The IEA responds to Equal Pay Day campaign
The official gender pay gap, according to recent data from the Office for National Statistics, is at a record low: 8.6% for full-time workers – in favour of men – and -4.4% for part-time workers – meaning a pay gap in favour of women. These figures are calculated by using the median hourly earnings of full-time and part-time workers, excluding overtime. The Fawcett Society uses the mean calculation of ONS data to inflate their figure to 13.7%; this is distorted by the outlier salaries of a relatively small number of high earners and therefore misrepresents the size of the gender pay gap for typical workers.
Co-authors Kate Andrews and Julian Jessop argue that pay gap statistics above 8.6% are achieved by moving away from like-for-like comparisons between men and women in the workplace. This contributes to the confusion between legal issues of equal pay and statistical averages (i.e. the gender pay gap).
The new briefing from the IEA, out today, presents a more accurate representation of the gender pay gap in the UK. It argues that the concept of Equal Pay Day is highly misleading, because the name implies that, after this day, men are being paid for their work, whereas women are not.
The briefing also argues that, rather than women being paid less for comparable jobs, the gender pay gap is explained by a series of complex factors, particularly the gap between mothers and non-mothers that occurs when women take time out of work to care for children.
- For full-time workers the gender pay gap is 8.6% in favour of men
- For part-time workers this figure is -4.4%; a negative pay gap in favour of women
Breaking down the 8.6%, the pay gap for women aged 22-39 is negligible:
- This year, the pay gap for women aged 22 – 29 is 1.3% – down from 2.2% in 2017
- This year, the pay gap for women aged 30 – 39 is: 0.8% – down from 2.1% in 2017
These ONS calculations do not show differences in rates of pay for comparable jobs; they do not prove that women receive unequal pay for equal work.
Assessing the Gender Pay Gap
- It is possible to produce an endless variety of pay gap statistics
- From Equal Pay Day to the newly mandated pay gap reporting measures, there are now pay gap calculations in the UK that range from negative gaps, to gaps exceeding 60%.
- This influx of data, that does not compare jobs or circumstances like-for-like, fails to provide any meaningful insight into equal or fair pay for men and women in the workplace.
- Promoting this kind of data can create perverse incentives for employers. For example, under the new pay gap reporting rules, large businesses are publicly embarrassed for giving young women entry level jobs, when the proportion of women in the bottom pay quartile is published without additional context.
Explaining the Gender Pay Gap
- A major contributor to the gender pay gap is motherhood: specifically, women taking time out of work to have children, and often returning into part-time work, which tends to be less well paid.
- Evidence from the United States found that the hourly wages of mothers are approximately 5% lower (per child) than the wages of non-mothers; this is mainly due to time taken out from employment and education.
- There is an important distinction between the ‘gender pay gap’ and ‘lower wage progression’; while the decision to work fewer hours will impact further career opportunities and earnings, this is not unique to women or mothers.
- There is also evidence that family and care-taking obligations fall primarily on women, which can result in a higher gender pay gap.
Closing the Gender Pay Gap
- The Trade Union Congress has claimed it will take 55 years for men and women to achieve pay parity.
- This is a flawed calculation. It appears to be based on the average pay gap for full-time and part-time workers combined (which is currently 17.9%). This is not comparing like-with-like because more women chose to work part-time.
- It is more accurate to focus on full-time earnings, like the ONS does. In the past year alone, the gender pay gap for those in full-time employment has narrowed from 9.1% to 8.6%. If it keeps falling at 0.5 percentage points per year, it will be closed in 18 years.
- Even if you take the average annual improvement over the last few decades, it will be closed in roughly 20 years: the pay gap was 17.4% in 1998 and 12.6% in 2008, meaning it is falling by at least 4 percentage points per decade.
- What’s more, this is not even the right approach for calculating how quickly the gap might close, because it fails to take account of changes as different cohorts move through the age distribution.
- Putting statistical errors aside, these types of calculations assume that it is desirable for pay gaps to be closed completely, and that equality of opportunity should result in equality of outcomes, regardless of different choices that men and women make freely.
Commenting on the briefing, the IEA’s Associate Director and co-author of the briefing Kate Andrews said:
“Despite the gender pay gap hitting a record low this year, Equal Pay Day hasn’t budged. It was the 10th November last year, and is the 10th November this year, because it is calculated in a way that skews and inflates the data, hiding the progress that working women have made over the past twelve months.
“We need to call times up on this misleading campaign that undermines the achievements of women in Britain, who are a success story through-and-through.”
Commenting on the briefing, the IEA’s Chief Economist and co-author of the briefing Julian Jessop said:
“The consistent misrepresentation of data on gender pay gaps is not just an abuse of statistics – it also risks undervaluing and undermining the very real progress that women have made in the workplace.
“Despite occasional acknowledgement that the gender pay gap does not show differences in pay for comparable jobs, it is constantly misrepresented to the public, creating an extremely negative narrative around women’s achievements.
“Campaign groups like the Fawcett Society shouldn’t ignore data that do not fit their narrative, especially when it could be used to encourage and support young women.”
Notes to Editors:
For media enquiries please contact Nerissa Chesterfield, Head of Communications: [email protected] 020 7799 8920 or 07791 390 268
To download the IEA’s briefing ‘The Gender Pay Gap: 2018 Briefing’ click here.
This briefing is an update of the IEA’s 2017 version, written by Kate Andrews, which you can download here.
For more research on the gender pay gap reporting measures, 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.
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