Happy Gender Pay Gap-Day

Facts and Myths About the Gender Pay Gap. What Causes the Wage Gap Between Men and Women in Western Countries.

As every year, Austria marked February 13 as the day when women, statistically speaking, work for free. On average, they earn 21 percent less than men. But how has the wage gap actually evolved over the decades? Which factors truly matter? And how disadvantaged are women in the workforce today?

The debate dominates the media across the Western world—whether public broadcasters, liberal-progressive, or conservative outlets. It is the first discussion of the year, but not the last. In November, the topic will resurface—this time as the day from which women supposedly work for free. Austria is not alone in this, but it performs particularly poorly in the European comparison.

Just as predictable as the media outcry are the hundreds of comments in online forums. Many will point out the difference between the adjusted and unadjusted wage gap—only to be ignored once again.

What is particularly questionable about the common approach is that it focuses not on the explainable factors but rather on the part that remains unexplained by statistical variables. This gap in knowledge is then filled with ideological interpretations. However, these explanations often have little to do with the reality of most women in Western industrialized countries—let alone with those outside academic circles.

What explains the wage gap between men and women?

Long-term trends reveal some fascinating patterns. Between 1980 and 1989, the pay gap—the wage difference between men and women—closed particularly quickly. This catching-up process was driven mainly by three factors: higher education levels among women, increasing work experience, and greater union participation. In short, objective factors helped shrink the wage gap. At the same time, the unexplained portion of the gap, which cannot be attributed to measurable differences, also narrowed.

Since the 1990s, this trend has slowed significantly. The explainable wage gap has barely decreased, while the unexplained part has remained largely constant—a pattern seen in nearly all Western industrialized nations. Women now outnumber men at universities and participate equally in the workforce. Yet, the pay gap continues to decline only marginally.

Since the turn of the millennium, wage differences can no longer be explained by education or work experience alone. Instead, career choice, field of study, and industry sector have become the dominant factors. One could conclude that until the 1990s, women deliberately pursued career paths that freed them from outdated economic dependencies and enabled financial independence.

Similar trends can be observed in countries with lower average incomes. In Iran, 70 percent of STEM graduates at universities are women. Algeria, Mongolia, and Morocco show similar figures. In Germany, despite numerous support programs, the figure reaches only 32.4 percent.

To have the cake and eat it

The wage gap for women in lower income brackets has closed significantly faster in recent decades than for women in higher income groups. However, as income levels rise, the relative pay disparity increases.

With equal qualifications, work experience, and working hours, the wage gap at the lower end of the income scale is barely noticeable. Yet, it widens with each percentile. It is largest where women have the highest levels of education and earn the highest salaries. Example: The wage gap between an unskilled cleaning woman and her male counterpart is minimal. In contrast, the gap between a female doctor and her male colleague is the widest.

If one follows the logic of postmodern ideologies, this would imply that a worker in a laundry, on an assembly line, or in a hair salon faces less discrimination than an academic. In other words, women who had every opportunity but still chose to study anthropology or theater studies—fields with significantly worse job prospects than engineering.

The wage gap has also closed much faster in lower-income segments than in higher salary classes. This trend holds true for Austria and other European countries. In German states, the pattern is clear: the higher the average income, the greater the gender pay gap. The best figures are found in Mecklenburg-Vorpommern, Saxony, Thuringia, Saxony-Anhalt, and Brandenburg—the former East German states.

Correlation is not causation, and life choices are not a wishful concert.

In discussions, vague explanations about patriarchal social structures quickly emerge. Girls are said to be assigned roles from an early age—for example, by not being given toolkits to play with. This, in turn, supposedly leads them to choose traditionally female fields of study, work part-time, or take on the motherhood role more strongly.

However, a survey from feminist Sweden paints a different picture. There, the female employment rate stands at 80 percent, almost as high as that of men. But this is often not by choice, but out of financial necessity. High living costs and unstable job conditions make full-time employment a necessity for many women.

Additionally, the Swedish state only grants social benefits—such as free childcare or child benefits—if both parents work full-time. Yet, 45 percent of Swedish women say they would rather be full-time mothers. However, this lifestyle has become a privilege for the wealthy. Those who can afford it stay home. This dynamic, paradoxically, drives the Gender Pay Gap even higher.

The simple logic behind this: In Western countries, the Gender Pay Gap mainly results from the way affluent women exercise their freedom. Instead of pursuing higher salaries in the workforce, they focus on self-fulfillment. Women with lower incomes do not have this option. They continue working in laundries, accounting departments, or night shifts in restaurants.

