Are women discriminated against in the finance sector?
14 April 2009
SUGGESTED
Society and Culture
Government and Institutions
17 April 2009
Government and Institutions
You might think that the financial sector had received more than its fair share of obloquy in recent months, but last week saw an attack from yet another direction, with the publication of a research report by the Equality and Human Rights Commission (EHRC). This report, written by authors from the National Institute of Economic and Social Research (NIESR), is entitled Employment and earnings in the finance sector: A gender analysis. It was commissioned to assist with the EHRC’s inquiry into alleged sex discrimination in the sector.
Unsurprisingly in view of what was previously known, it shows that men and women do very different jobs in the financial services industry, itself a hugely disparate sector embracing everything from two or three person financial advisory businesses, to credit unions, building societies, pension funds, insurance companies, Islamic bankers, hedge funds and so forth as well as the contemporary pantomime villains in our multinational banks. In the UK prior to the crash this meant around 1.3 million jobs with thousands of different employers. From earnings data in the Annual Survey of Hours and Earnings, it is possible to construct synthetic “pay gaps” between men and women (on an annual, weekly, or hourly basis). These show that the finance sector displays markedly larger gender pay disparities than is the case in the economy as a whole.
I have indicated elsewhere (Should We Mind the Gap? Gender Pay Differentials and Public Policy) that such statistical artefacts in themselves demonstrate absolutely nothing about any underlying sex discrimination or breach of equal pay legislation. In the same way, black Caribbean women earning more on average than white women, or gay men earning more on average than straight men (both established facts in the literature) certainly don’t mean employers discriminate in their favour.
This hasn’t stopped those with closed minds on this topic, however. A representative of the Fawcett Society was quoted in the press as saying the new report “is evidence of straight discrimination” in financial services. Harriet Harman says that the report “proves that the finance sector is a breeding ground for discrimination and unfairness”. Ms Harman, who I doubt has read the lengthy report in detail, goes on to promise “tough new measures” to deal with pay inequality in this month’s Equality Bill. She is echoed by Trevor Phillips from the EHRC who says the report justifies “significant steps” to address pay issues.
In fact the report, by two respected researchers, provides a careful statistical portrait of employment and earnings patterns in the financial sector and certainly does not over-interpret the data. It also documents considerable efforts made by major finance employers to provide female-friendly working environments.
What the report does not do is use multivariate econometric techniques to decompose the gender pay gap, as much research in this area does. Such decomposition usually shows that a large proportion of the pay gap can be explained by objective economic factors, leaving only a minimal possible explanatory role for sex discrimination. However, the evidence set out by the NIESR authors strongly suggests that much of the large pay gap in finance can indeed be explained by factors such as the type of jobs men and women do in the sector (women are concentrated in administrative and secretarial jobs), their qualifications (men employed in finance are twice as likely to have a degree), the size of the firm (women are concentrated in smaller establishments), the hours worked (men work much longer hours), the location (men are more likely to work in the City of London) and so on.
Quite how the “tough new measures” dreamed up by Ms Harman can change these factors remains to be seen. And, more importantly, why should we try? Sex discrimination and unequal treatment in pay are illegal. That means a particular employer is treating a particular individual unfairly. As the law stands, this should be dealt with, if the evidence supports it, through a Tribunal or the Courts. What the EHRC and its supporters are doing is something different: smearing an unpopular industry’s reputation to support a social engineering project which, even if it were desirable, is unlikely ever to succeed so long as men and women have on average different qualifications, preferences and attitudes and are free to choose the jobs they want.
Unsurprisingly in view of what was previously known, it shows that men and women do very different jobs in the financial services industry, itself a hugely disparate sector embracing everything from two or three person financial advisory businesses, to credit unions, building societies, pension funds, insurance companies, Islamic bankers, hedge funds and so forth as well as the contemporary pantomime villains in our multinational banks. In the UK prior to the crash this meant around 1.3 million jobs with thousands of different employers. From earnings data in the Annual Survey of Hours and Earnings, it is possible to construct synthetic “pay gaps” between men and women (on an annual, weekly, or hourly basis). These show that the finance sector displays markedly larger gender pay disparities than is the case in the economy as a whole.
I have indicated elsewhere (Should We Mind the Gap? Gender Pay Differentials and Public Policy) that such statistical artefacts in themselves demonstrate absolutely nothing about any underlying sex discrimination or breach of equal pay legislation. In the same way, black Caribbean women earning more on average than white women, or gay men earning more on average than straight men (both established facts in the literature) certainly don’t mean employers discriminate in their favour.
