Mind the (gender pay) gap: what it tells about work inequality

The pay gap between men and women, commonly referred to as the gender pay gap, is one of the most persistent inequalities in contemporary labor markets. Despite decades of equality policies and increasing levels of female education, women in most Western countries continue to earn less than men on average. Understanding what the gender pay gap is, how it is measured, and what factors determine it is essential to interpreting the economic and social dynamics that still produce gender inequalities in the workplace today.

What is the gender pay gap 

The gender pay gap measures the average difference in wages between men and women. In its simplest form, it is expressed as a percentage of male wages: that is, it indicates how much, on average, women’s wages are lower than men’s. This does not necessarily mean that, for the same job, women are offered contracts with lower hourly wages than their male colleagues; rather, it means that, considering all women and men in the labor market, the average wages of the former are lower than those of the latter in absolute terms.

For example, in the United States between 2009 and 2010, the average annual wages of white men were about 51% higher than those of white women, while considering only full-time workers, the gap fell to around 40%.¹ These represent the so-called unadjusted gap, which simply compares average wages without taking into account differences in the individual or professional characteristics of workers.

However, the gender pay gap does not stem from a single cause. Part of the difference may be due to observable factors, such as level of education, work experience, or sector of employment. Another part may reflect different treatment of men and women with the same characteristics, i.e., more or less explicit forms of discrimination.² For this reason, economists seek to break down the pay gap into different components.

How the gender pay gap is calculated

In its simplest calculation, the gender pay gap is given by the difference between the average male and female wages. In many economic studies, this difference is analyzed using the logarithm of wages, which allows differences to be interpreted in percentage terms: ∆w=wM-wF.

One of the most widely used tools for analyzing the gender pay gap is the Oaxaca-Blinder decomposition, developed in the 1970s by economists Ronald Oaxaca and Alan Blinder. This method allows the wage gap to be divided into two main components: the explained component, which depends on differences in observable characteristics between men and women, and the unexplained component, which represents the part of the gap that remains even after controlling for all observable characteristics. This component is often interpreted as a possible indicator of discrimination.

In practice, the decomposition consists of applying the estimated wage coefficients for men to the characteristics of women. In this way, it is possible to simulate what women’s wages would be if they were paid according to the same criteria as men. If there remains a significant difference between the simulated wage and the actual observed wage, this is attributed to the unexplained component.This does not necessarily mean that the entire unexplained component is discrimination, but it suggests that unobservable factors or discriminatory practices may play an important role.

Figure 1. Composition of the explained gender pay gaps at country level (in %), 2014. Source: Boll C. & Lagemann A., Gender pay gap in EU countries based on SES (2014), European Commission.

Figure 2. Composition of the unexplained gender pay gaps at country level (in %), 2014. Source: Boll C. & Lagemann A., Gender pay gap in EU countries based on SES (2014), European Commission.

The gender pay gap remains a key issue in Europe too. According to recent data from the European Commission, in 2023 the average unadjusted pay gap in the European Union was expected to be around 12%. This means that, on average, women earn around 12% less than men for every hour worked.

According to the European Commission’s 2014 SES report, the gap breaks down into 4.8% explained and 9.4% unexplained, with national variations ranging from 1% in Romania to 23.5% in Estonia. Eastern European countries (Poland 7.8%, Lithuania 6%) show low gaps but high adjusted gaps (12.5% Poland 2018)³, linked to sectoral segregation (24.8% ICT, 27.6% finance). In Germany (20.7%), reduced hours and part-time work penalize women (7.2% explained). Italy and Spain have moderate gaps (7.9%, 14.5%), mitigated by higher female education but amplified by family absences.⁴ 

Factors explaining the gender pay gap

Much of the economic literature shows that a significant portion of the gender pay gap is linked to differences in the career paths of men and women. These differences stem from various social, institutional, and cultural factors.

First, statistics must take selection bias⁵ into account: historically, female labor force participation has been more discontinuous than male labor force participation. This implies that the sample is biased by fewer observations in the labor market. In the 1980s in the US, for example, women’s potential work experience was estimated to be around 71% with respect to 93% of men. This was not only due to a cultural tradition that relegated women to the role of “angel of the hearth”, but also to periods of inactivity or career breaks, such as maternity leave.

This inevitably affects the number of hours worked: women work part-time more frequently⁶, often to balance work and family responsibilities. Part-time work generally means lower wages and fewer opportunities for advancement.

This is because caregiving responsibilities – for children, the elderly, or other family members – still fall largely on women, resulting in absences from work for maternity or caregiving activities. This phenomenon is often referred to as the care penalty,⁷ i.e., the wage penalty associated with motherhood due to inflexible working hours, which prevents women from being included in the workplace culture and favors biased promotion systems.

