Why the Gender Pay Gap Affects Everyone?

3/23/2025

Jānis Kaļķis, Data Scientist at Figure Baltic Advisory

The Paradox of Latvia’s Gender Pay Gap

Analysing 2023 data, we can see that Latvia is in a slightly worse position than the European Union average – the "unadjusted" pay gap remains significant, although it has been decreasing in recent years. A larger proportion of women work in lower-level and lower-paid positions, which significantly contributes to this gap. The so-called "motherhood penalty" still exists, meaning that women experience slower career growth and are hired at lower salaries simply because they have children to care for. It is important to emphasize that we should not forget the father's role in the family – fathers should also participate in raising children for an optimal family model.

It is also crucial to recognize that each person has their own choices regarding career progression and how much of their life they are willing to dedicate to their careers. Let’s compare teachers and programmers – these professions can be considered relatively equal in value from junior specialists to experts and managers. Comparable jobs are defined by gender-neutral factors that can be quantified mathematically. The teaching profession has a higher proportion of women, whereas the programming field has more men. The salary levels in these professions suggest that we simply do not sufficiently value teachers. The short-term financial gain from a programmer creating a new solution is often prioritized over the long-term intellectual growth of society, which could yield far greater benefits.

We can look at countries like Finland, Denmark, or Estonia, which made significant improvements in their education systems and teacher salaries ten years ago. If we compare Latvia with these countries, the conclusions speak for themselves. The argument that Latvia gained independence only in the 1990s is not a sufficient excuse, as Estonia has a very similar history. This is just one example, but we should evaluate the contributions of multiple professions more accurately, analysing their long-term impact from both a social and financial perspective.

Historically, both employees and employers have not done enough to understand what "transparent pay" means. When setting salaries, we do not always consider how valuable a position is and how much it should be paid based solely on gender-neutral factors like education, responsibility, and job performance. Employees are not interested enough, and companies do not analyse and implement transparent salary policies sufficiently. While some companies work systematically on this, data show that around 50% of companies do not even have salary systems in place. This often leads to subjective, non-data-driven decisions.

When looking at "equal positions," the overall pay gap between men and women still stands at around 4.1%, raising the question: are we lacking data to explain this gap, or is there systematic or unconscious discrimination against women?

Why Is This a Problem for the Whole Society?

Pay inequality does not only affect women – it weakens the entire economy. Here are some examples of its impact:

• Lower incomes mean lower pensions. Women who have earned less throughout their lives receive lower pensions, increasing the risk of poverty in old age.
• Lower purchasing power affects the economy. If half of society earns less, it means less money spent in the local economy – from real estate markets to retail and services.
• Loss of talent for businesses. Women who feel undervalued and disadvantaged are more likely to change jobs or leave the industry, leading to higher costs and reduced innovation potential for companies.
• Impact on future generations. Children grow up in an environment where they see that women are paid less, perpetuating the cycle of inequality.
• Decline in workforce motivation. When employees realize that salaries are unfair, it undermines motivation and loyalty to the company, reducing overall productivity.

These are just a few reasons why we should focus on data rather than emotions. This topic should not be avoided – it needs to be discussed and analysed based on facts. This is also one of the main goals of the EU Pay Transparency Directive – to promote fairness and transparency based on data.

How Can We Fix This?

As mentioned earlier, both companies and employees must work towards a solution. Here are some steps that can help reduce the pay gap and promote a transparent and fair work environment:

• Employers should promote transparent salary policies.
• Conduct regular pay audits to eliminate unjustified differences.
• Implement salary transparency policies so employees understand how their pay is determined and what factors influence promotions and bonuses.
• Establish clear criteria for salaries, bonuses, benefits, and career progression to avoid subjective decisions.
• Employees should actively engage in fair pay discussions.
• Research industry and position salary benchmarks to ensure they receive a fair and competitive salary.
• Do not be afraid to negotiate salaries, especially if the company does not have a clear pay structure.

This will become much easier after 2026 when companies will be required to publish salary ranges for specific employee groups internally.

The Uncomfortable Truth

The "unadjusted" pay gap does not fully reflect reality, and this indicator is less relevant compared to the "adjusted" gap, which accounts for gender-neutral factors. Of course, some professions may deserve higher pay, particularly those with a higher proportion of women, such as teachers or nurses. However, at the national level, we need to assess which professions provide the greatest long-term benefits to society.

If company salaries were made public tomorrow, would they reveal injustice or a discriminatory pay policy?

The real issue is not just the gender pay gap – it is that we still allow it in cases where employees perform the same job with the same results and contributions.