In the Spring of 2022, the European Parliament approved new binding pay transparency measures to reinforce the European Union’s commitment to its 1957 founding principle of ‘Equal Pay for Equal Work’ between women and men. The distributional consequences of tackling these wage penalties faced by women remain uncertain. In this paper, we estimate the gender pay gap for employees performing similar work for the 27 EU countries with harmonized microdata and a novel estimation approach. Employing microsimulation techniques, we subsequently evaluate the potential distributional effects of narrowing these gaps on gender inequality in labour earnings, household income inequality, and poverty levels. Our results indicate that these wage penalties among similar workers are the main driver of the gender pay gap in most EU countries, but not in all. This, coupled with factors like household composition and the structure of the tax-benefit system, leads to very different distributional effects across countries.
