Reality bites equal pay

What a difference half-a-year makes. Only recently, the political consensus seemed to be that the government should take action over equal pay, where necessary compelling firms to carry out audits and make the required pay adjustments. If anything, the Conservatives were ahead of Labour on this issue, with Theresa May arguing for mandatory equal pay audits in October 2007.

But yesterday, the Equalities and Human Rights Commission told the government that the economy is now too fragile to impose equal pay reviews on businesses and recommended that the proposal on compulsory audits be removed from the equalities bill due to be published next month.

There is some sense in this move. Many public sector organisations, forced by freedom of information requests and no-win no-fee lawyers to bring their pay inequalities out into the open, have faced crippling pay bills. Correcting wage inequalities and covering up to six years worth of back pay has almost bankrupted many local authorities. Last September, the government allowed them to take out an extra £455 million in loans to cover the costs. In normal times, such a huge aid package would have made headlines but, when set against the billions being advanced to the banks, it seemed like a relatively small amount.

Nevertheless, if public sector organisations have found themselves with huge pay bills after equal pay audits it is a reasonable assumption that private sector organisations would be hit with similar demands if they too had to make their pay levels public. These cases could include pay claims going back several years. As the EHRC has realised, at a time when many companies are struggling to survive, such a move could push many of them into bankruptcy.

Not surprisingly, this has been seen by many women’s rights campaigners as a sell out. Beatrix Campbell was quick off the mark yesterday, accusing the ECHR of betrayal almost as soon as its suggestions were published. Katherine Rake, director of the Fawcett Society, said:

We must not get caught in this trap of saying in difficult times we will trade in women’s rights.

Their anger is understandable but if these claims bankrupt employers there will be no-one left to pay the newly won equal pay rates. The cheque for compensation and back pay might come with a P.45 and a redundancy notice, as the employer files for insolvency.

This argument is not just about equal pay. It raises questions about many of the assumptions behind employment legislation and our general attitude as a society to questions of fairness and justice.

Much of our employment legislation was framed during a period when progressive assumptions prevailed. By that, I mean that most people belived society would get progressively fairer and progressively more prosperous, as it had done for much of the twentieth century. But are those assumptions still valid? As we enter what many people believe will be the worst economic downturn since the Second World War, the belief that we are still on that road to a fairer and wealthier future must, at the very least, be called into question.

An article I read a month or so ago, written by Max Hastings, came to mind as I was writing about this:

Seldom in peacetime has change come upon a society so rapidly and brutally. In a matter of months, the assumptions on which we have run our lives for decades, above all that of national prosperity, are out of the window. Yet, although reason tells us the game is up and that almost anything could happen, it remains hard to acknowledge how dramatically our lives must alter.

We face a long and painful voyage of exploration, to discover how Britain can earn its living through the next generation, in the face of irresistible global competitive pressures. Never mind the oil refinery contracts – millions of western jobs have moved to Asia, where goods are made much more cheaply. No government can force them to come back.

British workers will keep pay packets only if they perform skilled tasks which others cannot, or provide their services for substantially smaller real rewards than they have received in the past.

When this recession is over the world will not go back to how it was. It never does. In all probability China and India will emerge relatively stronger than before. Employment rights are weak in India and almost non-existent under China’s repressive regime. Will the West’s economies, battered by recession and facing stronger competition than ever before, still be able to afford the equality laws and employment protection that the years of plenty allowed us to get used to?

Like most of our employment laws, equal pay legislation was a product of a time when western countries enjoyed economic dominance and, therefore, relative prosperity. We assumed that things would continue to get better. The economic downturn and what comes after it will severely test these assumptions. In an unfair and unequal world, it might be that we can no longer afford our drive towards greater fairness and equality. The EHRC’s capitulation on equal pay could be a sign of things to come.

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7 Responses to Reality bites equal pay

  1. Jo Jordan says:

    Ah, so I’m supposed to pay for bankers’ errors. S’pose my turn had to come.

    I would have thought the opposite should be happening. A firm that is fragile should be shaping up real fast! How can it afford to pay “rents” (continue to afford to pay “rents”) for work that is not being done?

    The general argument, doesn’t wash with me. We will know whether Britain is ready to climb out of the crunch by its attitude towards its uglier features such as unequal pay.

  2. Rick says:

    Well we’re all paying for bankers’ errors.

    I don’t follow your argument about rents. Whaddya mean?

    I also think you’ll find India and, especially, China have some pretty ugly features but they’ll probably climb out of the crunch before we will.

  3. I accept your view that the UK is going to get poorer, at least relatively. Perhaps even austerity beckons. At the very minimum we’re going to have to invest more and consume less, as quite a lot of what we (& America) have been consuming is the accumulated savings of China, India and Japan. ( See Paul Mason in this, he’s very good http://www.bbc.co.uk/blogs/newsnight/paulmason/2009/03/the_imbalances_that_could_sink.html)

    What I don’t accept is that this mean we can’t afford equality- what we can’t afford, if we as a nation are ever to pull ourselves out of this mess, is the continuation of the rank and increasing inequality that typified the last 30 years. This is not just true of gender pay inequality of course, it’s about pay differentials much more widely.

  4. Rick says:

    I take your point Charlie and I don’t think the rising inequality has done us any good as a society.

    But if you impose more legislation on firms, especially things like forcing equal pay, it will ultimately make the UK less competitive.

    Of course, one answer might be to impose import bans against countries which don’t come up to a minimum standard of labour laws. To do that would effectively introduce protectionism against much of Asia.

    I don’t have an answer to this one, apart from the near certainty that to saddle companies with the same equal pay obligations that have hit the public sector would send a lot of them over a cliff.

  5. Rick,
    Equal pay will not make any firm go bust.It may add to a firm’s cost base and it may force a restructuring of other salaries and it might even imply redundancies. But no matter how big or small the cake is there is no reason not to share it out more equally.

    The point you make about equal pay making us less competitive vis a via Asia could be extended to say we should send 10 yr olds to work in factories, or pay Chinese level wages for adults. We don’t do that, so why be uncivilized in other ways?

    I’m not arguing for import controls. I’m arguing that if we even want to try and stay in the first division we need to restructure in a way that creates social solidarity and a willingness to share the sacrifice.

  6. Rick says:

    Well equal pay claims have forced local authorities to go to the government for loans, so if they have the same effect on companies they could push them into financial difficulties.

    I’m not suggesting we should adopt Chinese labour practices, only that our already narrowing levels of competitiveness are about to be eroded still further, offering even less scope for firms to increse their costs.

  7. irenicon says:

    For years I have argued the secret black hole in equal pay is the word value – value to whom? Is it to the world at large, the organisation’s profitability, it’s social/customer care objectives, what?

    Everytime I ask that question people just walk away. In the private sector everyone says well contribution to profit of course, but that is rarely measured on a role by role basis. In the public sector everyone is in a meeting and has no time to think about that one.

    What do we value? Is it gender biased? Is that reflected in pay or do we really pay more for what we can measure and less for what we can’t? Are just lazy when it comes to figuring this all out? Or too busy fighting a recession to deal with historic complexities?

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