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29 May 2018

Greater transparency on the gender pay gap is welcome, but there is still much more that could be done

Rachel Hesketh, Research Associate

The UK has recently mandated greater transparency on pay, but other countries have gone further

More can be done to address the gender pay gap
More can be done to address the gender pay gap

Maybe you’re reading this at your desk, or perhaps on a packed train or bus heading to the office. Look around at your colleagues or fellow commuters. Everyone’s putting in the hours, but over the course of a year, the women around you will take home on average 17% less pay than the men next to them.

Well, 17% if you’re working full-time in the UK, and something similar in Germany, the US, Switzerland and Mexico. Head to a workplace in Korea and this gap widens to almost 37% among full-time employees. Around the world, women in work are earning less than their male counterparts.

It’s not quite as simple and egregious as John the accountant being paid more than Joanna, despite both doing the same job. For starters, that would be illegal in many countries, where the principle of equal pay for equal work is enshrined in law. Instead, the gender pay gap (GPG) reflects a bundle of different forces, including the tendency of women to work in lower-paid occupations than men, or to accept less senior positions because they better allow them to balance work with caring responsibilities.

The recent policy response in the UK has been to mandate greater transparency in the gender pay gap at the firm level. Employers with more than 250 staff are required to publish their gender pay gaps, gender bonus gaps, the respective proportions of men and women receiving bonuses and the proportion of men and women in each quartile of the company’s pay structure. The intention is that poor performers will be incentivised to improve to avoid reputational damage, while good practice can be highlighted.

There are important questions as to whether this represents an effective way to address the GPG. At the most prosaic level compliance isn’t perfect – 1,500 firms missed the 30 March 2018 deadline to publish the required information, and it is yet to be seen if the enforcement powers of the Equality and Human Rights Commission have the teeth to address this. Perhaps more fundamentally, what are the consequences for doing badly? Ryanair, for example, explained away its 70% GPG by the fact that women in the company tend to be employed as cabin crew rather than as pilots. So, that’s alright then. But wait – surely women’s underrepresentation in higher-skill, higher-pay roles is exactly the problem we’re trying to solve?

There are almost certainly ways of bolstering this policy to oblige firms to address the problems that pay reporting identifies. Last year, Iceland passed legislation requiring companies to prove that they pay men and women equally, and all companies with more than 25 employees must carry out gender pay audits of all jobs in the organisation. Any identified wage gaps of more than 5% must be closed.

Ramped-up pay auditing sounds promising, but it might take more targeted measures to get at the underlying causes of why women are all too often occupying less senior roles within companies and across industries. Childcare responsibilities play a major role in this, which is why parental leave policies targeted at men have been introduced in many European countries. The rationale is that if men take more time off following the birth of their child, it will help to equalise birth-related labour market disruptions across the genders, reducing the relative career penalty for women. It is also hoped that more time spent caring for their child in the first few months of life will encourage men to play a more active role in childcare as they grow up, easing the burden on women and enabling them to devote more time and energy to their careers.

Men need to play a more active role in childcare
Men need to play a more active role in childcare

Sweden has been something of a pioneer when it comes to parental leave policies. 40 years ago they introduced shared parental leave, and in 1995 they went further, introducing a month of paid leave reserved specifically for dads. This ‘daddy month’ has since turned into three months, and the consequence is that 90% of Swedish fathers now take paternity leave, of an average duration of seven weeks. However, while the policy has clearly been successful at encouraging men to take leave following the birth of their child, it hasn’t necessarily had the long-term disruptive effect on gender roles that was hoped for. Specifically, evidence suggests that men benefiting from the policy don’t subsequently take more time off work to care for sick children, indicating that the burden of childcare, and associated career disruptions, continues to fall disproportionately on women. Additionally, Sweden still has a not-insignificant GPG of around 13%.

The muted success of these policy measures means that more radical change may be necessary to eliminate the GPG, and more broadly afford women equal labour market opportunities to men. This might involve changes to the nature of work – research indicates that there is still a substantial wage penalty for flexible working as firms value employees being present at certain times and working longer hours. This seems to be particularly the case in jobs that involve more interaction or where tasks are more time-pressured, such as business, finance and law. The alternative might be a more fundamental shift in the household division of labour; women in the UK do on average 60% more unpaid work, including cooking, childcare and housework, than men, with obvious consequences for the time they are able to devote to paid work.

The question that remains is the extent to which policy can be designed to achieve these sorts of cultural shifts. A more bottom-up revolution, led by communities, businesses and individuals, might be what’s needed to reach a point where gender is irrelevant for who’s holding a business meeting and who’s holding the baby.