Will employers’ gender pay gap figures tell us anything new?

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.

Gender Pay Chart 2014

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.

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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.

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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.

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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.

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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.

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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:

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.

Update

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!

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13 Responses to Will employers’ gender pay gap figures tell us anything new?

  1. Lisa says:

    Like this one – v interesting! I think working in small charities has meant I’ve never been paid less than a bloke…

  2. octopushr says:

    Fascinating point about the pay gap in Scandinavian countries

  3. sdbast says:

    Reblogged this on sdbast.

  4. The government already has a clear policy for addressing the gender pay gap:

    1) penalise women who do not go back to work (e.g. couples in which one partner takes job pay £2x pay a lot more tax than those in which both take jobs paying £x), and,
    2) keep increasing the subsidies for returning to work (r.g. childcare).

    If all women can be persuaded to return to work as soon as possible after having children, then the gender pay gap will disappear.

    • AJ says:

      “If all women can be persuaded to return to work as soon as possible after having children, then the gender pay gap will disappear.”
      This won’t happen as:
      1. Many women will want to spend time with young children in paticular and if financially possible they will do so.
      2. Even if they do return to work they will probably seek employment wth shorter commutes and shorter and or more flexible hours.

      The ‘problem’ here is one of perception and presentation. The earnings dfferences are apparently caused by different choices by men and women. There is an argument that the wage ‘gap’ actually reflects an advantage to women in that they are enabled to work less and take career breaks. This is after all their choice so presumeably seen as an advanatge by women.

      The problem is that all gender differences are presented within a conceptual framework of male advantage and female disadvantage. Differences that do not fit this framework are minimised and those that can be made to fit are maximised. There is little if any discussion of the massively larger male civilian death rates in conflicts versus female for example in fact what is generally presented is that women are uniquely victimised in war when the opposite is true. The same is true in terms of the health system, penal policy or as in this case work related statistics. How much attention is paid to the fact that female part timer workers are paid more than men for example (I do not believe this shows discrimination either). How often is this wage ‘gap’ talked about.

  5. Patricia Leighton says:

    We need to focus on the position in lower-paid as well as those ‘city firms’ that seem to get all the attention. Look at the retail, hospitality and caring occupations where often men dominate the supervisory roles and, therefore higher pay.A really good piece though.

  6. duncan brown says:

    Rick, the macro figures are made up of firms deciding whether or not to address their pay gaps. You are right that lack of career progression into senior positions is a common cause. But gaps vary hugely between firms in the same sector and the reasons can be wide ranging. With one client i worked with it was historic service increments that had pushed longer service men ahead, Line manager discretion on recruitment salaries is a common driver in my experience, as is bias in performance ratings, with women and part time workers less likely to get high ratings and pay awards. Disclosure on a common basis will help force firms to investigate and address these issues. And we need to move fast now: my girls are at uni! Good piece, well done, we need far more PwC’s with far-thinking leaders like Ian Powell

  7. Bernie Samson says:

    The accountancy couple illustration is nice, though I wonder if we might see a slightly different picture emerging in the next decade or so. From what I see around me (I work in a pro services firm and with a good deal of others), many female fee earners are staying in their roles but taking them part time when they have young children. If/when they return to full time work, they (and their employer) still has the benefit of up-to-date practice and a well maintained contacts book. This might well feed in to the higher end stats in the coming years, for pro service firms at least.

    I do have a gripe, though:

    “It never even occurs to Harry to volunteer”

    “Good social democrats they might be but Scandinavian dads still leave their wives to do most of the childcare.”

    I’m not sure how we can tell from these statistics that Harry and his Nordic peers insist that their wives take the lead in looking after the children. It is, after all, equally possible that their wives might have insisted on those arrangements.

  8. I agree with Patricia – it is a class issue as much as it is, or even more than it is, a gender issue.

  9. Brendan says:

    Could someone clarify the final figure for me – the UK has no paid parental leave?

  10. redpesto says:

    Thank you for this. The debate about the ‘gender gap’ in pay has been annoying me for ages since it’s much more complicated than the shouty headlines (and barely disguised chauvinist responses) make out. Likewise the complexity of solving the problem, as in the PwC workforce profile (anti-discrimination legislation is designed to produced equality of opportunity, not equality of outcome, i.e. a 50/50 gender split in everything).

  11. Reblogged this on Transitions At Work and commented:
    Fascinating posting from FlipChartFairyTales, with plenty of varied evidence painting a picture of the dynamics behind gender pay gaps – where they are; they they’ve almost closed (e.g. for workers in their 20s), and why decisions about computing shift career paths quite considerably! See the Tales of Harry and Hermione

  12. metatone says:

    The much criticised Marissa Meyer unwittingly highlighted what real flexible working policies look like. On-site creche. Time out between meetings to go see the kids during their day. (Easy because on-site.) etc. etc.

    Of course, the network thing is very interesting also. It happens to others too – expats are often vulnerable (male or female) to the atrophying of the address book. The post-industrial reality is that few well-paying jobs are about just about skills, they are increasingly about network relations. But that means that anyone who drops out of “mainstream” work for whatever reason for longer than about 9 months is in trouble…

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