Scribblings

The “No Show” Pay Transparency Directive

Today is June 7. Just another Sunday. Where I live, rain is threatened for the day. A good excuse for not walking on the beach. Not that I was planning to walk on the beach anyway. But whenever I tell people I live by the coast in France, they always assume that I have a daily ramble along the sand. Which I don’t. I consider too much exercise to be dangerous, which is why I have avoided it for most of my life.

But it is not just another June 7, especially for those who take an interest in European labour and employment law, as I do. Taking an interest in these matters is pretty much my day job.

Today is the day by which all 27 member states of the European Union, along with the three member states of the European Economic Area (EEA), should have transposed the European Union’s Pay Transparency Directive (PTD) into national law. The Directive is designed to help eliminate the 12% pay gap that exists between men and women in Europe by making employers’ decisions on pay transparent, by, for example, putting pay ranges in advertisements for jobs.

As of today, just three EU member states have transposed the Directive: Italy, Lithuania, and Slovakia. It is questionable if Italy has properly done so, saying, in effect, that the matter has been dealt with by a series of national sectoral collective agreements. A doubtful proposition at best.

Germany has also pushed the idea that undertakings covered by collective bargaining agreements should be considered to be compliant, a difficult argument to sustain, as it assumes that, by definition, collective bargaining agreements cannot be discriminatory. History suggests otherwise.

Three out of thirty. Within the past week, Belgium has asked the EU Commission for permission to delay implementation by six months. Sweden has gone further and asked that the implementation of the Directive be suspended and that it be renegotiated to simplify it and reduce its complexity. The Swedes have a point.

I have been writing about EU labour and employment law since the late 1980s, when the dead hand of the UK veto was lifted, and the EU Commission under Jacques Delors began to produce a stream of new Directives, covering working time, health and safety, maternity leave, and the one that turned out to be something I would specialise in thereafter, the European Works Council Directive.

There have been other labour and employment law Directives since then. I am not going to list them all here.

With all of these Directives, of course there were some laggards when it came to transposing them into national law, but in most cases the majority of member states did so by the due date, there or thereabouts.

But over all those years, I can never remember a case of 27 out of 30 missing the deadline, while making it clear at the same time that they are going to miss it by a lot. Is the EU Commission now going to start taking infringement proceedings against all of them? Or would it be better off asking why governments are struggling to transpose the legislation? Maybe because it is just a badly written and constructed piece of law. Well-intentioned, hoping to do the right thing, but creating more problems than it offers solutions.

I can’t say I am surprised. The PTD is a complex piece of legislation which seeks to eliminate the estimated 12% pay gap between men and women that exists within the EU. It does this by focusing on pay differentials that may exist within grades and categories of workers. If the data shows gaps of more than 5%, which cannot be justified on objective, non-gender grounds, or which cannot be eliminated within six months of having been identified, then employers have to engage with employee representatives to identify the reason for the gap and to look at ways of eliminating it. The data analysis involved puts a considerable strain on companies and stretches resources.

I have never been convinced that the approach set out in the Directive will go any distance to eliminate the 12% gap because the gap does not exist at what might be called the “micro level” of individual jobs and categories, though undoubtedly, some such gaps will be thrown up. It exists mostly because of “macro level” factors such as women taking more time out of work than men because of childcare and other family responsibilities, which increasingly involves aged care as more of us live longer because of improved standards of living and advances in medical science.

It also exists because of “occupational choice”, with, for instance, more women in nursing and teaching than in finance and engineering, the latter dominated by men and paid more than teaching and nursing. Because of their absence from the workforce, women may not be present when promotional opportunities arise, meaning the upper and better-paid levels in many organisations have more men than women in top positions. The PTD is not going to do much about these issues but will involve businesses in a considerable amount of work with little to show for it at the end of the day.

Let me set out a personal position here. I have never believed that there is some scientific and objective way of determining what jobs should be paid. Schemes of job evaluation have always left me cold. They are little more than pseudo-science.

Pay is determined by value judgements and relations of power in the workplace, and these flow from our wider judgements about what we consider important economically and socially. Are bankers really more important than nurses? Are accountants more important than teachers? Who gets to decide these things? On what basis? Why are women who stack shelves in supermarket shops paid less than men who stack shelves in supermarket warehouses?

No amount of made-up evaluation spreadsheets or hocus-pocus “toolkits” will ever resolve these questions because, at the end of it all, the answer does not come down to “factors” or “weightings”, themselves subject to bias, but to value judgements. The economics of pay in the workplace will always be an area of contestation that cannot be “scientifically” resolved.

I often wonder how many of those in the Council, the Commission, and the Parliament have any first-hand experience of the way things actually work within businesses when they are writing laws. Do they have any insight into the mechanics of the way decisions get made, the complexities involved in trying to determine which jobs fit into which category, what are appropriate pay scales? What attention do they give to the role that collective bargaining, if it exists, which it increasingly does not, plays in all of this?

Here is an interesting fact. The EU Parliament publishes all sorts of analysis about its membership - men/women, political parties, countries of origin, and so on. One thing it does not publish is the occupational backgrounds of MEPs. So we have no way of knowing what workplace experience they bring to the table when employment laws are being considered. When writing something into legislation, they never seem to ask the question: how exactly is this going to work in practice, not in theory, but in practice?

I suspect that the reason many governments are struggling with transposing the PSD into national law is that they are having difficulty in trying to figure out just how things are supposed to work in practice. For example, some EU countries, mostly the older Western ones, have well-established systems of workplace representation. Many member states do not. In those member states without workplace representation systems, who counts as an employee representative for pay transparency purposes? What systems need to be put in place to provide for such representation if joint pay assessments are to be conducted?

With the exception of California, which is a law unto itself, those US states that have pay transparency laws limit these laws to ensuring transparency in job advertising. Put what the job pays out there for all to see. They do not require the bureaucratic burrowing that the PTD does of European employers. The US states have kept it simple. Maybe if the EU had also kept it simple, member states would have transposed the Directive by today.

As I said earlier, I am not persuaded that the PTD is the answer to the 12% gender pay gap in the EU. It is well-intentioned, but it is looking in the wrong place. The issue is not pay discrimination within categories and grades, or between two individuals. It is social and cultural and requires answers that are not to be found in the PTD.

Made the Swedes do have a point. Stop the clock and think afresh about the issue. Put a deadline on it of a year. What’s to lose? Many member states probably won’t have transposed it within the year anyway. Why not pull them together to discuss the problems they are running up against in the transposition process?

As for employers, it is difficult to be getting on with things when you do not know what is required of you. You can’t implement a law that does not exist.

Coda

I am not one of those who believes that the answer to every labour market problem is deregulation. Like the rules of the road, I believe we need strong and robust labour market regulations to ensure the wellbeing of all labour market participants. But not every regulation should be sacrosanct because not everything that comes out of the Brussels legislative process is always fit for purpose. My argument above is that the PSD is not fit for purpose and it should be revisited before it imposes burdens on employers that yield little in the way of results. Maybe even the unions might want to revisit it to build in some collective bargaining safeguards. Maybe some genuine social dialogue around the issue is what is needed. Negotiations in the “shadow” of a bad law might be no bad thing.