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Gender pay gap reporting produces another round of misleading statistics


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IEA publishes updated gender pay gap briefing

It has become increasingly clear that the influx of data from the gender pay gap reporting measures fails to provide any meaningful insight into fair pay for men and women in the workplace, according to a new briefing paper from the Institute of Economic Affairs.

Now into the second year of mandated gender pay gap reporting for large organisations, the briefing provides examples – including data from KPMG, EasyJet, Npower, Thomas Cook and the National Health Service – to illustrate how the crude figures create a misleading picture, especially for companies that have hired large numbers of female staff into lower paid roles.

The author of the briefing, the IEA’s Associate Director Kate Andrews, argues that the reporting measures contribute to the narrative that women ‘are paid less than men’, despite this statement remaining categorically untrue for many women in their respective organisation.

Pay gap reporting measures vs. official data

Many organisational statistics produced by the pay gap reporting measures are notably out of line with the official data from the Office for National Statistics (ONS) in 2018, which:

  • Places the pay gap for full-time workers at 8.6%, in favour of men;

  • Places the pay gap for part-time workers at – 4.4%, in favour of women.

Problems with the pay gap reporting measures

No like-for-like comparisons

  • The government’s reporting measures do not take into account key differentials, such as job, background, education or degree level, age, or years of experience

  • The measures do not distinguish between full-time workers and part-time workers

  • They do not take into account ‘number of hours worked’, which renders the bonus pay gap statistics meaningless

Unnecessary reputational damage for organisations

Despite the inability of the new pay gap figures to reveal sex discrimination, employers are facing reputational damage, threats of boycotts and possibly fines because of these figures.

  • EasyJet and Virgin Atlantic are criticised for large gender pay gaps, which result from hiring a majority of women into their largest internal jobs sector.

  • Npower and Thomas Cook report higher gender pay gaps, partially because of the salary sacrificing benefits they offer, to give employees more flexibility and control over their work life.

  • The National Health Service has been flagged to have a problematic gender pay gap, despite using a national pay scale, which all but completely removes questions of gender discrimination in wage-setting.

Bad incentives

The poor incentives created by the gender pay gap reporting measures may be particularly damaging to younger women who are seeking their first job after graduation.

Employers publishing their pay quartile statistics – under the assumption that a higher percentage of women in lower quartiles is a bad result – may feel pressured to hire more men in the lower quartile pay range, denying entry level positions to more qualified women.

Commenting on the report, author and Associate Director at the Institute of Economic Affairs Kate Andrews said:

“While many are waking up to the reality of this abysmal pay gap reporting exercise, it is still defended on the grounds that it encourages us to think more carefully about women’s experiences in work. But bad statistics cannot inform good policy.

“We would not condone teaching a child that 1+1 = 3, for the sake of increasing her interest in maths. We do not praise flat earth theorists for getting people talking about the health of the planet.

“Why should we give credence to meaningless and often deceptive gender pay gap statistics, which have us tackling women’s issues from completely the wrong direction?

“If we care at all about women in work, we must dramatically reform or scrap these pay gap reporting measurements, which incentivise employers to prioritise useless figures over organisational policies that actually benefit working 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 Reporting Measures: 2019 Update” click here.

This briefing is an updated version of “The Gender Pay Gap Reporting Measures” published in 2018.

Author Kate Andrews is Associate Director at the Institute of Economic Affairs.

For more IEA briefings on the gender pay gap, 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