What we know (and don’t know) about the Gender Pay Gap

International Equal Pay Day falls on September 18 and draws attention to the persistent differences in pay between men and women. On this occasion, we asked Lucie Bartůsková from the Faculty of Economics, University of Economics in Prague (VŠE), why the gap in earnings between women and men arises, what role parenthood and the division of household care play, and what economic policy should focus on more. She also told us which courses allow you to explore this topic in greater depth. 

What exactly does the Gender Pay Gap mean, and how do we view it purely from an economic perspective? 

The GPG simply expresses the difference in average earnings between men and women. However, that figure needs to be interpreted carefully. It does not mean that women (typically) automatically earn a certain percentage less than men for the same work. A number of factors feed into it, for example, which professions and sectors women and men work in, what positions they hold, how long they work, or how their careers develop over their lifetimes. For me, the question of why this gap arises is therefore much more interesting than the size of the GPG figure itself.

Which economic factors play the biggest role in the Czech labor market?

Differences in earnings begin to form as early as entry into the labor market. Women and men are not evenly represented across professions and sectors, and they more often move into fields that differ in wage levels and career-growth opportunities. This is what we call occupational and sectoral segregation of the labor market. As a result, certain differences in average earnings can already be observed at the very start of a career, even before the effects of parenthood become more pronounced.
Parenthood itself is then one of the factors that further deepens the divergent career and wage trajectories of women and men. A longer career interruption for women can affect their subsequent wage growth, accumulation of experience, and career advancement. In the Czech context, this is compounded by a relatively limited supply of quality part-time and flexible positions, which makes a faster return to the labor market more difficult.
In my view, the third important factor is the still-uneven division of childcare and household responsibilities. When women bear a larger share of these duties, they often have less time and spatial flexibility in the labor market. This affects not only the number of hours worked, but also the choice of employer, willingness to commute, the ability to take on a more time-demanding position, or the ability to invest more time in career advancement. From an economic standpoint, it’s important to note that flexibility has its price. An employee may, for example, be willing to accept a lower wage in exchange for a job that allows them to better combine work with caregiving. 

What real data does modern economics work with today when analyzing the labor market? 

I still consider data availability to be something of a weakness in the Czech context. We have relatively good data on wages and on the characteristics of employees and employers, for example from the ISPV (Information System on Average Earnings), but for deeper research we would need to know much more. Ideal would be longitudinal administrative data that allow the same individual to be tracked over time, linking their work history, earnings, and job changes with, for instance, the birth of a child and family situation. Data of this kind allow us to understand much better when the career and wage paths of women and men begin to diverge, and what is really behind it. In the Czech Republic, access to such linked microdata is still fairly limited. 

Where do effective economic solutions lie, and what do you think is most misunderstood in the whole debate? 

I consider the biggest misunderstanding in the whole debate to be the idea that the mere existence of the GPG automatically means something is wrong. At the macroeconomic level, significant differences in the earnings of women and men can signal underused human capital, but at the level of individual households, the same difference can arise as the result of a perfectly rational and preferred decision, for instance, when one parent decides to devote more time to childcare and less to paid work. Caregiving in itself creates value that wage statistics do not capture at all. The fact that a certain activity is not paid on the labor market does not mean it has no economic or social value. To some extent, then, the debate about the GPG is also a question of what value we as a society assign to paid work versus to caregiving and other work performed outside the market.
In my view, the goal of economic policy should therefore not be to bring the GPG to zero at any cost. What matters more is creating conditions in which the decisions of women and men truly reflect their preferences and are not the result of barriers such as unavailable childcare, an inflexible labor market, or a difficult return after parental leave. It is precisely in removing these barriers that I see room for effective economic solutions. 

In which courses at our faculty can students explore this topic in more depth? 

We address this topic in detail primarily in the course Labor Market Economics and in the course Practical Functioning of the Labor Market, where students learn not only to correctly interpret the GPG but, above all, to seek out the economic mechanisms behind the pay differences. We cover human capital, occupational segregation, discrimination, household decision-making, and the effects of parenthood on the career and wage trajectories of women and men. I also touch on this topic indirectly in the course Social Policy, where we focus with students more on how the design of family policy and the social system influences household decision-making and, in turn, the position of women and men in the labor market.