Monday 22 August 2016

The gender pay gap - new evidence

This morning a new report by the Institute for Fiscal Studies on the gender pay gap is being released. It comes along some new evidence about the structural reasons for the pay gap.

The new evidence and reports make fascinating reading, not least because they attempt to identify the point at which the pay of female workers diverges from that of male workers in companies. This point appears to occur at the time of child birth when women traditionally take up child care and either drop out of employment temporarily, or work part time. Once the children reach the age of 20, women who go back to full time employment the wages of women never reach the wage levels of their male counterparts.

If this points to the need for structural changes such as providing better child care for families and/or more flexible parental leave, this is certainly not the whole story. Interestingly, even before women take up maternity leave, the wage gap to their male colleagues is already 10 percent.

Once women are working part time, their chances of progression are also significantly reduced which points to a dilemma. We know that part time workers are actually more productive compared to their full time workers, but that does not seem to translate into better pay or equal opportunities to be considered for promotion.

If this all sounds gloomy and hard to tackle, however, it is worthwhile remembering that there is some good news too. The gender pay gap itself has reduced from about 28 percent in 1993 to 18 percent to date. Much of that is due to the increasing number of women in high paying jobs. So, whilst women's pay now increases faster than men's pay in general, the gap still exists. In addition, women in low pay jobs with no promotion opportunities do not experience any pay differential to their male colleagues in similar positions, which again illustrates the critical role of promotion and progression in generating the pay gap in the first place for higher paid workers.

It seems to me that to make progress on this issue, several things need to happen. First, the government should continue to provide additional flexibility for parental leave. The cultural shift in providing child care jointly by both parents still has not materialised, but incentivising both parents to contribute to this appears essential.

Second, the legislation to compel companies to provide transparency about salary structures amongst their work force is welcome as well. It will produce additional evidence and allow boards to take a hard look at how they perform on the issue of pay.

Last but not least, progression and promotion needs to be de-coupled from the amount of time you work, and linked to productivity, which would ensure that part time workers gain opportunities to progress as well.

Legislation is unlikely to make inroads into this problem, what is required is more a cultural shift at the work place.

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