Has Iceland Cracked the Equal Pay Code?

The tiny country’s new law requires equal pay—but leaders everywhere will need to push a lot farther to close the gap.

First it was New Zealand. Now another small country has joined a global effort to try narrow the gap in pay between genders: Iceland. 

In an eyebrow-raising move, the country this year launched a new law requiring public and private employers to show that all employees are being paid equally for equal work. The question now is how effective a measure like this will. 

According to Ben Frost, global product manager for Korn Ferry in London, unequal pay laws have been tried on and off since the 1970s. "It hasn't solved the problem,” says Ben Frost, global product manager for pay with Korn Ferry. The greater emphasis, he says, must come from companies themselves narrowing a different gap--perception.  "Professions that have been considered historically female are subjectively valued less than those that have been considered historically male," he says

For instance, in a group of a dozen accountants where seven are male and five are female, research has shown that on average they are paid about the same, with slight incremental differences, Frost says. However, if you have a dozen workers at a retail organization, with seven men in warehousing and five women working as cashiers, the men are likely to be paid more for what is objectively work of equal value. The bottom line challenge: Creating a level compensation playing field for men and women across certain jobs and industries.

Be it Iceland or elsewhere, the laws fighting pay issues generally don't address this salient aspect of pay discrimination. Another issue:  Part of the reason pay gaps exist among people who hold the same job, Frost says, is because organizations can base compensation on experience, hardship involved in doing the job, and other factors that are largely subjective. 

Frost says that organizations are being more proactive, in part because of the government and social pressure to bring the issue to the forefront. He advises a three-step remedy that all leaders can employ as a baseline for guarding against gender pay discrimination: be more transparent, be more process and data driven in determining compensation, and avoid individual salary negotiations as much as possible. 

“Laws forcing disclosure will help with transparency, not being allowed to ask about salary history will help with assessment,” Frost says, “and there’s lot of evidence showing that males end up in a better position than women in individual negotiations, so eliminating that will help level the playing field as well.”