Bridging the Divide

Source: Flickr_Gender Wage Gap Warning _ Mike Licht_Notions Capital

Learn about pay gaps which can arise because of factors like gender. Understand the effect of these gaps on the economic growth and stability of a country.

Pay gaps aren’t a lesser-known issue. Many groups have made it known that there is a big wage gap between the two sexes because of inequality and patriarchal pressure. This is a significant economic challenge because it can heavily influence the overall working and stability of a country’s economy.

This can also arise between two racially distinct groups where one exerts dominance over the other and also between different ethnic groups. Whatever may be the driving force, the effect is evident and consequential.

Cause

The wage gap (or the pay gap) is a metric used to define the difference in pay between two groups. One of the most discussed examples of this is the gender wage gap in which the gap exists between what women are paid as compared to what men are paid. This metric highlights the differences along other themes like work, education, and occupation as well since we get to know how each of themes treats the two sexes. Currently, on average, a woman earns about 80 cents for every one dollar earned by a man.

No one cause is pinpointed as the sole reason behind this disparity. Of course, the first reason we can jump straight to is the discrimination women face in different work sectors. These prejudiced opinions can’t be quantified and removed by any sort of system. This is why 70% of the wage gap remains “unexplained” in the US, as reported by the US Department of Labor. And at the same time, it is found that this huge percentage generally aligns with the pay gap for women of colour. So, we have the answer to this one riddle- indirectly but we do.

Another reason that comes up is the career choice these women opt for. Many occupations are perceived as women’s “work” while many others are dominated and comprise mostly of men. This forms up to 10 to 33 percent of the gender wage gap and was reported by Claudia Goldin who won the Nobel Memorial Prize in Economic Sciences in 2023 for this.

And the last reason economists cite is the time taken off by women when they embrace motherhood. This is the reason which takes up the least space in the total number of reasons behind the pay gap but is the one which comes out on top in such discussions.

Effect

As mentioned earlier, the effect is swift. According to the Cross-country data on the gender wage gap compiled by United Nation’s International Labour Organization (ILO) which highlights that the gender pay gap isn’t slowing down for even the most developed countries in the world like South Korea, Russia, Switzerland, France, Norway, Spain, Belgium, and Poland.

Other than the obvious disadvantage of earning less than they should, there are more than just a few impacts of the gender pay gap:

One important consequence of this gap is the unwillingness of women to venture into different careers because they already know they would be paid less. Prior knowledge about the gender pay gap will help them make up their mind to not participate in the labour market.
It also aligns with a rapid decline in discussions about gender equality as it leads directly to a setback in the decades full of progress made by feminists and gender equality advocates
Many independent women workers aren’t able to save up enough for their retirements which can result in higher rates of poverty amongst retired individuals.
A lower starting salary means that promotions will be lesser than they should be. A lower salary directly translates to a lower raise.

Only 47 percent of women are active in the global labour market. This is obviously very less as compared to the 72 percent of men working alongside. Developing economies have it way worse and many statistical reports highlight the fact that the situation isn’t going to get better for many women anytime soon.

What will removing it do?

How does removing this wage gap help out a nation and its economy though? That’s the main question.

It is obvious that boosting the number of women involved in the global labour markets would automatically increase the number of brains and hands working for the global economy. There are several studies that have attested to this fact and the success this involvement guarantees once the pay gap is removed.

Consequently, the poverty rates of working women will be cut to half if women started working as much as men. This report is provided by a 2017 study by the Institute for Women’s Policy Research. This will be accompanied by an additional income of 512.6 billion US dollars to the US economy alone.
Another report by an international organization called ActionAid estimated that developing countries will witness a boost of 2 trillion dollars if the gap is bridged successfully!
The IMF estimated that there would be an increase in the GDP by 12 percent in the United Arab Emirates, 5 percent in the US, 27 percent in India, and 9 percent in Japan.
The workplace will become more diverse which will, in turn, create a more innovative and productive workforce.
Social norms and gender inequalities will be addressed and resolved to some extent as more women will operate from positions of authority.

Who wouldn’t want to reap such economic benefits? Anyone would! But unfortunately, attention isn’t provided to such issues and many nations keep on searching for other ways to boost their economy while the best solution is lying right under their nose.

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