Clare Gregory and Kate Hodgkiss, January 11, 2017
While the pay gap has shrunk for some, there’s still an age disparity that pay reporting won’t tackle
A recent report by the economic and social policy think tank the Resolution Foundation highlighted that the pay gap for women starting out in graduate roles in their 20s has shrunk to just 5%. This is on the face of it excellent news and progress in narrowing the pay gap is certainly heading in the right direction: the gender pay gap has closed for every generation of women for the last century, at all stages of their working lives.
However, the Foundation’s analysis of the variation in the pay gap by age makes less comfortable reading.
The pay gap increases significantly as women age through their 30s and early 40s, partly because many women take leave to have children. The gap persists and widens further even when women return to work as many women take part-time roles which may attract a lower salary and reduced opportunities for training, progression and promotion.
A 2015 report by the Institute for Fiscal Studies found that becoming a mother equates to a 33% pay cut over the first 12 years of the first child’s life. Progress in narrowing that gap has stalled, meaning that women entering the workforce in 2017 can still expect to face a substantial lifetime earnings penalty compared to their male counterparts.
In an attempt to accelerate progress the government has introduced legislation requiring larger employers to publish information about pay. Employers will need to publish, using data captured at a snapshot date (5 April 2017):
- The difference in the mean and median pay of male and female employees;
- The difference in mean and median bonus pay of male and female employees;
- The proportions of male and female employees who were paid a bonus in the previous year; and
- The numbers of male and female employees employed in quartile pay bands.
The regulations are not well drafted and contain a number of anomalies which may lead an inaccurate picture of pay equality at an organisational level. The most notable is that the definition of pay omits overtime pay, which may lead to a distorted reflection of the gender pay gap, particularly if overtime is predominantly done by male employees.
However, a more important drawback is that the regulations only require employers to publish a headline figure; there is no breakdown by age, job role or full time vs part time status. That headline figure may therefore be skewed by the workforce comprising more women in their 20s rather than those slightly older women more likely to suffer an unfair pay gap.
Further guidance on the regulations is expected in the coming weeks and may well encourage employers to provide information on the breakdown by age as part of their voluntary narrative. However, while employers might find information regarding the gender pay gap by age informative in setting an equal pay strategy within the organisation and measuring progress, there is little incentive for employers to publish this information publically.
The gender pay gap is by no means a perfect measure of equality, either at an organisational or a societal level. By comparing the pay of all women and all men it obscures the fact that there may be significant differences in their characteristics and the jobs they do, and conflates positive choices which women make about work-life balance, education and career path with constrained career decisions due to caring responsibilities, and sex discrimination. The existence of a pay gap does, of course, not in any way prove (or necessarily even suggest) any unlawful pay discrimination. However, it could be a useful tool for highlighting structural blocks to women’s participation in the workplace.
Gender pay gap reporting will undoubtedly lead some large employers to look more closely at their pay policies, which is a positive step towards achieving pay equality. However, the persistent pay gap for older women has complex causes and is unlikely to be significantly affected by the new reporting requirements.
Clare Gregory and Kate Hodgkiss are partners in the employment group at DLA Piper