Equal pay for equal work has been a core EU principle since the Treaty of Rome was signed in 1957. Yet, almost seven decades later, women across Europe still earn less than men, even when they have similar qualifications, experience, and jobs.

Over the past two decades, many OECD countries have introduced pay transparency measures that vary in scope, design, and enforcement (OECD 2026). More countries are expected to adopt such measures throughout 2026 because by June, all EU member states are required to transpose the new EU Pay Transparency Directive into national law. 

The Directive is the EU’s first comprehensive framework on pay transparency, combining mandatory employer transparency with stronger workers’ rights to challenge unjustified pay differences. Yet, its impact remains uncertain. Can greater transparency meaningfully reduce gender earnings gaps? And what could be the broader consequences for household incomes, inequality, and public finances? 

Previous evidence gives us clues, but no full answers

Evidence from previous pay transparency reforms is encouraging but far from conclusive. Reviewing similar initiatives in Austria, Canada, Denmark, the UK, and the US, Cullen (2024) reports that pay transparency typically reduces gender pay gaps by 1–3 percentage points, although both the magnitude of the effects and the underlying wage adjustments vary across reforms. In Denmark, for example, a 2006 reform narrowed the gap mainly through slower wage growth for men rather than higher wages for women (Wolfenzon et al. 2020). Drawing on similar evidence and expert consultation, the European Commission assumed a 3 percentage point reduction in the adjusted gender pay gap in its baseline impact assessment of the Directive.

We also know that unequal pay is only one part of the story. Parenthood, working time, occupational segregation, social norms, and the unequal burden of unpaid care – all contribute to persistent gender earnings gaps (Cortés et al. 2026, Blau and Kahn 2017, Goldin 2014). Recent studies further suggest that robotisation (Özcan et al. 2020) and adoption of GenAI tools may also widen these gaps (ILO 2026).

This raises another question: if unequal pay is only one component of gender earnings inequality, how much difference can enforcement of equal pay actually make?

New evidence from all 27 EU Member States

To answer these questions, we provide the first EU-wide simulations of how the new Directive could affect wages, annual earnings, household incomes, firms’ labour costs, and public finances across all 27 EU countries (De Poli and Maier 2024). The study combines harmonised microdata from all EU Member States with EUROMOD, the EU tax-benefit microsimulation model, to estimate unequal pay for equal work – or, more broadly, for work of equal value – among comparable workers using matching methods with regression adjustment (Imbens and Rubin 2015).

Our first scenario reflects the Commission’s expected impact of the Directive, reducing the adjusted gender pay gap by 3 percentage points (‘pay transparency’). The second provides an upper-bound benchmark in which unequal pay for equal work is fully eliminated (‘benchmark: equal pay’). 

Three takeaways stand out.

First, unequal pay matters, but much more in some countries than in others

Our first takeaway is that unequal pay among comparable workers is a key driver of the gender pay gap in many countries, but not in all. These wage penalties are generally larger in Central and Eastern Europe, suggesting greater scope for pay transparency policies to reshape wages there. The adjusted gender pay gap – the difference in hourly wages between comparable women and men – averages around 11% in the EU. This means that, for a monthly wage of €2,000 earned by a man, a woman performing similar work would earn about €1,780 (€2,640 less over a year). This ranges from below 8% in Belgium, Denmark, Germany, and France to more than 15% in Cyprus, Czechia, Estonia, and Latvia (Figure 1). 

Figure 1 The unadjusted and adjusted gender pay gap in the 27 EU member states

Notes: UGPG: Unadjusted gender pay gap (difference in average gross hourly wages between men and women, expressed as % of average men’s gross hourly wages). AGPG: Adjusted gender pay gap (difference in average gross hourly wages between men and women performing similar work, as % of average male average gross hourly wages). 
Source: De Poli and Maier (2024).

Curiously, countries with the largest or lowest adjusted pay gaps in hourly wages are not always those with the largest or lowest unadjusted gaps. Take Germany, for instance. It combines one of the lowest adjusted gaps with one of the highest unadjusted gaps, a pattern that is also observed in other large Western countries, such as France and Spain. There, the bulk of the gender pay gap comes from differences in the type of work done rather than from unequal pay for equal work. The opposite holds true in Italy (high adjusted gender pay gap, low unadjusted gap), where most of the gender pay gap in hourly wages is explained by unequal pay for equal work.

Second, equal pay could close one-third of the gender gap in annual earnings, on average

The second takeaway is that eliminating unequal pay among comparable workers could almost close the gender earnings gap in some countries while having only modest effects in others where differences in employment and working time matter much more. 

Comparing hourly wages alone is not enough to understand the potential impact of these new transparency measures on gender inequality in earnings. Annual earnings also reflect differences in employment and hours worked, which in fact accumulate over the life cycle, with consequences for pensions (Garbinti et al. 2025). 

Working-age women in the EU earn around 28% less than working-age men each year. This gap is substantially larger than the gender gap in hourly wages because it also captures differences in labour market participation and working time. Under the pay-transparency scenario, the gender earnings gap would fall to around 26%, on average. By contrast, under the equal-pay scenario, where unequal pay is eliminated, it would shrink by about one-third, to around 20% (Figure 2). 

