The UK’s Gender Pay Gap reporting requirement launched last year sparked an ongoing conversation about the causes of pay gaps and what can be done to close them. This conversation coincides with uncertainty surrounding the UK’s departure from the European Union. With questions over what a post-Brexit economy will look like, many firms become less open to taking risks and making any significant changes. As companies prepare for the 2019 gender pay gap reporting deadline on 4 April amid Brexit negotiations, what is the pay gap picture in the city of London?
Calculating the gender pay gap
The gender pay gap is calculated as the difference between average hourly earnings (excluding overtime) of women and men as a proportion of average hourly earnings (excluding overtime) of men’s earnings. For example, a 4% gender pay gap denotes that women earn 4% less per hour, on average, than men. Conversely, a negative 4% gender pay gap denotes that women earn 4.0% more, on average, than men.
The gender pay gap fell from 2017 to 2018, to stand at 8.6% among full-time employees. The gap among all employees is higher (17.9%), driven by more women working in part-time jobs, which are lower paid (an average hourly rate is £9.36 compared with £14.31, excluding overtime, for full-time jobs).
In 2018 the gender pay gap for full-time employees was close to zero between the ages of 18 and 39 years. From the age of 40, the pay gap widens, an age coinciding with an increase in working part-time. A negative gender pay gap among part-time employees emerges in the age group 30 to 39 years before reversing by the age of 50 years.
Another key factor in the gender pay gap is the management gap. As the Financial Times reported, as pay increases for any given position, there are fewer women occupying that position. 29.5% of all women hold the lowest paid positions at their companies, while just 19.2% held the highest paid positions, or the top quartile. With these patterns of women leaving full-time work at the height of their careers, and ultimately being underrepresented in the highest paid executive positions, one must ask ‘why?’ That women simply do not occupy the highest paid positions at a company is not a sufficient answer for the gender pay gap. It should be the start of a more nuanced conversation.
Diverse perspectives drive innovation
Given the work to be done to close the gender pay gap while also facing Brexit, many firms may be tempted to put the gender pay gap on the back burner. However, there is a lot of evidence to suggest that in these turbulent times, it is a commitment to supporting a more diverse workforce that can strengthen a business. Jamie Broderick, chief executive for UBS Wealth Management UK, said that boardroom diversity can yield innovative solutions, adding “When you have change in the business, when you have stress in a business, those are exactly the times when you need creative, diverse debate around what’s next, because diversity works best in an environment where you’re struggling with problems, and trying to create innovative solutions around change.”
An intersectional problem needs intersectional reporting
Despite all the talk on diversity, women and BAME individuals are still facing an alarming bias in the UK’s job market. BAME individuals face an ethnicity pay gap that may be as high as 17%, but without reporting requirements, this is an estimate. Looking ahead, if the government is serious about holding companies accountable for closing pay gaps, an ethnicity pay gap reporting requirement is needed.
Pay gaps are a symptom of the many inequities fuelled by conscious and unconscious biases in workplace policies, ranging from recruitment to promotion and retention. A recent study published by the Centre for Social Integration at Nuffield College, University of Oxford, found that when researchers sent almost 3,200 applications to both manual and non-manual jobs – including software engineers, marketing, chefs and shop assistants – advertised on a popular recruitment platform between 20016 and 2017, they found that on average, 24% of applicants of white British origin received a positive response from employers, compared with 15% of minority ethnic applicants applying with identical CVs and cover letters. Applicants of Pakistani origin had to submit 70% more applications. Those of Nigerian, Middle Eastern and North African (MENA) origin had to submit 80% and 90% more, respectively.
This is not the first time a study has found bias against applicants with names perceived as non-white. Beyond recruitment, similar patterns emerge in explaining projected ethnicity pay gaps when these groups gain employment. Despite modest gains highlighted by the government last year, BAME employees remain significantly underrepresented in senior management positions. Fewer than one tenth of management jobs in the UK are held by BAME individuals. These findings reiterate the need to reduce the space for conscious and unconscious biases in workplace processes that impact the careers of employees.
How can pay gap reporting help?
As the UK prepares for the next round of gender pay gap reporting, potential employees and consumers are paying attention. Gender and ethnic pay gap reporting has the potential to support accountability, transparency, substantiate action and a scope for improvement.
Other governments can learn from the UK’s groundbreaking gender pay gap reporting policy, tracking how it is implemented and how the data is validated and used. Other countries are examining alternative options. For example, the French government recently announced measures requiring companies to close its gender pay gap within three years.
The Government Equalities Office says it will use the results from the first year of reporting to “target our efforts effectively as we continue to work closely with employers towards eliminating the gender pay gap”.
A good start would be refining the way in which data is collected and analysed to identify patterns around when women leave full-time work in their careers and when they return. Further, disaggregating data by ethnicity, and additional reporting requirements for the ethnicity pay gap will help to better understand the causes of inequities in the workplace. Policymakers must ensure that individuals from underrepresented groups have a voice in developing these reporting requirements.
Tracking gender and ethnic pay gaps is a start, but this data should be used to inform policies to improve career progression and stamp out employment discrimination, both overt and systemic. WERKIN’s mentoring technology helps to reduce bias in decision-making processes, matching mentors with mentees outside of their immediate lines of sight. WERKIN is the market leader in Diversity Tech and is changing who managers see and how they assemble diverse teams.