Are Multinationals Doing Enough to Close the Gender Pay Gap?
Thu, February 2, 2023

Are Multinationals Doing Enough to Close the Gender Pay Gap?



A crucial aspect of the battle against gender inequality is the gender wage gap. While data from the Organization for Cooperation and Development (OECD) show gradual progress is being made towards equality, PwC's Women in Work Index 2017 reported that, on average, women still earn 16% less than men. The causes of the pay gap are deep-seated and often linked to women working less in remunerative sectors and filling more part-time roles, but the problem is much more than that. In reality, women have to face patriarchy and toxic masculinity every day.

According to the Pew Research Center, a nonpartisan fact tank that informs the public about the issues, attitudes, and trends shaping the world, the gender pay gap has narrowed since 1980 mainly due to the large gains women have made in educational attainment, occupational segregation, and work experience. It was estimated that the 15-cent gender pay gap among all workers in 2018 has narrowed from 36 cents in 1980. For young women, the gap has narrowed by a similar margin over time. Women ages 25 to 34 earned 33 cents less than their male counterparts in 1980, higher than 11 cents in 2018.

While this is good news, experts say that the gender pay gap has been relatively stable over the past 15 years or so primarily due to gender discrimination. A 2017 Pew Research Center survey revealed that 42% of women said they have experienced gender discrimination at work, compared with about 22% of men who said the same. The survey also showed that 1 in 4 employed women said they have earned less than a man who was doing the same job. Women have also been reported overrepresented in lower-paying occupations, contributing to gender differences in pay.


Women in Developing Countries Are Paid Less by Multinationals

Multinational companies play a crucial role in setting pay differentials since they have the power and capacity to pay their employees equally. However, many previous reports show that this isn’t happening. A 2019 analysis found that 4 in 10 private companies that published their gender pay gap reports last year are reporting wider gaps than they did. According to BBC, an operational business division of the British Broadcasting Corporation responsible for the gathering and broadcasting of news and current affairs, the big firms with a wider pay gap include Kwik Fit, Npower and Virgin Atlantic.



Of those 1,146 companies that were part of the survey, 74% reported a pay gap that favors men, 14% had a pay gap favoring women, and 12% reported no pay gap. The hourly median gender pay gap, which refers to the difference in pay between the middle-ranking woman and the middle-ranking man, in these firms was 8.4%, a slight improvement from 9.7% last year. "Closing the gender pay gap is not a quick fix, and employers may take time to see their gap close as they implement long term action plans," the Government Equalities Office said in a statement.

A recent analysis by the World Economic Forum, an independent international organization committed to improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas, showed that the gender wage gap turns out to be even larger in multinationals than in domestic firms in developing countries. In this study, the researchers used comprehensive micro-level data from over 40,000 employees in 13 countries. They found different results with developed and developing nations. While the gender wage gap is 25% larger in domestic firms than in multinationals in developed countries, the larger gender wage gap is found in multinationals and not in domestic firms in developing countries. 

The researchers explained that the reason why there’s a smaller gender wage gap in multinationals compared with domestic firms in developed countries is because of the multinationals’ highly formalized international human resources management systems and as well as greater attention to their role and reputation as good “global citizens” in such countries. Meanwhile, the reason why multinationals are found to be associated with an even larger gender wage gap than domestic firms in developing nations is related to these countries' cultures. 



According to JD SUPRA,  a daily source of legal intelligence on all topics business and personal, one of the main reasons why men are paid more than women is the difference in work-life patterns that sees them spend more time out of the workforce. Women also make up a higher proportion of part-time workers whose pay is generally lower than that of full-time colleagues. Matthew Moth, the founding partner of strategic communications consultancy Madano, stated that addressing the gender pay gap is part of a wider HR strategy.

"Organisations must think hard about the levers that they can use to drive change over time, as it will be tracked. This may be quite different from sector to sector but will include areas such as recruitment policies, training, education, tools to understand the impact of decisions on gender pay gaps and communication tools to help employees return to work more easily,” Moth said. 


Why Companies Fail to Close the Gender Pay Gap

According to Quartz, the gender pay gap also comes down to one major factor: workplace flexibility. A 2018 study by Harvard economics researcher Valentin Bolotnyy reported that today’s pay gap is a result of how workplace flexibility interacts with people’s personal life preferences and constraints. This is because both men and women make different choices about how to spend their time, and, unfortunately, workplace inflexibility harms women most.

There are many reasons why companies fail to close the gender pay gap in their organizations. For instance, if a firm has a 10% pay gap, the leaders would solve this issue by giving every woman in the firm a 10% raise - which is a major cost increase. Aside from that, they would evaluate every employee’s pay and give raises to every woman who appears underpaid based on their job and qualifications. However, this is wrong since it lacks a clear objective way of determining who is underpaid and can be equally expensive.


According to the Harvard Business Review, the leading destination for smart management thinking, companies need to establish a list of defined priorities to close the gender pay gap. This includes avoiding large discrepancies with the external job market, maintaining pay differences across job categories to reflect different job responsibilities and to incentivize good performance, capping raises to individual employees in percentage terms, minimizing the overall increase in the wage bill, and paying women fairly in the context of the firm.