Meanwhile, affluent women advocate for expanding their freedoms—often in the name of closing the Gender Pay Gap. But who should pay for this remains unanswered. Ironically, the very behavior of those who most criticize the Pay Gap contributes to its widening. This is illustrated in the following calculation:

A simple model helps to illustrate the effects. How do salary changes affect women’s earnings? In the first four rows, the individuals in our society are listed: a wealthy man, a low-income man, a wealthy woman, and a low-income woman. Everything else is assumed to be equal: work experience, industry, and working hours. The second column shows their annual salaries in euros for the year 1990. In the rows below (6 and 7), the average salaries of all men and all women in this society are displayed. The bottom row calculates the Gender Pay Gap at 8.82 percent (a purely fictional value). This base salary serves as the foundation for the three scenarios in the adjacent columns. Men’s salaries remain constant at the 1990 level in all cases. In the first scenario, the salary of the low-income woman increases by 1 percent, from 55 to 55.55 euros. This reduces the Gender Pay Gap by 0.32 percentage points. In the second scenario, the wealthy woman’s salary increases by 1 percent, while the low-income woman’s salary remains unchanged. This reduces the Gender Pay Gap by 0.59 percentage points. Thus, salary increases for wealthier women have a greater impact on the wage gap. In the third scenario, the low-income woman’s salary increases by 1 percent again, while the wealthy woman’s salary decreases—for example, due to part-time work or childcare responsibilities. Despite the income improvement for the low-income woman, the Gender Pay Gap increases by 0.26 percentage points. This is where many policy measures come into play. Resources often flow into supporting wealthier women to reduce the Gender Pay Gap. However, as this calculation shows, this can paradoxically lead to an even larger wage gap. (Source: Own calculations)

The Wage Gap Is Closing Because of Men

Now that we have developed an understanding of the Gender Pay Gap, a more pressing issue emerges. The wage gap between low-income women and low-income men has not only narrowed due to rising female salaries. Rather, a significant factor is that men in lower income groups have suffered substantial losses.

Globalization and technological change have eliminated many low-skilled jobs. Manufacturing jobs moved to China or Eastern Europe, displacing many workers. At the same time, the economy shifted: the industrial economy, with well-paid production jobs, was replaced by a service economy with lower wages, where women are often preferred for employment.

However, household wealth is not determined solely by individual income. What matters is the total household income earned by both partners. When both work, household income rises—even if one earns less.

Nevertheless, despite lower individual earnings, women often control a significant portion of household budgets. Studies show that over 70 percent of consumer spending is decided by women. This effect is further amplified by the fact that women tend to choose partners who earn more than they do.

Decisions on Consumer Spending from the Joint Household Budget: Example: In the USA, men decide on 27 percent of total expenditures, while women control 73 percent. In Germany, men account for 30 percent, while women make 70 percent of consumer decisions. (Source: Harvard Business Review, own calculations)

No Discrimination in Job Applications

The narrative of discrimination against women in job applications is hardly supported by evidence. A research team conducted an experiment, sending identical résumés to university faculties, with the only difference being the applicant's gender. The study covered 371 American universities and 873 professors. The result: With the exception of male economics professors, all faculties preferred female applicants—given the same qualifications. The findings are presented in the bar chart below. At best, such experiments yield mixed results.

Bevorzugung von Frauen bei akademischen Berufen an amerikanischen Universitäten

Example: 30 percent of female biologists preferred male candidates with equal qualifications, while 70 percent favored female candidates. (Source: Economist.com, own calculations)

Statistics and Reality

Discussions about the Gender Pay Gap are often shaped by ideologies and political narratives. However, a look at long-term trends and international comparisons reveals a more nuanced picture. Social structures have changed—along with the causes of the wage gap.

In the early decades of progress, women benefited primarily from higher education, entry into the workforce, and increasing work experience. However, since the turn of the millennium, different factors have played a greater role: the choice of field of study and industry sector.

Western women rarely enter high-paying sectors such as mechanical engineering or IT, unlike their counterparts in poorer regions.

There is little evidence to support claims of systematic discrimination in job applications. However, income redistribution still takes place within households—mostly through higher-earning men.

Ultimately, statistics do not strongly support the common narrative of structurally disadvantaged women in the labor market. Policies aimed at increasing female workforce participation must consider these factors—otherwise, they risk being ineffective.

Read more:

Blau, F., & Kahn, L. (2017). The Gender Wage Gap: Extent, Trends, and Explanations. Journal of Economic Literature , Vol. 55, No. 3, S. 789-865.

Cheryan, S. (2012). Understanding the Paradox in Math-Related Fields: Why Do Some Gender Gaps Remain While Others Do Not? Sex Roles, Vol. 66, S. 184-190.