IEA releases briefing on gender pay gap reporting measures
The way in which the government has required pay gaps to be measured – breaking down gaps across entire organisations rather than between comparable roles, lack of distinction between full-time and part-time workers, and omission of key data – has resulted in largely useless statistics, misleading headlines and unfair demonisation of companies.
A new briefing from the Institute of Economic Affairs scrutinises the consequences of the new reporting measures, finding that only one measurement has led to data being reported in a useable way. This measure – ‘proportion of males and females receiving a bonus payment’ – reveals a more positive picture for women than the rest of the data.
Select data from the 70 FTSE 100 companies to report so far (as of 30 March 2018) shows 36 companies gave bonuses to a higher percentage of their female staff, while 31 companies gave bonuses to a higher percentage of their male staff. Of that 31, 18 were within a margin of 3 per cent – a statistically negligible gap.
Much of the new data is wildly out of line with the official gender pay gap, as calculated by the Office for National Statistics. For full-time workers, the UK gender pay gap currently sits at 9.1%, in favour of men, and for part-time workers at -5.1%, in favour of women.
While these statistics still don’t take into account crucial differentials, such as job or experience, they are the most reliable statistics we have because they are calculated using the median hourly earnings of full-time and part-time workers, and therefore do not skew the data towards men, who are less likely to work part-time.
Why the reporting measures are problematic:
• No distinction between full-time and part-time workers – as women are significantly more likely to work part-time (where salary tends to be lower) the results are almost guaranteed to be skewed towards men.
• No like-for-like comparisons – measures do not take into account key differentials such as type of job, background, education, age or years of experience – all of which are factors in the determination of pay.
• Missing data – omitting ‘total hours worked’ from bonus calculations renders it impossible to determine if pay disparity is based on gender discrimination or number of hours worked. Plus, without additional information on annual salary, it is impossible to calculate the percentage of one’s salary the bonus accounts for.
• Changing trends – publishing the proportion of men and women in pay quartiles, without a breakdown of age in each area, makes it impossible to determine if a disparity is caused by sex discrimination or other factors, such as the recruitment of young female graduates into junior roles.
• All data published as standalone statistics – without providing context or additional information, the data do not reveal anything meaningful about differentials in pay for men and women doing comparable work.
What are the consequences?
• Has led to increased cherry-picking of statistics – meaningless statistics have tainted the pool of data and encouraged cherry-picking of larger, misleading figures.
• Creates bad incentives – reporting measures could dissuade companies from hiring women into junior roles, which will have a huge impact on job opportunities for women – particularly young women.
• Unfair demonisation – companies such as EasyJet are facing reputational damage and possible fines as a result of their 51.7% pay gap – yet the airline’s pay gap is not a result of unequal pay or gender discrimination, but rather the company’s decision to hire more women into their largest internal job sectors (i.e. cabin crew).
Commenting on the report, author Kate Andrews, News Editor at the Institute of Economic Affairs, said:
“The gender pay gap reporting measures are worse-than-useless. Not only do they fail to provide any meaningful insight into equal or fair pay between men and women, but they also risk damaging well-meaning companies, many of which are helping women move up the ranks through organic measures.
“The pain these reporting measures inflict goes far beyond commercial damage. The gender pay gap is the lowest it has ever been on record. Women have seen a stronger growth in their earnings over the past twenty years, and women who work part-time are, on average, earning 5.1% more than their male counterparts. The extremely misleading nature of this new data is undermining the achievements of working women in Britain, who are a success story through-and-through.”
For media enquiries please contact Nerissa Chesterfield, Communications Officer: firstname.lastname@example.org or 07791 390 268
To download a copy of ‘The Gender Pay Gap: Reporting Measures’, please click here.
For the breakdown of the FTSE 100 data, please click here.
In response to the Equal Pay Day campaign, the IEA released the first of its briefings on the Gender Pay Gap reporting. To download a copy of this briefing please click here.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.
The IEA is a registered educational charity and independent of all political parties.
Further IEA Reading: Should We Mind the Gap? Gender Pay Differentials and Public Policy