Plans to force firms to publish their pay gaps won't come close to solving the problemby / February 15, 2016 / Leave a comment
The Equal Pay Act 1970 made it illegal to pay men and women differently for equivalent work. Four decades later, men still earn an average of almost 20 per cent more than women in the UK.
The regulations put forward for public consultation last week, which would make it mandatory for companies to report on their gender pay gap, are an attempt to tackle this. It’s a simple way to force organisations to pay attention to an issue they might otherwise ignore, and it’s a necessary step: when the government introduced voluntary reporting in 2011, an embarrasing five companies chose to take part.
No legal mechanism is being proposed to force companies to close the gap; there is no requirement for them to explain themselves if the gap is shown to be large or to take steps to reduce it, as exists in some European countries. Instead, the UK’s proposed regulation will allow the public to turn jury. The penalty for companies that fail to improve is a PR headache, which will likely have a varied impact—consumer brands need to be more careful about their public image, for example, than others.
Nobody can complain that the regulation would impose an unreasonable burden on small companies, an objection often raised in relation to such regulations, since those with fewer than 250 employees are exempt. And the suggested requirements are simple: companies must declare the mean and median salaries of male and female employees (calculated, as usual, as an hourly rate, to avoid the results being skewed by the proportion of those in part-time or full-time work); the difference in mean bonus paid to men and women; and the numbers of each sex in each quartile of pay.
That’s a good range of indicators and importantly includes bonus pay. This has long been a concern for women in certain sectors, such as the City. Bonuses—which can be higher than basic salaries—are often the result of opaque negotiations between employees and their managers, rendering them more susceptible to boys’ club favouritism or to an unconscious bias under which employers are more receptive to the salary demands of male employees. Basic salary figures provide only a partial picture.
It’s hard to argue that this regulation is a bad thing; but it’s not going to solve the problem by itself. It will reveal overall differences in pay, but not what kind of work that pay relates to. A yawning gap between the average earnings of male and female employees might be a result of the glass ceiling (fewer women being employed in more senior positions), or it might be caused by men and women being paid differently for equivalent work. Both are problems that need fixing, but they call for different cures.
The latter is the practice that was banned by the Equal Pay Act and, though it may seem like a relic from ancient times, cases still occur. Birmingham City Council has recently had to pay out hundreds of thousands of pounds for failing to pay female workers as much as their male colleagues in comparable jobs; while in the US there have been recent high-profile cases of Hollywood actresses being paid less than their male co-stars.
The former—the lack of women in senior positions—might be harder to challenge. UK law of course prohibits workplace discrimination on the grounds of gender, but it is difficult to prove in all but the most explicit of cases. Since most organisations suffer an increasing gender imbalance further up the ranks, we can guess that discrimination of this kind, conscious or otherwise, is fairly endemic. But because individual cases are hard to detect, ensuring that more women are promoted requires either a change in social attitudes (which is time consuming and difficult to achieve) or quotas (which are controversial). Mandatory pay reporting may go some way towards helping by using public pressure, rather than unpopular quotas, to encourage the promotion of women. But we need to be careful: what most organisations need is a change in culture, not a box-ticking exercise.
There are many factors that won’t show up in the figures. Part of the cause of the gender pay gap is that women are often employed in lower-paying sectors such as care work, teaching and administration—fields that involve a high level of skill and responsibility but tend to be devalued as traditionally female—while traditionally male sectors such as finance and engineering are often higher paying. That is a bigger problem than any individual company.
Without measures to address the gender pay gap, it will be another half century before it disappears. I’ve met many who argue that we need to let it close naturally, but at that rate even the youngest generation of women alive today will see equal pay only by the end of their careers. It will be too late for women who are already working to enjoy what is our right. Critics are right to say that the causes of the gap are cultural and structural, and that those things take time to change. Legislation cannot solve everything—but it can, and must, lead the way.