Outside the marginals

a commentary on the politics that followed the UK 2010 & 2015 elections

Equal Pay

The Editor of Elle has just said (ITV, The Agenda 22:40 3 November 2014) that for every pound that a man earns a woman earns 81p.

Does this mean that there is naked discrimination amounting to almost 20% in terms of unequal pay for equal work? That would be truly shocking in the UK in the 21st century. It probably doesn’t.

Does it mean that women are being denied (or not seeking/wanting) opportunities (for equal work) that on average reduces their earning capacity by nearly 20%? At first sight that would still be shocking discrimination probably based on possibly manipulated aspirations, stereotyping and unconscious discrimination in recruitment and promotion.

But what is a “reasonable” gap? (light blue touch-paper!)

The Elle website does not give a citation to support this 81p figure – but does mention that the World Economic Forum published The Global Gender Gap Index 2014. The index, which shows “The highest possible score is 1 (equality) and the lowest possible score is 0 (inequality)”, reveals

Rank Economy Score
1 Iceland 0.8594
2 Finland 0.8453
3 Norway 0.8374
4 Sweden 0.8165
5 Denmark 0.8025
6 Nicaragua 0.7894
7 Rwanda* 0.7854
8 Ireland 0.7850
9 Philippines 0.7814
10 Belgium 0.7809
11 Switzerland 0.7798
12 Germany 0.7780
13 New Zealand 0.7772
14 Netherlands 0.7730
15 Latvia 0.7691
16 France 0.7588
17 Burundi 0.7565
18 South Africa 0.7527
19 Canada 0.7464
20 United States 0.7463
21 Ecuador 0.7455
22 Bulgaria 0.7444
23 Slovenia 0.7443
24 Australia 0.7409
25 Moldova 0.7405
26 United Kingdom 0.7383

That’s even worse than Elle claims! But the 0.7383 is a total gender gap not just a wage gap – which might imply that other factors are worse than the pay gap! So where do the numbers come from?

The link takes us to a mass of detail. For the UK the next level of detail shows:

Factor Rank Index
Economic Participation 46 0.714
Educational Attainment 32 1.000
Health and Survival 94 0.970
Political Empowerment 33 0.270
Overall 26 0.738

So actually our ranking is being held up by equality in Educational Achievement (where women outrank men in some areas) and a good health score – but the Economic Participation index looks worse (never mind the political empowerment score).

Digging deeper we see the economic participation score is made up of a number of factors including:

Wage Equality for Similar Work: 0.69 – but this is a perceptual survey figure not an earnings comparison measurement (i.e. it is not 69p for every £1.00.) It is a response to the survey question, “In your country, for similar work, to what extent are wages for women equal to those of men?” (1 = not at all — significantly below those of men; 7 = fully — equal to those of men). The data is converted to a female-over-male ratio.

Estimated Earned Income (expressed in US dollars as Purchasing Power Parity) gives men earning (on average)  $40,000 against women earning $24,820 – or 62p for every £1.00 – even worse than the editor of Elle’s quoted figure of 81p. This may be because it is not an equal pay for equal work figure, but an overall figure and I wonder at the methodology – which is of course applied to all countries and has to cope with varying availability of data.

The World Economic Forum uses the methodology described in United Nations Development Programme (UNDP)’s Human Development Report 2007/2008 (displayed in technical note 1, addendum, p.361). This methodology seems to be dependent on the assumption that the female share of the wage bill is equal to the female share of GDP.

This is not helping me to answer my provocative question as to what is a reasonable gap? Most single figures seem to drown in a morass of data.

Trying to theoretically model the issue (for a single set of assumptions), I came up with a figure of 79p (a 21p difference)! The model (Spreadsheet EqualPay) makes the following broad assumptions (looking at the whole current working population):

  1. Men and Women entered paid work aged 16
  2. Men leave paid work aged 65
  3. Women leave paid work aged 60
  4. Incomes for both increase at a rate of 3% per year (so I model that pay is related to age)
  5. Incomes for both are the same (for equal age)
  6. All women are out of the economy for 3 years in their early 20s (assumed for maternity and early child rearing)
  7. Apart from this both men and women are in continuous employment
  8. Despite being out of paid work when women return they return to equal pay for equal age – i.e all they lose from being out of paid work for three years is the actual pay not received – they have not got “left behind”

On the above assumptions the only different factor (to earnings averaged over a lifetime) is that women do not work as many years as men due to different retirement ages (which adversely effect the probable peak earning years) and due to maternity and early child rearing. Or put it another way, it attempts to derive a difference after excluding pay and opportunity discrimination.

