Incentive pay and gender gaps in the Nordic countries

This paper explores the effect of incentive pay on gender pay gaps in Finland, Norway and Sweden among professionals and managers within MNCs. Mercer 2009 Total Remuneration Survey data is utilised. Uniform job ladder, occupation, industry and wage definitions enable consistent cross-country comparisons. In addition to the between-country variation, the within-country variation of gender gap with respect to incentive pay is analysed. The results indicate that gender pay gaps differ among the Nordics and that occupation and industry controls have dissimilar effects across countries. Irrespective of wage element, Finland and Norway are characterised by higher gender gaps than Sweden. Incentives tend to accentuate gender pay gaps. In intention to alleviate the absence of job performance data, this study utilises a rudimentary, promotion-based measure for job performance. In Finland it does affect the gender gap. However, irrespective of gender, high-performers are penalised in Sweden but not in Finland or Norway. The Finnish data also allows the identification of low-performers. Low job performance is rewarded in Finland. Nonetheless, the job performance findings should be interpreted with cautions.