Addressing the gender pay gap

Last Monday was International Women’s Day. The day marked 102 years since British suffragettes marched on Charing Cross leading to Sylvia Pankhurst’s arrest. British recruitment firm, Robert Half, used the day to highlight significant wage disparities between men and women.  Their analysis showed that working women in the UK are likely to be paid £300,000 less than men over the course of their career. These statistics provoked significant debate on the existence and causes of the gender pay gap.

Is there a gender pay gap?

The Office for National Statistics (ONS) conducts an annual survey of hours and earnings (ASHE). This robust survey finds that, in 2015, there was a 9.4% gap between men and women’s pay for full-time workers. On average, men earned £96 more per week than women.

However, beneath the headline figures lie some interesting findings. For part-time workers, there was a gender pay gap in favour of women. In 2015, the gap between male and female part-time workers was -6.5%.

In addition to work hours, age matters enormously. Between the ages of 22 and 29, the pay gap between women and men was, on average, -0.8%. That is, women earn slightly more than men. Between the ages of 30 and 39, the gap was 0.6%. After the age of 40, the gender pay gap widens enormously. At ages 40 to 49 the gap was 12%, 17% at 50 to 59 and 13% for over 60s. 

There are also significant differences between occupations. The gap between men and women working in skilled trades was almost 25%, while the gap between men and women working in sales and customer service was less than 5%.

What causes the gender pay gap?

Clearly, there is a significant gap between the pay received by men and women. This is despite the fact that women now outperform men at almost every level of education. So what is driving the gap?

The single most important cause of the gender pay gap is hinted at in the data above. The average age for women to have their first child is now over 30 years old. Over two million women are economically inactive because they are looking after their children compared to just over 200,000 men.

After a period of extended leave, women rarely return to the wage of their male counterparts who did not exit the labour market. This largely explains why the gender pay is narrow, and even negative, between the ages of 22 and 40 before increasing dramatically after the age of 40.

How can policymakers rectify the gender pay gap?

There are a number of points at which policymakers might intervene to attempt to redress the gender pay gap.

Addressing the gap at its root

The first stage at which policymakers might intervene is when women leave the workforce to care for their children. This could be done by incentivising men to care for children, by making forms of childcare more affordable, or by increasing the availability of flexible working.

Generally, this has proved a popular way of attempting to close the pay gap. Measures such as shared parental leave - whereby up to 50 weeks of leave can be shared by parents - have attempted to incentivise more men to become the primary carer.

However, the Government’s own estimates suggest that only around 8% of men will actually utilise this leave. Indeed, Unilever - who offer new dads 37 weeks of paternity leave at full pay – find that only around 15% of eligible men utilise that leave.

Reducing childcare costs has also proved a popular way to incentivise women to return to work. Successive governments have introduced tax breaks for childcare in an attempt to make it more affordable, while the Government is currently in the process of meeting its promise to introduce 30 hours of free childcare per week for working parents.

Despite these reforms, the cost of childcare in the UK remains comparatively high. The cost of childcare in the UK regularly ranks among the highest in the world. And even when childcare costs are lower, the gender pay gap persists. For example, Sweden has some of the most generous childcare benefits in the world but a gender pay gap very similar to the UKs.

Returning to the workforce

The second obvious point at which policymakers might attempt to redress the pay gap is when women return to work. There are a number of ways of making the return to the workforce easier for women. These include: increasing the provision of flexible working and accelerated re-entry programmes.

The Coalition Government introduced the right to request – whereby employees with 26 weeks or more service are allowed to request flexible working, which employers must address in a 'reasonable manner'. Since the introduction of the legislation around 25% of all employees - and 36% of female employees with dependent children under the age of six - have requested more flexible hours, with around, 80% of requests either partially or fully instated.

US companies such as JP Morgan, Credit Suisse, Morgan Stanley and Goldman Sachs have implemented re-entry programmes for women to allow them to return to work more easily after leave. Goldman Sachs, for example, operates a paid, ten week, return-to-work programme. People who have been out of the workforce for at least two years are eligible and Goldman Sachs provides them with training, mentoring and networking.

There is a significant and persistent gap in the pay of men and women in the UK. This is largely caused by women leaving the workforce to care for children. However, there is no silver bullet to redress the gap. The choices for policymakers are complex, and attitudinal change is likely required if the pay gap is to be eradicated.