Mind the (gender pay) gap: will gender pay reporting make any difference?
5 Apr 2017
April 5th is the day. That’s the ‘snapshot’ date in the new The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 when UK-based employers with 250 or more employees need to calculate the gaps in pay between their female and male employees. Six calculations are required:
- the mean and median or mid-point gender pay gap;
- the mean and median bonus gaps and the proportion of males and females receiving a bonus payment; and
- the proportion of males and females in each quartile in a list from top to bottom of the pay levels of all their employees.
Employers then have 12 months in which to publish this information, on their own and a government website.
But what will the effect of this level of pay exposure be? In announcing the implementation of the regulations, David Cameron predicted that they would support the complete closure of the gap in a generation. The European Commission is more pessimistic and forecasts another 70 years will be required at current rates of progress. The business-lobbying organisations strongly opposed the regulations in the original 2010 Act, as being potentially misleading and a burden on smaller businesses. A recent survey by the CIPD suggested that the HR community have come round to supporting the requirement but believe it will make ‘little difference’ to closing the 18 per cent national pay gap between men and women in the UK.
IES has recently been reviewing the evidence on what actually has an impact on gender pay gaps, considering both: government measures such as these reporting requirements (similar measures have just come in in Germany), maternity provisions and compulsory equal pay audits (required in Scandinavia); and employer actions such as flexible working and fair pay management policies. This review will be published shortly by the Equality and Human Rights Commission (EHRC), and in a new book in 2018. So what are our conclusions? Does reporting have any impact on the gender pay gap?
The first impression from reviewing the research and literature on this area is how many articles there are on the nature and difficulties of trying to address what one group of academics calls the ‘moving target’ of gender pay gaps, and how little research there is on ‘solutions’. Clearly there are deep-seated and inter-related social, cultural, and educational contributors to these gaps. When the Halifax annual pocket money survey reveals our sons get more than our daughters, pretty much in line with the size of the gap between their mums and dads nationally, you begin to realise how difficult this is to address.
Nonetheless, looking across different studies and geographies, the following factors and actions do come out as potentially having an impact.
A variety of studies supported by the EHRC indicate that employers with greater pay transparency have narrower gender pay gaps. This logic underpins the compulsory reporting requirement which is becoming increasingly common in Europe. In Sweden, businesses with 25 or more employees have to conduct an equality action plan every three years, which has contributed to the narrowing of the gender pay gap to only 3 per cent for women working in male-dominated occupations.
Flexible working and parental support
Despite the recent extension of the right to request flexible working to all employees in the UK, the evidence suggests it has not yet delivered substantial change. Research by legal firm Hogan Lovells and My Family Care based on a sample of 70 organisations, suggested that only 2 per cent of them had seen a significant uptake of shared parental leave since it came into effect in April 2015. This survey found the biggest barrier to take-up (41%) was a cultural perception that an extended period of time off for a father would be career limiting. The National Childbirth Trust similarly found that almost a third of the men interviewed (30%) would not consider sharing parental leave with their partner, with almost half (45%) stating that the poor remuneration of parental leave was the key barrier. Generally working hours’ flexibility is associated with lower earnings.
A number of studies have identified that the uneven distribution of jobs between men and women is key to the ‘maintenance of gender disparities’. In some occupations and industries such gender bias against women limits those short-listed for interview and impacts recruitment decisions, which in turn impacts the gender pay gap. The use of gender-blind screening – whereby the applicant name is removed during the initial screening process – has been found to have a significant positive impact on the number of women recruited. It is also at the point of recruitment that interventions around controlling starting salaries for new recruits and limiting line manager discretion in this area will also, in turn, impact the size of the gender pay gap. Careers advice is a related area that is revealed to have a significant impact in a number of qualitative research studies.
A UK government review conducted by Lord Davies in 2011 found that the growth of numbers of females on boards was very slow and recommended that FTSE 100 companies should aim for a minimum of 25 per cent female representation by 2015. Davies’s target was achieved in 2015, although this was heavily focused on growth in part-time and lower paid non-executive roles. A new five-year plan was agreed in 2016, focusing on building the talent pool below board level and greater representation in executive as opposed to non-executive roles. Although a voluntary initiative rooted in individual corporate actions, the tacit threat of legislation has undoubtedly also encouraged progress.
Cardoso and Winter-Ebmer (cited in Hensvik, 2014) found that in Portugal female earnings increased when organisations appointed a female manager; and Bell (also cited in Hensvik, 2014) found that the earnings of female executives were higher and women were more likely to be among the highest-paid executives in female-led firms.
Training and qualifications
Quantitative research by London Economics highlighted that wages are greater when a STEM A-level is undertaken and girls taking one STEM A-level can expect annual wages be £4,500 higher, on average, than if they hadn’t; while those who take two STEM A-Levels can expect a wage return of 33.1 per cent (London Economics, 2015). Olsen et al (2010) found that training (formal study, on-site training and other training paid for by employers) was associated with 6% higher hourly wages.
The introduction of the UK’s National Minimum Wage (NMW) followed by the more rapidly escalating National Living Wage in 2015 benefited women in particular, as they hold the majority of minimum wage jobs (59% - LPC, 2014). The Low Pay Commission’s research, however, suggests that the impact on the national gender pay gap has been limited by the preponderance of low-paid females in part time work.
In conclusion, our research analysis shows that many individual actions by individual employers and governments have the potential to impact on gender pay gaps. Yet in almost all cases the effect is small and highly context dependant. It is also clear that just as factors of causation interact - with women in their forties suffering, for example, from having both child- and elder-caring costs and responsibilities, inflexible working policies, norms in working patterns, and so on - so supporting actions can exert a positive upwards effect on female pay. For example, the legislative right to request flexible working encourages more employers to follow the example of the leading firms and to apply their policies at more senior levels.
Ultimately therefore, it appears that the only really effective way to continue to reduce and eventually remove gender pay gaps is for multi-stakeholder groups to co-operate, working together to address this complex web of causation with multiple and sustained initiatives. This can be seen in the progress made in Boston in analysing and starting to reduce the City’s overall gap. A similar multi-pronged initiative in UK Higher Education has been associated with a fall in the full-timers’ gap of over 2 per cent. IES’s case study research in Lewisham Council, which is characterised by what is referred to as a ‘negative pay gap’, ie women earn more than men, highlights the importance of sustained focus and example-setting by senior leaders, effective HR monitoring and support measures, and a promote-from-within talent strategy.
The new gender pay reporting requirements in the UK should help to encourage a more transparent pay environment which we know is conducive to smaller gender pay gaps. But, on the basis of the evidence we have reviewed, researchers and HR practitioners would almost certainly agree with Professor Caroline Gatrell that ‘while it is a good thing to encourage more transparency around levels of average pay and to expose the discrepancies between what men and women in the same roles earn, it is important not to think that the task ends there.’
Any views expressed are those of the author and not necessarily those of the Institute as a whole.