Can the World’s Most Equal Country Finally Kill the Gender Pay Gap?

(Bloomberg) -- No country can match Iceland in gender equality. Icelandic women earn just 8 percent less than men with similar experience in similar jobs—one of the smallest discrepancies in the world. There are laws mandating leave for parents and requiring that at least 40 percent of corporate board members are women. Yet in the country ranked best for gender egalitarianism by the World Economic Forum, that 8 percent income gap stubbornly persists, even in spite of an equal-pay law passed in 1961. That's right: Iceland's pay gap is technically illegal.

Now, in a bid to finally reach parity, the country is going to make companies prove that men and women are paid exactly the same.

Iceland's new Equal Pay Standard, which went into effect this week, requires companies with more than 25 employees to submit to the government an official salary level for all positions. The salary data must be updated every three years.

As a result, with the exception of some small wiggle room, jobs in Iceland will now come with a nonnegotiable, predetermined salary. “There is some room for an upward adjustment, for example if a worker adds extra value to the work,” Marianna Traustadottir, an adviser with the trade union Icelandic Federation of Labor, said in an interview with the Nordic Information on Gender research group.

The goal of the law is to make wages as fair and transparent as possible while also eliminating the need for negotiation. Numerous studies have shown that men are more successful at negotiating salaries than women. Reasons for this vary. Last year a Harvard University report on business negotiation tactics found that men are often more assertive than women—and that assertive women tend to be punished for appearing pushy.

Iceland's Ministry of Welfare has been working on the new law since 2008, and the government ran pilot studies with private and public companies starting in 2012. Now the burden of proving discrimination will shift from the employee—who previously had to prove discrimination in court—to the employer, which will now be required to prove pay parity to the government.

While Iceland's new law is also expected to curtail racial wage discrimination, the impact will be relatively minor, since roughly 94 percent of Icelandic residents are of Nordic or Celtic descent.

Even if the law proves great news for Icelandic women, it's unlikely to eliminate the wage gap completely. Across Iceland's entire workforce, women make about 16 percent less than men, according to Statistics Iceland, the country's national statistics agency. (In the U.S. that figure is about 20 percent.) At least half that gap is due to the fact that, as is the case in many countries, women and men are clustered into different industries. The most common occupation for Icelandic women is teaching; for men, it's what Statistics Iceland refers to as “business professional.” The agency also estimates that women work about 2.5 fewer hours than men each week.

In 2012, when Iceland mandated a boardroom quota of 40 percent women for companies with more than 50 employees, only 3 percent of company board members across the country were women. The quota worked—nearly half of board seats are now held by women. Even the makeup of Parliament is approaching parity, with women routinely claiming about 40 percent of seats. (In the U.S. Congress, meanwhile, women occupy about 20 percent of seats.)

Iceland has been using the law to achieve true gender equality for years. All families receive nine months of leave for new children, with fathers required to take at least three of those months so as to share the costs of career interruption. Affordable preschools have also allowed nearly all Icelandic mothers to work and remain financially independent, if they choose. About two-thirds of babies are born to single mothers or unmarried couples, the highest out-of-wedlock birthrate in the world.

Still, sexism remains a problem. Last year more than 1,000 current and former female politicians in Iceland joined the #MeToo movement, sharing stories of harassment and discrimination—a massive outpouring of firsthand testimony in a country of roughly 335,000 people. One politician was told her voice was too shrill. Another said she was slipped a date rape drug during a national party convention.

Assumptions about women and the value of their work are believed to be the driving force behind Iceland's inexplicable wage gap. “There's a tendency to look at work usually done by men as more valuable,” Snorri Olsen, Iceland's customs director, told the New York Times last year. “This is technically a discussion of equal pay, but it's really a question about equality in our society.”

To contact the author of this story: Claire Suddath in New York at csuddath@bloomberg.net.

To contact the editor responsible for this story: Aaron Rutkoff at arutkoff@bloomberg.net.

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