Gender Wage Gap: A Comparison Between Canada, South Korea, And Sweden

Executive Summary

This report outlines the topic of the gender wage gap within companies and how HR departments can tackle this issue by educating their employees. Countries such as Canada, South Korea, and Sweden have taken action to close the gender wage gap in terms of implementing programs that companies must or should enforce. This directly impacts the HR departments of the companies in these countries as they are tasked with educating employees about the policies regarding the wage gap.

The three countries were found to be taking steps to decrease the wage gap by investing in early education, childcare, extending parental leave to men, and large fines on companies who were to be found in direct violation of pay equity laws. In jurisdictions in which legislation has been passed but is not actively being enforced companies such as Lululemon and Ikea take it upon themselves to update their HR policies. Companies located in South Korea were found to have a larger disparity between men and women in the workplace. Resulting in the South Korean government enforcing legislation on companies because of their unwillingness to enact pay equity policies.

Our research found that one of the leading factors causing pay inequity was the socio-culture of the three nations in regards to women taking maternity leave and occupying more lower-paid or part-time positions. The issue regarding the wage gap also was found to be that multinational companies in Western countries were more likely to take action. Organizations that took a proactive rather than reactive approach to pay equity stand increased profits by both reducing turnover and increasing job satisfaction among female employees and by improving their public image.

Introduction

Since the dawn of the industrial revolution women have been paid markedly less than men and although this inequality of pay has been reduced in recent years it is still prevalent in a number of countries such as Canada, South Korea, and Sweden. At this point in time most governments of developed countries have enacted pay equity legislation. For example,the UK requires all companies to assess and publicize data on their pay gap and their plans to shrink or eliminate it. Some companies, such as Lululemon and Ikea, are taking a proactive approach to pay equity and have seen bottom line returns as a result. In other parts of the world pay equity legislation has been passed but is not actively being enforced. Companies in countries such as South Korea are still using HR policies that were created prior to the passing of pay equity legislation and haven't been updated, a government enforcement instrument is either lacking or not being used. This paper will discuss the issue of pay equity, pay differences in gender, the various steps governments of different countries have taken in an attempt to close the gender gap, their failures and successes, and the ways in which organizations have reacted to the issue of pay equity.

Canada

According to Statistics Canada, for every dollar a man earned, a woman earned 87 cents in hourly wages for full-time workers in 2016. But when comparing overall earnings on an annual basis, women earned significantly less at just 69 cents for every dollar a man made. Some of the issues of pay equity in Canada can be related to the over-representation of women in part-time work, women being employed in low paying work sectors, women’s lack of representation in senior positions and gender discrimination in the workplace.

In 2018, Canada established a significant piece of legislation under the Pay Equity Act to begin proactive pay equity in both the public and private sector. This important legislation is to advance gender equality in the workforce. This legislation, in collaboration with the government's investments in quality childcare and more focus on creating more flexible work arrangements, sees women growing in STEM fields, trades, and entrepreneurship. This is because these two pillars of support champion women in all fields by supporting them holistically. The government needs to continually and financially support early learning to change the stigma, plus, enhance flexible parental leave, pay transparency, the continued appointment of skilled women into leadership positions, and improved flexible work arrangements to support work-life balance.

Unfortunately, since 1977, the Canadian Human Rights Act has recognized pay equity as a right for employees in the federal jurisdiction under a complaint-based system. As a result, it does not need employers to actively examine their compensation practices. Instead, the responsibility falls upon its employees to issue complaints regarding pay discrimination. A proactive HRM system would take that burden off employees and would instead require employers to undertake pay equity analysis to ensure that their compensation practices are in line with pay equity requirements.

Though few Canadian companies have championed for employer-led pay-equity initiatives, as a team, we see that Lululemon HRM stands out as one Canadian company that has leveraged the Pay Equity Act, government support and corporate responsibility to achieve 100% global pay equity for their 15,000 global employees, which includes 425+ stores worldwide. To achieve this, we believe that Lululemon HRM mainly focused on diversity and inclusion training which included mandatory foundational training on unconscious bias that fostered collective awareness. Plus, improved parental leave (a gender-neutral program) which includes paid top-up and other benefits to incentivize talent retention. We believe that South Korea can learn from Lululemon’s example to champion a gender-neutral initiative to best attract talent to see exponential growth as opposed to relying on the traditional patriarchal system that is embedded in their culture that excludes untapped talent and therefore potential monetary growth. Other companies should look to Lululemon and Ikea as a large corporation that can bring about global pay equity change, regardless of the cultural norms and legislative obstacles.

South Korea

According to the Organization for Economic Co-operation and Development (OECD), South Korea has a reputation for having one of the widest “gender gaps regarding earnings, labour market participation, and representation in government.” The OECD report in 2017 indicates that Korea is the country with the third highest wage gap. The gender wage gap report in Korea shows that women earn approximately 63% of what men earn (see Appendix 1). The biggest issue is that the wage gap in South Korea has not decreased much over the years compared to other countries, such as Sweden and Canada. The South Korean government implemented numerous acts and policies, including the Equal Employment Opportunity Act to target gender inequality have been implemented by the Korean government. However, the human resource policies of many organizations, such as Inditex Korea, have not changed to follow the new policies. As a result, treatment of women changed very little.