Another important cause of the gender pay gap is occupational segregation,⁸ i.e., the concentration of women in certain sectors or professions that are generally less well paid. This phenomenon takes two main forms: first, horizontal segregation, in which women and men are concentrated in different sectors – for example, women are overrepresented in professions such as receptionists or administrative assistants, where they can make up over 90% of the workforce; and second, vertical segregation, whereby women are less present in top management and leadership positions. This leads both to women being forced into low-income jobs and to a further reduction in that income due to poor bargaining power caused by the surplus supply in those sectors.

This is referred to as the glass ceiling, i.e., the invisible barriers that prevent women from accessing the highest management positions. Even if opportunities are formally open to all, organizational practices, stereotypes, or informal networks can limit women’s advancement.

Discriminatory forms of the labor market

From here, we move on to hypothesize how the unexplained part of the gender pay gap may reflect different forms of discrimination in the labor market.

According to Gary Becker’s theory, some employers may have discriminatory preferences – that is, an “aversion” to working with women – and therefore be willing to pay male workers more.

Another form is statistical discrimination; in this case, employers do not discriminate based on personal preferences, but base their decisions on average expectations regarding the productivity of groups. For example, they may believe that women are more likely to interrupt their careers for maternity leave and therefore offer lower wages or fewer opportunities for promotion.

Policies to reduce the gender pay gap

Reducing the gender pay gap requires action at several levels. In 2023, the European Union adopted the Pay Transparency Directive,⁹ which aims to increase transparency in remuneration and facilitate the identification of any wage discrimination.

However, this is not enough; it is also necessary to enable women to balance work and family life. Accessible childcare services and equally distributed parental leave between mothers and fathers can reduce career breaks for women. While a measure to equalise parental leave was recently voted down in Italy,¹⁰ several Nordic countries, such as Sweden, Norway, and Denmark,¹¹ already have mandatory parental leave that can be shared equally between mothers and fathers. The goal is not only to allow fathers to be more present in their children’s lives or to reduce the gap between female and male career breaks due to maternity, but also to promote a model of shared parental care¹² that enables women to have full-time jobs and suffer less of a care penalty.

If this helps to reduce the gap explained by fewer working hours, educational and career guidance policies can encourage greater female participation in the scientific, technological, and financial sectors, which are traditionally more lucrative. This would not only allow women to access jobs with higher average incomes, but also reduce overcrowding in sectors where gender segregation is prevalent.

Conclusion

The gender pay gap is a complex phenomenon with multiple causes. A significant part of the gap stems from observable differences in career paths, often linked to the unequal distribution of family responsibilities and occupational segregation. However, a not insignificant portion remains unexplained even after controlling for these characteristics, suggesting the persistence of forms of discrimination in the labor market.

In recent decades, the gap has gradually narrowed in many countries, thanks in part to greater female participation in the workforce and higher levels of education among women. However, the problem has not yet been resolved.

Understanding how the gender pay gap arises and how it is measured is an essential step in developing effective policies. Only by addressing the structural causes – from the division of domestic labor to wage transparency – will it be possible to significantly reduce one of the most persistent economic inequalities in contemporary societies.

1.  Borjas, G. J. (2020). Labor economics (8th ed.). McGraw-Hill, p. 388. ↩︎
2.  Ivi, pp. 373-378. ↩︎
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4.  Boll C. & Lagemann A., Gender pay gap in EU countries based on SES (2014), European Commission, pp. 15-19. ↩︎
5.  Borjas, G. J., op. cit., p. 399. ↩︎
6.  Boll C. & Lagemann A., op. cit., p. 24. ↩︎
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8.  Borjas, G. J., op. cit., p. 401. ↩︎
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10.  “Congedo parentale paritario: cos’è e perché è stato bocciato”, IlSole24Ore, Feb 24th, 2026, https://www.ilsole24ore.com/art/congedo-paritario-cos-e-e-perche-e-stato-bocciato-AIGuMpbB?refresh_ce=1. ↩︎
11.  Nicolosi E., “I favolosi Latte Dads dei Paesi del Nord Europa: un modello che vince a confronto con i papà italiani”, Fem, Jan 7th, 2026, https://www.alfemminile.com/genitorialita/chi-sono-i-latte-dads-e-perche-rappresentano-un-modo-migliore-di-essere-padri/. ↩︎
12.  Lomazzi V., Israel S., Crespi I., “Gender Equality in Europe and the Effect of Work-Family Balance Policies on Gender-Role Attitudes”, Social Sciences, Vol. 8, No. 5, 2019, 1-29. ↩︎