Figure 2 Total annual gender earnings gap: Baseline vs benchmark (equal pay) scenarios

Notes: The gender earnings gap is the difference in total annual (labour) earnings between working-age women and men (expressed as % of men’s annual earnings). Countries are ranked by the difference between the baseline and benchmark scenario (where equal pay is fully enforced), from largest to smallest expected impact. 
Source: De Poli and Maier (2024). 

Here too, results substantially differ across countries. In those where women are much more likely to work part-time, such as Austria, Germany and the Netherlands, or where gender employment gaps are particularly large, such as Italy or Malta, tackling wage gaps leads to only modest effects on the overall gender earnings gap. This is true both where unequal pay is not a big issue (Germany) and where it is much larger (Italy). As a result, even full enforcement of equal pay would leave the gender earnings gap above 30% in these countries.

By contrast, where women’s employment patterns are closer to men’s, such as the Baltic States, equal pay policies have much greater potential to reduce the gender earnings gap. Interestingly, the largest reductions occur in countries with relatively small baseline earnings gaps, increasing divergence across countries.

Third, correcting unequal pay could raise household incomes by up to 3%

The third takeaway is that wage adjustments triggered by greater pay transparency could substantially reshape household incomes, firms’ labour costs, and government budgets. The magnitude of these effects, however, depends on how firms adjust wages.

If firms comply by increasing women’s wages, average household disposable income (after taxes and benefits) increases by around 0.8% under the pay-transparency scenario, and by almost 3% under full equal pay, ranging from 1.2% in Belgium and Greece to 6.5% in Estonia and Latvia.

Because most beneficiaries are concentrated in middle- and high-income households, these wage adjustments slightly increase income concentration. At the same time, they reduce poverty by around 0.2 percentage points under the pay-transparency scenario and 0.6 percentage points under full equal pay – reaching a 2.5 percentage point poverty reduction among single mothers.

The fiscal effects are also sizeable. Government revenues increase by around 0.3% of GDP under the pay-transparency scenario and by about 1% under full equal pay, while firms’ labour costs rise by 0.6% and 2.2% of GDP, respectively.

If, instead, firms complied by lowering men’s wages, the distributional picture would be broadly reversed: household incomes would decline, poverty would increase, and government revenues would fall. The effects are not perfectly symmetric because women facing wage penalties are underrepresented at the bottom of the income distribution, whereas men earning wage premia are spread more evenly across it. 

Transparency is a big step forward, but not enough on its own

The Pay Transparency Directive marks an important step towards enforcing one of the EU’s oldest principles. Yet, its impact is likely to vary widely across countries because the sources of gender inequality differ across Europe. Where unequal pay for comparable work accounts for a large share of the gender earnings gap – as is often the case in Central and Eastern Europe – the Directive could substantially reduce disparities. Elsewhere, where employment, working hours, and occupational segregation are the main drivers, complementary policies, including non-transferable parental leave and high-quality affordable childcare, remain essential.

Our simulations are not predictions but estimates under alternative wage-adjustment scenarios, assuming other things equal, including employment. Although standard economic models predict some reduction in labour demand following higher wages, evidence from previous equal-pay and pay-transparency reforms suggests little, if any, employment effects (Bailey et al. 2024, Wolfenzon et al. 2020, Manning 1996).

The Directive’s ultimate impact will crucially depend on how member states implement the new rules, and on how firms and workers respond. While only future ex post evaluations will be able to identify its causal effects, our simulations already indicate where the greatest gains are likely to occur and where equal pay alone will not be enough to close the persistent gender earnings gap. 

References

Bailey, M J, T Helgerman, and B A Stuart (2024), “How the 1963 Equal Pay Act and 1964 Civil Rights Act shaped the gender gap in pay”, The Quarterly Journal of Economics 139(3): 1827–78. 

Blau, F D, and L M Kahn (2017), “The gender wage gap: Extent, trends, and explanations”, Journal of Economic Literature 55(3): 789–865. 

Cortés, P, J Hwang, J Pan, and U Schönberg (2026), “Gender norms and the labour market”, VoxEU.org, 1 April.

Cullen, Z (2024), “Is pay transparency good?”, Journal of Economic Perspectives 38(1): 153–80.

De Poli, S, and S Maier (2024), “Enforcing ‘equal pay for equal work’ in the EU: Distributional effects of correcting wage penalties”, Journal of Economic Inequality 23: 1219–54.

Garbinti, B, C García-Peñalosa, V Pecheu, and F Savignac (2025), “Part-time work slows the narrowing of France’s lifetime gender earnings gap”, VoxEU.org, 22 June.

Goldin, C (2014), “A grand gender convergence: Its last chapter”, American Economic Review 104(4): 1091–119. 

ILO (2026), “Gen AI, occupational segregation and gender equality in the world of work”, Research Brief. 

Imbens, G W, and D B Rubin (2015), Causal inference for statistics, social, and biomedical sciences: An introduction, Cambridge University Press.

Manning, A (1996), “The Equal Pay Act as an experiment to test different theories of the labour market”, Economica 63(250): 191–212. 

OECD (2026), Pay transparency in progress: Valuing jobs, closing gender pay gaps, OECD Publishing. 

Özcan, B, J Philipp, and C G Aksoy (2020), “Robots and the gender pay gap in Europe”, VoxEU.org, 16 July.

Wolfenzon, D, E Simintzi, M Tsoutsoura, and M Bennedsen (2020), “Pay transparency and its effect on the gender pay gap”, VoxEU.org, 7 May.