Labour Market

The entire concept of Equal Pay Day is fundamentally flawed


November 10 this year was Equal Pay Day, the day of the year when the Fawcett Society claims “women effectively stop earning relative to men” – a claim which is, to put it politely, complete twaddle.

Let’s remind ourselves what the Gender Pay Gap (GPG) is, and more importantly, what it isn’t. According to the Office for National Statistics (ONS), the GPG in 2018 for those in full-time employment is 8.6 per cent, based on the median hourly wage. In other words, women working full time earn 8.6 per cent less per hour than men. This gap has fallen from 9.1 per cent in 2017 and is the smallest since records began.

Despite this, Equal Pay Day 2018 has remained at November 10 – the same date as each of the past two years. That’s the first clue that something is fishy here. This is because, instead of comparing median wages (the number in the middle), the Fawcett Society uses the mean (the simple average of all the data), which is currently 13.7 per cent.

This switch has the effect of giving more weight to the incomes of a relatively small number of high earners at the very top of companies. But it is unrepresentative of the rest of the workforce, where the the GPG has already narrowed significantly.

Even more seriously, the whole concept of the Equal Pay Day is flawed. We are told this is the day that women effectively stop earning. But there is nothing ‘effectively’ about it. As the ONS constantly warns, the GPG does not show differences in wages for comparable jobs. It is therefore completely misleading to imply the GPG is about ‘equal pay’, or that it reveals when women are paid less for doing the same work as male colleagues.

Indeed, campaigners here have a track record of ignoring any evidence that does not fit their narrative. For example, the GPG for part-time employment is minus 4.4 per cent, meaning that women working part-time earn 4.4 per cent more, on average, than men. This is simply because the part-time jobs that women do tend to be higher paid than the part-time jobs that men do. But where is the campaign to tackle this injustice?

Similarly, what action should we take against the small but not insignificant minority of firms (around one in six) where the data show that women are paid more than men? What is the date when their male employees ‘effectively start to work for free’?

The repeated distortion of GPG data is not just an abuse of statistics. It also risks undervaluing and undermining the very real progress that women have made in the workplace. In the words of the ONS, the full-time GPG for those under the age of 39 is already ‘insignificant’ and has narrowed ‘markedly’ for those between the ages of 40 and 49.

This means that the GPG should continue to close rapidly as these younger cohorts replace those whose experience of the workplace has been very different – even without further (and potentially counter-productive) action from the government.

Above all, equality of opportunities does not necessarily lead to equality of outcomes, especially when people are free to make different choices. We could perhaps do more to level the playing field, for example in parental leave and flexible working. However, if the majority of women continue to want to spend time out of the workforce to look after their children, who are we to tell them no?

Indeed, the GPG data reported by individual employers are far too blunt a tool to judge the extent to which women are genuinely being disadvantaged. If campaigners keep making the basic mistake of conflating gender pay gaps with ‘equal pay’, what hope is there that it can get any better?

This article first appeared in CapX.

Julian Jessop is an independent economist with over thirty years of experience gained in the public sector, City and consultancy, including senior positions at HM Treasury, HSBC, Standard Chartered Bank and Capital Economics. He was Chief Economist and Head of the Brexit Unit at the IEA until December 2018 and continues to support our work, especially schools outreach, on a pro bono basis.


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