Equalise retirement ages and make paternity leave equal to maternity leave and (on this model) the 21p difference is totally eradicated.

On this basis we can claim that (for the – until recently – current retirement regime and parental leave practices) the 21p per pound pay difference is potentially “reasonable”, but perhaps we ought to put, say,  a +/- 5p on that difference to reflect the assumptions made. (For instance not all women take career breaks, but on the other hand most of those returning after such breaks do find that they have been left behind in terms of career progression by an amount approximately equal to the length of their absence. Take the career break out the model and the five-year difference in retirement ages can still give a 19p in the pound difference in lifetime earnings.)

I don’t like the idea of the extra bureaucracy involved in statutory pay audits, but they may be the only way to ensure that there is not massive pay discrimination (in terms of equal pay for equal work) in those parts of the economy that are outside our direct experience. (For instance my experience is predominantly big private sector firms, large government organisations and academia – where any discrimination is no longer directly “in pay” but, if at all, is more subtly indirect in terms of “opportunity”.) Perhaps the small business sector (which is meant to be growing) is massively discriminatory, or self-employed women are prepared to pay themselves less in order to have more autonomy?

It feels rather non-intuitive – but even playing with the assumptions does not massively change the figure. But it does indicate to me that headlines like “a women earn 81p for every pound earned by a man” may not be helpful – the issue is more complex than mere pay equality.


 

Given that our “Educational Attainment” measure (World Economic Forum figures – see above) have indicated that for a number of years we have had near equality, it would be interesting to track those who entered the labour market say in 2004 and analyse:

  1. Equality of progression
  2. How this compares with the cohorts that entered the labour market in say 1994, 1984 and 1974. (We might hope that the later cohorts had greater equality of progression as obvious discrimination was rooted out and more role models started to appear.)

If we have an “equal opportunity workplace” we would expect that, particularly for the 2004 cohort, progression would be approximately equal (after allowing for a few weeks or months slippage by women due to maternity).

If we do not see equal progression, we then need to ask why not?

  • If it is because women tend to go into careers that have lower pay or lower opportunities for progression than the typical careers that men go into, we need to check:
    • That within those careers we are seeing equal pay for equal work
    • Check that as a society we are correctly valuing those careers
    • Whether there should be more progression opportunities (for instance in the typically male career of the police, until recently a chief constable was expected to progress through the ranks from police constable, but in the typically female career of personal care, how many care home managers have genuinely come through the ranks from care assistants?)
  • If it is because women do not get promoted as fast as men, we need to check:
    • Whether women are failing to get promotions as much as men, or whether they are not applying for promotion as much as men? (Is it a matter of promotion discrimination or low aspiration for women – or over-inflated aspirations for men?)
  • If it is an issue of aspiration, are women feeling that it is not worth applying for promotion, or are they making a life-style choice?
    • Is a decision not to apply because of an organisational culture that makes it look “not worthwhile” to apply (do they perceive that the selection process is discriminatory)
    • Is the life-style choice due to more senior jobs looking unattractive (e.g. longer hours, more stress, more responsibility but less autonomy and more adversarial/competitive relationships with colleagues)? Senior roles are often seen as a rat-race and therefore to succeed you have to be a rat.
  • If senior jobs look unattractive we then have an interesting dilemma;
    • Do we respect the life-style choice as a sensible decision (that male colleagues often seem incapable of making), or
    • Do we try to make senior jobs more attractive – which possibly requires massive cultural change and which in areas subject to global competition (or even just spending constraint) might be next to impossible to achieve?

Have we ever had a Royal Commission (or similar) on the nature and future of Work?

 

 

Advertisements

Single Post Navigation

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: