Britain’s pay gap standards are outdated and threaten an equal future
The continual disparity between men’s and women’s pay remains the starkest illustration of gender inequality in the UK. For several years now, we’ve had the data showing the harsh reality that female workers are valued less – but simply shining a light on a problem is not always enough to fix it.
We only know about these disparities because of gender pay gap reporting – a pioneering system which came into force in April 2017 and offers an X-ray vision of the inner workings of many organisations. The publicly available figures leave offending companies nowhere to hide. Yet for all its impressively radical transparency, our system risks being left behind by countries pushing for new standards of pay reporting.
In new research, the Global Institute for Women’s Leadership at King’s College London and the Fawcett Society analysed gender pay gap reporting systems in the UK and five other countries: Australia, France, Spain, Sweden and South Africa. The UK ranks joint-last with Australia.
In essence, our pay gap legislation has no teeth – it’s focused on monitoring the problem but not actually fixing it. The strategy banks on the fact that transparency might force action, through a tactic of naming and shaming. Extra public and media scrutiny has had a welcome impact.
There has been an acceleration in the reduction of gender pay gap among firms covered by the legislation – from 0.6 per cent a year to 1.6 per cent, a significant improvement. However, these gains are felt largely by high-paid early-career women. It hasn’t yet reached low-paid women.
Tomorrow is the deadline for companies to report their pay gaps. But initial data shows why we shouldn’t get our hopes up – there is a glacial rate of progress in some sectors. For example, among 10 large banks that have reported early, the latest figures show an average 44.5 per cent difference between male and female hourly wages, compared with 45.2 per cent reported the previous year. The change is only slightly better.
Nationally, the gender pay gap – which currently stands at 15.5 per cent among all employees – has narrowed slowly over the past decade, falling by only around a fifth. According to analysis done for the Labour party, unless we make quicker headway, women currently in their mid-30s will never know equal pay in their lifetimes.
There needs to be a clear demand placed on companies to produce actions plans with clear timelines, spelling out how they will improve not just hiring practices but progression, promotion and policies around family leave. A huge part of the pay gap is driven by what happens after women start work – not what they do when they start.
Both Spain and France do require companies to come up with a strategy. In the latter, for example, companies that fail to address identified gender inequalities within three years can face heavy penalties of up to 1 per cent of company payroll.
According to McKinsey, there would be a £150bn benefit to UK GDP if the performance of every region on gender equality at work was raised to that of the best.
This isn’t about bashing business. It is in our economic interests to introduce tougher rules for pay gaps.