This hasn’t stopped those with closed minds on this topic, however. A representative of the Fawcett Society was quoted in the press as saying the new report “is evidence of straight discrimination” in financial services. Harriet Harman says that the report “proves that the finance sector is a breeding ground for discrimination and unfairness”. Ms Harman, who I doubt has read the lengthy report in detail, goes on to promise “tough new measures” to deal with pay inequality in this month’s Equality Bill. She is echoed by Trevor Phillips from the EHRC who says the report justifies “significant steps” to address pay issues.
In fact the report, by two respected researchers, provides a careful statistical portrait of employment and earnings patterns in the financial sector and certainly does not over-interpret the data. It also documents considerable efforts made by major finance employers to provide female-friendly working environments.
What the report does not do is use multivariate econometric techniques to decompose the gender pay gap, as much research in this area does. Such decomposition usually shows that a large proportion of the pay gap can be explained by objective economic factors, leaving only a minimal possible explanatory role for sex discrimination. However, the evidence set out by the NIESR authors strongly suggests that much of the large pay gap in finance can indeed be explained by factors such as the type of jobs men and women do in the sector (women are concentrated in administrative and secretarial jobs), their qualifications (men employed in finance are twice as likely to have a degree), the size of the firm (women are concentrated in smaller establishments), the hours worked (men work much longer hours), the location (men are more likely to work in the City of London) and so on.
Quite how the “tough new measures” dreamed up by Ms Harman can change these factors remains to be seen. And, more importantly, why should we try? Sex discrimination and unequal treatment in pay are illegal. That means a particular employer is treating a particular individual unfairly. As the law stands, this should be dealt with, if the evidence supports it, through a Tribunal or the Courts. What the EHRC and its supporters are doing is something different: smearing an unpopular industry’s reputation to support a social engineering project which, even if it were desirable, is unlikely ever to succeed so long as men and women have on average different qualifications, preferences and attitudes and are free to choose the jobs they want.
8 thoughts on “Are women discriminated against in the finance sector?”
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I quite see that state monopolies should not ‘discriminate’ in their hiring policies on irrelevant grounds: if they did, someone who was being discriminated against might be unable to find employment at all in their chosen field.
But in a competitive free market, what’s wrong with ‘discrimination’? If an employer prefers not to employ a ‘better’ candidate, on the grounds that she’s (a) a Chelsea supporter, (b)too old, (c)too young, (d) Jewish, (e) not Jewish, (f) female, etc. etc. there should be plenty of other employers who will not use these criteria.
Shackleton’s analysis in ‘Should We Mind the Gap?’ is a splendid and scholarly demonstration of the folly of Keynesian aggregation.
I quite see that state monopolies should not ‘discriminate’ in their hiring policies on irrelevant grounds: if they did, someone who was being discriminated against might be unable to find employment at all in their chosen field.
But in a competitive free market, what’s wrong with ‘discrimination’? If an employer prefers not to employ a ‘better’ candidate, on the grounds that she’s (a) a Chelsea supporter, (b)too old, (c)too young, (d) Jewish, (e) not Jewish, (f) female, etc. etc. there should be plenty of other employers who will not use these criteria.
Shackleton’s analysis in ‘Should We Mind the Gap?’ is a splendid and scholarly demonstration of the folly of Keynesian aggregation.
The great majority of society, including employers, is neither sexist nor xenophobic nor homophobic. That is a problem for those in the do-gooder camp whose self-conception is that of an enlightened, tolerant minority amongst prejudiced, narrow-minded masses. They need artefacts to sustain their self-image.
The great majority of society, including employers, is neither sexist nor xenophobic nor homophobic. That is a problem for those in the do-gooder camp whose self-conception is that of an enlightened, tolerant minority amongst prejudiced, narrow-minded masses. They need artefacts to sustain their self-image.
Incidentally, a somewhat ironic point I forgot to make: in March 2008 who was given an award as the UK employer with the best work-life balance, and hence (allegedly) offering the most family-friendly regime? RBS.
Incidentally, a somewhat ironic point I forgot to make: in March 2008 who was given an award as the UK employer with the best work-life balance, and hence (allegedly) offering the most family-friendly regime? RBS.
Assuming I have read this post correctly it is saying that the so-called pay gap in the finance sector is larger than the average. Given that Shackleton’s work shows that there is no evidence that the average pay gap in the economy as a whole is caused by discrimination then, if the larger-than-average pay gap in the finance sector is caused by discrimination against females (as some claim), does that mean that the smaller-than-average (or negative) gap in other sectors is caused by discrimination in favour of females?
Assuming I have read this post correctly it is saying that the so-called pay gap in the finance sector is larger than the average. Given that Shackleton’s work shows that there is no evidence that the average pay gap in the economy as a whole is caused by discrimination then, if the larger-than-average pay gap in the finance sector is caused by discrimination against females (as some claim), does that mean that the smaller-than-average (or negative) gap in other sectors is caused by discrimination in favour of females?