduates are not going to negotiate in the same way and on the same basis depending on their gender. Female students need to be aware of this in order to negotiate better. But for things to evolve in the right direction, both sides of the negotiation must be aware. Managers must be aware of the unconscious bias to which they are subject. So indeed, something crucial is at stake during the negotiation.

What is the role of universities, especially those who train future managers, in reducing wage inequalities?

M. S.: Since managers have an important role to play, so do the universities and schools where they are trained. In the schools I attended, they try to avoid specific courses on 'gender equality' or 'diversity'. The aim is that these are not subjects that are presented only to people who are already interested. On the contrary, we try to integrate these issues into the core curriculum and into compulsory course modules to reach all students. Because if all the graduates of a school are aware of inequalities and the role that managers can play in them, when they are in a position to take decisions, we can hope that they will have the reflex to ask themselves the right questions.

In addition to training and raising awareness, schools have a role to play in turning future managers into true ambassadors for equality. If all graduates come out of their course wishing to promote equality and raise awareness among their future colleagues, universities become a huge force in reducing inequality.