Features

The gender pay gap: are women getting paid less than men?

Data on the gender pay gap would suggest that they are. Does that mean sexism is rife in British society? It’s not quite as simple as that, says Simon Wilson.

937_MW_P14_Briefing
Taking time out for childcare may explain much of the gender pay gap

Data on the gender pay gap would suggest that women are getting paid less than men. Does that mean sexism is rife in Britishsociety? It's not quite as simple as that, says Simon Wilson.

What is a "gender pay gap"?

It's the difference between the median hourly rate of pay for men, and therate for women, expressed as a percentage of the men's rate. So if, in a particular company, men are paid on average £30 per hour, and women are paid an average £27 per hour, the gender pay gap is 10%.

Government statisticians, and somemedia reporting of the issue, use the potentially confusing phrase "negative gender pay gap" to mean a pay gap in favour of women. Thus, if men are paid £30 and women are paid £33, that's a "negative pay gap" of 10%. It's important to distinguish the "gender pay gap" from "unequal pay" ie, paying men and women different rates for the same job. This has been illegal since 1970.

What's the current gap?

Since last year it's been mandatory for all public bodies and private companies in Great Britain (but not Northern Ireland) that employ more than 250 people to provide gender pay-gap data to the government. They also have to publish details of the gender split in different pay quartiles and the proportion of men and women who get bonuses.

Last April, the first batch of this data showed an overall gap in hourly median pay, including part-timers of 9.7%. There were vast differences between sectors, with the biggest gaps in construction, finance, utilities, communication and education. High-street banks with a lot of men in highly paid roles and a lot of women in the branches reported massive gaps of up to 43.5% (at Barclays, which also reported that women earn 73.3% less in bonuses).

Data for this year must be sent in by30 March (public bodies) or 4 April (private companies). Some has already been published, and shows the gap widening at a significant minority of firms/bodies (as many as 40%), but narrowing a bitoverall, in line with the long-term trend.

What other data is available?

The other major source of information on the gap is the Annual Survey of Hours and Earnings (ASHE), published by the Office for National Statistics (ONS). (This survey is constructed from a 1% sample of HMRC data on all PAYE employees.) In 2018, the ASHE data shows a gender pay gap for full-time workers of 8.6%, a fall from 9.1% the year before. In fact, this rate has been falling steadily since the ONS first started measuring it in 1997, when it was 17.4%, and is now lower than ever. But the ONS figures also highlight a big difference between full-time and part time work.

Which is what?

Among part-time workers there is actually a small "negative" gap in favour of women (of about 4%). But, paradoxically, once those part-timers are factored in, the overall gap ie, for all employees widens to 17.9%.

The reason for this is that more women work in part-time jobs, which are lower paid (an average hourly rate is £9.36 compared with £14.31 for full-time jobs). This 17.9% gap is bigger than the figure for staff at big organisations with more than 250 employees suggesting that, broadly, bigger companies have smaller pay gaps. The ONS figures also highlight another striking feature of the pay gap which is that for full-time workers aged between 18 and 39, the gender pay gap is close to zero.

Meaning what?

Meaning that women and men who work full-time are paid almost exactly the same until their 30s.But for full-timersin their 40s, 50sand 60s, that gap leaps to 12%-15%.Once part-timers are factored in, the gender pay gap increases steadily in every age cohort from 18 to 59 (after which it dips back a bit). In other words, the gender pay gap is closely related to (a) part-time work and (b) age.

Many women who take a career break to care for children subsequently return to work part-time, and they earn less than their male peers even if they return to work full-time. To what extent these facts reflect millions of perfectly sensible individual choices about family life, or a structural sexism that underpins all social and economic activity, is a question of politics. What seems clear is that the gender pay-gap figures are not necessarily a good proxy for "measuring" sexism at work.

Why not?

Take Npower, which has just reported an increased pay gap year-on-year. The reason, it says, is that this year it offered its workers a salary sacrifice benefits package that was taken up by far more women than men. The details of it aren't public. But if, for example, an employer offers workers more annual leave or higher pensions contributions in lieu of a pay rise and more women go for it than men then its gender pay gap will grow. But that doesn't mean it has been unfair to women.

If it wanted to slash its pay gap, points out Mark Littlewood in The Times, it could offer the package only to men. But that would definitely be unfair to women (and probably illegal). Moreover, those countries with the widest pay gaps also have disproportionately high female participation in the workforce.

Such as?

Analysis by Eurostat shows that in the European countries with the biggest gaps in average pay (such as the UK, Germany and Estonia) about 80% of women are in work. In countries with smaller gaps (including Romania, Italy and Belgium) the rate of women in work is significantly lower (about two-thirds). Clearly, if a big chunk of the female population is not working at all, rather than doing relatively low-paid and/or part-time work, then the gender pay gap will be smaller. But that might not be a good thing either for the non-working women or for society as a whole.

Conversely, if the UK decided to compel companies to close their pay gaps say, by making it illegal to employ a woman below a certain salary, or below a certain proportion of the average male salary it would make the gap smaller, but might also cause a collapse in the number of women employed. That would be in nobody's interest.

Recommended

How the fear of death affects our investment processes
Investment strategy

How the fear of death affects our investment processes

Many of our investment decisions are driven by one simple fact: the knowledge that, one day, we will be dead. Here, in an extract from his new book, J…
2 Jan 2020
The good investments of the 2010s – and the bad
Stockmarkets

The good investments of the 2010s – and the bad

John Stepek takes a look back on which investments did well and which did badly in the decade that’s about to come to an end.
26 Dec 2019
How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Beyond the Brexit talk, the British economy isn’t doing too badly
Economy

Beyond the Brexit talk, the British economy isn’t doing too badly

The political Brexit pantomime aside, Britain is in pretty good shape. With near-record employment, strong wage growth and modest inflation, there is …
17 Oct 2019

Most Popular

No, the UK did not “plunge” into recession yesterday
UK Economy

No, the UK did not “plunge” into recession yesterday

That the economy took a massive hit due to Covid-19 should be news to no one, says John Stepek. The real question is what happens now.
13 Aug 2020
Inflation spiked in the US last month – is this the shape of things to come?
US Economy

Inflation spiked in the US last month – is this the shape of things to come?

Prices in the US rose much more dramatically than expected in July. Can we expect more of the same, and what does that mean for your money? John Stepe…
14 Aug 2020
The MoneyWeek Podcast: house prices, staycations, and the death of cash
House prices

The MoneyWeek Podcast: house prices, staycations, and the death of cash

John and Merryn talk about the rise in UK house prices and the fact that everybody is holidaying in the UK, plus gold's new highs, the death of cash, …
12 Aug 2020