The government is consulting on the detail of its proposal to force companies with over 250 employees to publish their gender pay gaps. We don’t yet know what information employers will have to give. Whatever happens, it will probably yield some interesting data for wonks to pore over. Apart from that, though, I’m not sure it will tell us anything we don’t already know.
The last five years have seen a gradual fall in the full-time gender pay gap but the overall figure disguises significant differences. For women in their twenties, the gender pay gap had disappeared by the late 2000s. If anything, median pay for women has been slightly higher than that for men of a similar age for the last half decade. Over the same time period, the full-time pay gap for women in their thirties fell until it, too, disappeared. For those in their forties and fifties, though, there is still a big gap between the pay of men and women.
Source: ONS ASHE
That’s not the whole story though. The age related pay gap gets more severe the further up the pay scale you go. Again, there is not much of a gap for women in their twenties. It’s during their thirties when men’s pay starts to pull ahead in the more highly paid occupations. In the upper income deciles, the thirty-something pay gap shoots up. Women at the 90th percentile earn 16 percent less than their male counterparts.
Source: David Richter, using ONS data.
It’s not difficult to see what’s going on here. The pay gap increases with age and seniority which, given the relationship between the two is perhaps not surprising. This is, by and large, the result of people having families and the decisions they take about who looks after the children.
Debra Leaker’s study for the ONS found that the gender pay gap increased with the number of children people had. More children made little difference to men’s earnings but had a big impact on the pay of women. She also found that there was no gender pay gap for single women.
Women take the greater share of responsibility for child-care after leaving the workforce to have children and they often don’t return to the jobs they had before. Because they need to be near to their children’s schools, they are more likely to take jobs nearer home. As the Women & Work Commission noted:
Women, particularly women with children, tend to have shorter commuting times than men which limits the range of jobs available to them. This potentially leads to the crowding of women into those jobs available locally, and in either case, depresses wages.
On average, women who have children have a quicker journey to work than women without children. The travel-to-work time of women with more than two children is half that of their male counterparts.
Women often want shorter commuting times than men if they have children to drop off and pick up. Also, for women working part time, it does not make financial sense to commute long distances.
The report also found that the difference between commuting times was greatest in London. Longer commutes mean higher pay, especially in London.
It’s therefore not surprising that, while the gender pay gap at the median has fallen during the past two decades, it has proved stubbornly persistent at the higher end of the salary distribution. The gap between male and female pay at the 90th percentile has hardly moved in the last 20 years.
Source: House of Commons Library
Let’s take a hypothetical story of two accountants, Harry and Hermione. They both get good degrees from good universities and join the same City firm. Both start work in London on corporate and international assignments and both earn more or less the same. For a while, in her late twenties, Hermione earns more than Harry.
At around 30, Harry and Hermione get married. At 34, Hermione has her first child and has another a couple of years later. She tries to stick with her job in London but, in the end, the stress is too much and she and Harry realise that one of them will need to work closer to home. It never even occurs to Harry to volunteer so Hermione gets a transfer to the regional office near to their house, working in one of the firm’s back office functions.
Once the children are at school, Hermione returns to fee earning work but still in the local office. Here she works for local SMEs while Harry continues to work in London on the big corporate accounts with the bigger revenues and bigger rewards.
By the time the children are old enough to look after themselves, the world of corporate accounting has moved on and Hermione no longer has what the firm considers to be the right skills and depth of experience for the top-level assignments. The impressive network of contacts she had in her twenties has long since dissipated so her ability to generate new business is nowhere near what it was. She returns to work in the London office but never makes it to the senior ranks and never again matches Harry’s earnings.
Before anyone cries foul, I’m not singling out accountancy firms here. There are similar stories in any number of firms and occupations. This doesn’t just happen in London either. the scenario is played out in all our major cities. In whatever line of work, staying close to home limits career options and, in the majority of cases, it’s the women that do it.
PriceWaterhouseCoopers is one of a few employers to voluntarily publish its gender pay gap. It was 15.1 percent in 2015 compared to a national figure of 19.1 percent. Presumably this is an overall figure including part-time roles, as that’s what they have compared it against. Compared across grades, says PwC, its gender pay gap falls to 2.5 percent:
[W]e adjust this figure for the different gender demographic across the grades, as we have more men than women at our most senior grades, and the adjusted pay gap figure is 2.5%.
Most of the pay gap is accounted for by the different gender balance in senior and junior grades, which the firm also publishes.
As you might expect, the further up the hierarchy you go, the greater the proportion of men. PwC’s gender and grade profile is probably not much different from that of any other professional services firm.
Whenever the gender pay gap is in the news there is usually talk of the need for more flexible working and family friendly policies. There are sound reasons for all these suggestions and there is no doubt that they have helped a lot more women to stay in the workforce. At the same time, though, they are reinforcing the gender pay gap at the senior levels. A lot of employers have put a lot of effort into helping women to downshift their careers when they have children. But the trade-off for flexibility is lower pay. The highly remunerated jobs are still done in the big glass towers in the city centre and they require your presence early in the morning and late at night.
Helping women to carry on working after having children also helps them to earn less. That’s why Scandinavian countries, which have done more than most to eliminate gender inequality, still have pay gaps only a few percentage points below ours. Good social democrats they might be but Scandinavian dads still leave their wives to do most of the childcare. Compare this with Italy which has almost no full-time gender pay gap because many of its women simply leave the labour force altogether when they have children. That’s the trouble with statistics. You need to get behind them to find out what is really going on
When details of employers’ gender pay gaps are published, they will show that almost every company pays men more than it pays women. Some firms will look better than the national average, others will look worse but most probably won’t be that far either side. It will be worse in some industries than others. The financial services firms will almost certainly be the worst of the lot but will probably not be that much different from each other. Unless more detailed figures are published, comparing the pay of people in specific jobs, it will be impossible to say whether a gender pay gap is due to something the employer is doing wrong or simply because that’s the way things are in that industry.
As Darren Newman said, the purpose of equal pay legislation was to stop specific forms of discrimination. It was never designed to address the underlying structural issues that lead to women earning less than men. Or, as low pay commissioner Neil Carberry put it earlier this week:
Wish MPs would acknowledge diff. btwn gender pay gap & unequal pay. One about cultural factors that take time to address, other is illegal
— Neil Carberry (@Gramscisghost) July 14, 2015
Publishing employers’ gender pay gaps won’t tell us much that we hadn’t already worked out. The PwC figures, for example, are interesting but not surprising. We will find out that men dominate the upper reaches of management and that pay gets more unequal with age. It will be worse in some industries than others but probably not that much different between employers in the same industry.
What we do with that information is anybody’s guess.
Someone just sent me this chart from Pew Research on the relationship between the full-time gender pay gap and the amount of parental leave countries give. Fascinating!