What’s going on in Birmingham?
The rubbish continues to pile up in the streets – to the disgust of residents and the delight of the local rat population – as the city’s binmen last week rejected the latest pay offer from the municipal authorities. It’s an intractable row, with no immediate resolution in sight. But what’s getting lost in all the media coverage, says Ross Clark in The Spectator, is a clear-eyed view of what caused the stand-off. The strike, which began on 11 March, is the “fallout of Birmingham City Council going bust as a result of an equal-pay claim brought by [female] cleaners who complained they were not paid as much as [male] binmen”. Their successful case was built on the allegation of sex discrimination, and based on the concept of “work of equal value”. That’s a worryingly nebulous concept, which has the potential to wreak much havoc on UK business, says Clark – and we can expect things to get worse once Labour’s new “Fair Work Agency” muddies things further.
How is “equal work” defined?
Employers have been required to offer men and women equal pay for equal work since the Equal Pay Act in 1970. The concept was widened under the Equality Act 2010, and today it applies to employees (including agency workers) no matter whether they are full-time, part-time, apprentices, or on temporary or freelance contracts.
When it comes to defining “equal work”, there are three kinds of equality recognised by the law. The first two are “like work” (work that involves similar tasks, knowledge and skills), and “work rated as equivalent” (under a job-evaluation scheme). The third type of equal work is the most controversial and hard to define; namely, the “work of equal value” at the centre of Birmingham’s woes. This refers to “equal” job roles that might not in fact be remotely similar, but are judged to be equivalent in terms of the effort and skill needed to carry them out, and the level of decision-making involved.
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Sounds quite subjective?
Indeed – and it’s that that has proved a boon for (mostly) female workers and even more so for their lawyers. The concept of “equal pay for work of equal value” was enshrined in law in 1984; the Conservative government was obliged to legislate under European Community rules.
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To make a claim, a worker needs to identify a “comparator” employee – someone of the opposite sex within their organisation, or an “associated” organisation – and show that their pay or conditions are worse. This is a difficult thing to do – and there were relatively few cases until 1999, when legal changes (a new Europe-wide right to claim six years’ extra back pay rather than just two; the relaxation of rules on “no-win no-fee” lawyers) improved things for plaintiffs.
Ever since, it has led to a multitude of legal cases – originally in the public sector and now increasingly in the private sector, too – in which (for example) female cleaners and carers have argued that their work was just as valuable as that of dustmen or caretakers. One of the most high-profile cases, involving Asda, finished (for now) its ten-year crawl through the courts in January.
What happened in the Asda case?
The judges decided in favour of tens of thousands of shop-floor workers (most of them female) who were suing Asda for being paid less than their colleagues (most of them male) in warehouses.
It’s the biggest private-sector case so far, involving at least 60,000 staff. The case work was certainly thorough, says The Economist: “Detailed job descriptions submitted for the judges’ consideration spanned over three times the length of the complete works of Shakespeare.”
Of the 14 store-based roles they analysed, they concluded that 12 were of equal value to the warehouse-based roles. Although the plaintiffs did not have to prove intentional sexism, Asda does now have to prove it had a good reason (a “material factor”) other than sex for the pay disparity. That could take another two years.
What if it can’t?
If the supermarket can’t justify the pay disparity, it will be on the hook for compensation of about £1.2 billion – plus higher ongoing wage costs of about £400 million (15%) a year.
Leigh Day, the law firm representing Asda’s staff, is also representing shop workers bringing claims against Tesco, the Co-op, Morrisons and Sainsbury’s; clothes-chain Next is already on the hook to pay compensation, possibly more than £30 million.
For free-market liberals, says Tim Worstall of the Adam Smith Institute, to argue about the equal value of work is “to commit a category error” akin to the one Marx made with his labour theory of value.
In reality, the “value” of work – the wages paid for it – is determined by the supply of workers able to do the job and the demand for them to do so. Thus, two different jobs can never be said to be of “equal value”, since the only useful measure we have of what a job’s worth is “what someone is willing to pay to get it done. How can it be otherwise in a market economy?”
How can it?
When policymakers decide that it can, and pass laws to make it so. But organisations can protect themselves in a number of ways against unequal-pay claims and ensure they are acting fairly, says Charles Cotton of the Chartered Institute of Personnel and Development.
Transparency: “Being transparent about pay and grading systems should avoid discrepancies that trigger equal-pay claims.”
Audits: conduct regular equal-pay audits to identify potential issues.
Action plan: identify risks around pay disparities and make a plan to resolve them.
Job evaluation: put a formal scheme in place that rates the value of each job to the organisation.
Salaries: do line managers tend to offer higher salaries to male new joiners?
High levels of managerial discretion can increase the risk of unequal pay. “The gavel-wielding hand is on the move at the (considerable) expense of the invisible hand,” says The Economist. It’s an ominous development: forewarned is forearmed.
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