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Iceland Is Going to Make Companies Prove They Pay Men and Women Equally. Could That Work Here?

The rugged Icelandic landscape outside Reykjavic.
The ruggedly picturesque Icelandic landscape outside Reykjavic.
Reuters/Michaela Rehle

Iceland is serving as a frosty beacon of inspiration for feminists everywhere this week, thanks to a first-of-its-kind law that will require large businesses to prove that they don’t engage in pay discrimination against women.

Just like the United States and many other countries, Iceland has long had rules on the books banning employers from paying women less than men based on their gender. But the new law, which was passed last year and went into effect Monday, will put the onus on companies to show that they’re actually treating their female workers fairly. Known as the equal pay standard, it requires businesses with at least 25 full-time employees to undergo an official audit of their pay practices every three years, then submit it to the government for a certification. Companies that fail to measure up could face daily fines.

The gender pay gap is an especially fraught issue in Iceland, where women have had much better luck winning equal footing in government than in the workplace. The World Economic Forum ranks Iceland tops for women’s political empowerment—almost half of the country’s parliament was female last year, as is the country’s new prime minister, Katrin Jakobsdottir. Perhaps not coincidentally, Lawmakers have come up with some cutting edge policies meant to promote gender equity, such a rule requiring that females make up at least 40 percent of corporate boards. And yet, Icelandic women still earn about 30 percent less than men on average.

While much of the difference can be explained by the fact that women work fewer hours than men and often in lower paying fields, the intractable gap has inspired widespread protests. Last year, thousands of women walked off their jobs at exactly 2:38 p.m. Activists said that time symbolized the precise minute in a 9-to-5 workday that women stop getting paid.

The new law certainly won’t erase all of Iceland’s economic disparities between the sexes, which, as in the U.S., may have as much to do with cultural expectations about who’s responsible for childcare as outright discrimination on the job. But it does set up a promising experiment that may tell us how much governments can do to bridge the divide, albeit in a quirky, culturally egalitarian nation of just 340,000 people. Other countries, including Great Britain, have experimented with making companies report how much they pay men versus women. And in a bold step last year, the Obama administration released a regulation that would have required larger business to provide detailed salary data of their workers broken down by sex to the Equal Employment Opportunity Commission. That would have given government investigators a chance to look into potential instances of discrimination without employees filing complaints (unfortunately, the Trump administration scotched the rule before it could take effect). But by making employers prove up front that they’re paying men and women the same or risk being punished, Iceland is going much further, and—if it works as intended—potentially creating a model for other countries to imitate.

Could the U.S. ever follow suit? It’s a little hard to imagine. As an official from the Icelandic Federation of Labor has explained, the equal pay standard is designed to make sure that companies pay a “fixed salary for certain types of work”—albeit with a little bit of room to bump up pay for especially valuable employees. The idea is that people should be paid based on their job, not their ability to negotiate or the whims of a boss. But that concept maps more naturally onto a country with a highly unionized and regulated labor market like Iceland, than a place like the U.S. where many workers and employers are uncomfortable with basic collective bargaining.

On the other hand, an especially progressive state like Massachusetts or California might still want to give it a try. Ariane Hegewisch, the program director for employment and earnings at the Institute for Women’s Policy Research, told me that as of now there’s no federal rule that would stop a progressive state legislature from trying out a version of Iceland’s rule. If they did, it would possibly have knock-on effects across the country, since large national companies would have to comply. If a Democratic governor wanted to strike a blow for women’s equality and get a higher national profile, he or she might just want to pay attention to what’s happening in Reykjavic.

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