New German government vows to tackle wide gender pay gap

Social Democratic Party (SPD) top candidate for chancellor Olaf Scholz, Greens party co-leaders Robert Habeck and Annalena Baerbock, and Free Democratic Party (FDP) leader Christian Lindner pose for a family photo after a final round of coalition talks to form a new government, in Berlin, Germany, November 24, 2021. REUTERS/Fabrizio Bensch

FRANKFURT (Reuters) – Germany’s new government on Wednesday pledged to tackle the country’s gender pay gap, one of the widest in the European Union, vowing to increase wage transparency through stronger legislation.

Europe’s largest economy comes fourth behind Estonia, Latvia, and Austria in EU rankings of EU countries that show difference in earnings of male and female employees, with women in Germany earning 19.2% less than men.

The average EU gender pay gap is 14.1%.

Ingrained cultural stereotypes and biases, poor access to childcare, skewed tax systems, and education idiosyncrasies mean that Germany’s pay gap has changed little under Chancellor Angela Merkel, economists and equality advocates say.

“Germany is one of the countries where action is most needed,” said Terry Reintke, a German European Parliament member who helped negotiate new government policy on the pay gap issue.

“Germany’s image on issues like gender equality is very different from the reality on the ground,” she said.

The government policy on pay is part of a wide-ranging contract agreed by the new coalition under Olaf Scholz after his narrow victory in September’s elections, which was made public on Wednesday.

“We want to close the pay gap between women and men,” the agreement said.

The government said that it would support an EU directive on pay transparency, which is currently under discussion by the European Commission and parliament in Brussels. According to a draft, many employers would be required to publish pay gaps and make efforts to shrink them if too large, or face penalties.

But there is opposition to the plan from the Confederation of German Employers’ Associations, which views the proposal as “Brussels bureaucracy”.

Steffen Kampeter, chief executive of the employers group, said in a statement to Reuters the proposals ignored root causes of pay inequality, such as career choice and part-time work.

He said what was needed was childcare and initiatives to reconcile family and career and the EU proposals were “merely an additional bureaucratic burden for companies”.

In Austria, where the pay gap is bigger than Germany’s at 19.9%, Sandra Konstatzky, whose office handles equality-related complaints, said people in both countries were reluctant to talk about income.

“That’s the real problem. That’s why both countries have to really push on pay transparency,” she said.

Economists say Germany fares poorly compared with countries like Italy because Germany has a higher portion of working women, but their work is often part-time. In Italy, fewer women work, but tend to earn more.

Pay inequality is widespread across industries in Germany but pronounced in finance.

A female manager at Hannover-based insurer VGH sued her employer after she learned that her male counterparts earned 1,000 euros a month more than her, her lawyer Jan Scholand said.

She won a victory in Germany’s labour court, which ruled that the burden rests on the employer, not the employee, to prove there is no discrimination.

VGH, which declined to comment on the case while it is pending in a different court, has called her claims “unjustified”.

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