There are a number of factors that affect the wage gap in Korea. There is a problem “between gender-equality and human resource development and ineffective Korean government policies.” One case that best presents this issue was when Inditex Korea was formed in 2008. The Inditex HR regulations were not modified to include new gender equity policies implemented by the Korean government (see Appendix 2). Instead, they followed a rather traditional patriarchal approach to their HR policies. Women are primarily hired for entry-level job and part-time position, giving men priority over higher-level positions.

Korean’s social culture follows Confucian values, where women stay at home to take care of the family and men go to work. When women leave work for marriage, birth, or for taking care of children, there is little chance of re-entering to their previous jobs. As a result, over-qualified women take on low-paying low-quality jobs to earn income. Despite the government’s attempt to implement programs for women who falls into that category, married women re-entering the workforce continues to be an on-going issue. Women who possesses similar levels of education and skills as men are often overlooked in hiring processes, making it more difficult for women to find jobs. Many Korean organizations continue to follow the traditional approach and give men a bigger advantage when hiring and recruiting for management positions.

Our HR consulting team recommends that new policies targeting gender equity created by the South Korean government should be more forcefully enacted with larger fines. Similar to Sweden in how the companies faced fines if caught discriminating against gender. Many organizations such as Inditex turn a blind eye on the policies recommended by the government in our research. New gender equality trends have been created around the world, from revising work hours to hiring women in more leadership roles. We believe that Korea will also be influenced by these changes around the world. Organizations such as Inditex will have to review their HR policies frequently to address any new policies and trends. They should be open to new changes rather than sticking to the old traditional HR approach. An HR policy that focuses on gender pay equity in the workplace will increase employee’s morale and productivity.

Sweden

Sweden is one of the most progressive countries on the planet when it comes to pay equity between men and women. However, the country still faces issues in regards to the pay gap between the two sexes. One of the leading factors into why the pay gap is still prevalent in the nation is social-cultural values and companies HR policies. The country has a record number of women in parliament and hold an average of 46% of the seats in the house according to the annual report done by The World Bank in 2018. The country's parliament is one of the most balanced forms of government in the world but still faces challenges in ending the pay gap between men and women. This shouldn’t discourage the Swedish government however to not keep updating its laws to end the pay gap between men and women. Swedish companies like Ikea have tried to combat the wage gap by reforming their HR policies to encourage diversity among the workplace. Including this type of legislation into Canadian companies could possibly help with gender wage gap issue.

Political and socio-cultural values have also affected companie in Sweden regarding the wage gap. The nuclear family that was once the norm in Western countries has shifted towards a new type of household where both men and women work. In terms of the pay gap, it seems that the current issue between Sweden and the pay gap is job growth. Women often need a considerable amount of time to recover from child labour and this leads to stagnant growth in terms of their careers. The social-cultural values in Sweden are comparable to Canada in the sense of the mother's responsibility to raise the children. However, many companies in Sweden offer a lengthy maternity leave for both men and women compared to Canada. Regarding South Korea, companies in the nation like Inditex can implement these programs similar to Sweden in their HR policies. In addition, if Canada could implement the programs that Sweden offers and enforce large fines on companies then this could help decrease the wage gap. The recommendation for companies would be of educating employees and increasing awareness of equal pay in the workplace through HR departments.

The social cultural values of Sweden are family oriented and this has pushed the gender pay gap. The maternity leave for Swedish mothers is 480 days and 80% of salary. This long period of unemployment makes women less desirable in terms of employment for companies. As well as women making a large number of part-time employment drives wages down.

The country has established laws that try to combat the pay gap in the nation. For example, companies with 25 or more employees have to develop an equality action plan that must be submitted to local authorities and larger companies face fines if they are found to be discriminating against women in terms of pay. Swedish companies like Ikea have been subjected to this and their HR team has developed an action plan to end the pay gap between men and women in the company. The company has implemented equal opportunity and pay for all employees into their human resource policies. The company values set by HR have developed a culture on inclusiveness and provided opportunities to reduce the wage gap.

Conclusion

It's easy to see why some companies don’t take pay equity seriously, any opportunity to pay an employee less can result in an immediate boost to profit, countries that lack enforcement mechanisms often have high pay gaps. A large part of the pay gap is caused by cultural factors if organizations want to tackle the pay gap they can invest in training for female employees child-care and flexible work arrangements for returning mothers and encourage fathers to take paternity leave. Additionally companies that have clearly defined pay ranges and pay rates and publish the criterion which employees must meet to obtain high wages create an environment that helps women obtain higher salaries. In job categories that are low paying and female dominated HR should consider adding compensable factors such as increased responsibility to the job descriptions in order to increase the value of the job. Tackling the wage gap will cost organizations upfront but many companies are seeing bottom line returns on their pay equity policies. Creating employee assistance programs to help women obtain higher wages, fill senior positions, and reach their true potential, is a smart investment.

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