the-gender-pay-gap-explained

 

Yesterday was the last day for more than 9000 large UK employers to report their gender pay gap to the Government.

The new rule was created in the hope that bringing to light the gender pay disparity would encourage businesses to take action – or face being named and shamed.

The final numbers have surprised almost no one: men are paid more than women at 8 out of 10 businesses, often by a wide margin. However, even in this enlightened #MeToo era, the progressive new legislation has met with controversy – both over the efficacy of the solution and the need for a solution at all.

Here, we answer your questions about what the pay gap is, why it matters, if reporting will really help, and what businesses should do next.

 

What is the gender pay gap?

The gender pay gap is the difference between men and women’s average salaries. It can be looked at for the whole country or on a smaller scale, such as within individual companies or industries.

The gender pay gap is distinct from equal pay, which deals with pay between those performing the same job. Companies are legally required to pay the same wages for directly comparable jobs, regardless of gender, sexual orientation, or other protected characteristics.

The gender pay gap compares salaries of men and women in the target group no matter which role they’re in.

 

What are the reasons for the gender pay gap?

The causes of the pay gap are complex. It doesn’t necessarily mean that companies are actively discriminating against women, although implicit bias certainly a factor, particularly in senior roles and male-dominated industries like tech.

Harvard professor Iris Bohnet explains the three main factors that contribute to the gap:

  1. Within-occupation segregation, with men occupying more senior and women more junior roles
  2. Across-occupation segregation, with men and women in different types of jobs
  3. A “residual” that economists attribute to gender differences in time on the job, as well as bias in pay negotiation and discrimination.

The reasons behind the first two factors - women working in more junior positions and in lower-paying industries - are often linked to motherhood.

Although most women now work, the world is still organised for families with a parent at home, from short school days to expensive childcare. As such, the ‘motherhood penalty’ affects women in many ways, from missing out on career development after taking maternity leave, to being forced to switch to a lower-paying, more flexible industry in order to manage childcare commitments.

For one example: the highest-paying jobs generally reward those who can work long, inflexible hours. (This is why the largest pay gap can be seen in temporally-demanding professions like law, while the smallest is seen in jobs with stable hours.) The highest-paying jobs therefore penalise those who require flexible hours: predominantly women who have caregiving responsibilities.

And it’s not simply that motherhood makes women less able to work long hours – women who remain high-performers in demanding roles experience negative bias by becoming mothers.

As explained by Claire Cain Miller in the New York Times:


‘One of the worst career moves a woman can make is to have children. Mothers are less likely to be hired for jobs, to be perceived as competent at work or to be paid as much as their male colleagues with the same qualifications.

‘For men, meanwhile, having a child is good for their careers. They are more likely to be hired than childless men, and tend to be paid more after they have children.

‘These differences persist even after controlling for factors like the hours people work, the types of jobs they choose and the salaries of their spouses. So the disparity is not because mothers actually become less productive employees and fathers work harder when they become parents — but because employers expect them to.’


It should come as no surprise, then, that an American study found that childless, unmarried women earn 96 cents for every dollar a man earns, while married women with children earn just 76 cents.

 

Why does addressing the pay gap matter?

Aside from the obvious reason of equality and opportunity for women, and the knock-on benefits for families of parents earning more, there are large and proven financial benefits for companies with a diverse workforce and leadership.

Companies with homogenous workforces make worse products and earn less money, explains Priya Guha, former UK consul general and the UK lead of tech incubator RocketSpace. ‘A female founder is 86% less likely to be funded than a man. That’s crazy when we know the return on investment is higher; it is about 34% higher for companies with a gender diverse leadership,’ she says. ‘It’s not about ‘corporate social responsibility’: a diverse range of thinking will bring better value for the company.’

Guha’s claims are backed up by many studies. Companies with diverse workforces and leadership are more innovative, create more new products, and perform significantly better financially.

 

Will pay gap reporting actually help?

Peter Cheese, Chief Executive of the CIPD, thinks so. ‘Gender pay gap reporting was dismissed by some as a blunt instrument of compliance. But as more and more results have been published we have seen that it is revealing some challenging truths about where the real issues lie in achieving sustainable change.

‘It is often said that sunlight is the best disinfectant. The increased transparency that gender pay reporting has brought has further fuelled the debate about how we’re supporting different groups in society towards fulfilling, fair, and rewarding opportunities and work for all.’

  

What should businesses do with the new gender pay data?

The first step, suggests Cheese, is examining the data. ‘We need to use the data to give us greater clarity on the courses of action we all need to take to make a real shift on this long standing business and societal agenda,’ he explains. ‘It’s vital that organisations continue to develop this narrative, and hold themselves to account in the years ahead.

‘There are many actions we can take now, such as providing more flexible working roles and opportunities, and ensuring recruitment, development and promotion processes are truly unbiased and inclusive.​’

Other strategies for reducing the pay gap include:

  1. Enforcing paternity leave to reduce the burden on mothers
  2. Subsidising childcare 
  3. Allowing parents to work from home
  4. Increasing the value of low-paid work, such as catering and caring

For businesses looking to improve their pay gap statistics, the UK government has produced a guide to practical actions employers can take to close the gap, and CIPD has a knowledge hub to guide you through the reporting process.

 

Working in HR and not sure where to start with diversity? CIPD can help. Find out more about getting CIPD qualified online.


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