Labour Market

Three nails in the coffin of new ‘pay gap reporting’ measures

From today onward, big companies are now being forced to calculate and publish their ‘pay gap stats’.

It’s unclear how the government got bullied into such an intrusive piece of policy by the victimhood industry, that tries to sell women on the (debunked) ideas that they are being paid anywhere between 13.9% – 23% less than their male counterparts.

Unfortunately, as far as meddling goes, these measures are particularly bad – not only do they perpetuate myths around women’s pay, but they may have the unintended effect of limiting women’s options in the workplace altogether.

1) Despite claims that the new rules will help better promote equality in the workplace, these new measures do nothing to illustrate or prove that women are being paid differently to men for doing the same job – because jobs aren’t being compared like-for-like.

Companies are being asked to calculate the mean and median salaries of male and female employees across the entire organisation – but there is no breakdown of what job they’re in, what qualifications they have, how long they have been working, or any of the other million differentials that could contribute to differences in pay.

It will be impossible to know from the statistics produced if any ‘pay gap’ – favouring men or women – is due to legitimate or illegitimate causes.

2) As if the manipulations of the Chartered Management Institute and Fawcett Society weren’t bad enough, we’re now going to a huge influx of meaningless statistics floating around, inevitably confusing and muddling the debate more.

Meanwhile, we continue to ignore the solid facts we do have – that according to the ONS, the pay gap for full-time work stands at 9.4%; though women between the ages of 22-39 are earning the same as their male counterparts, fluctuating within less than two percentage points in 2016. The gap forms when women are over 40, and have often decided to follow different career paths than men, largely because of children.

Furthermore, women who do return to work part-time are not getting paid less per hour – and women who generally work part-time don’t seem to be suffering in the slightest. Indeed, the negative pay gap for women in part-time work stands at -6.0%.

3) These measures create perverse incentives for employers, which may well harm the negotiating power of employees; and it may put young women entering the workplace at a disadvantage.

For the sake of their public relations, large companies may find themselves much more concerned about salaries on a spreadsheet matching up to the pence, rather than on what the individual employee is actually looking to get out of their performance review or career trajectory. If after a year working at the company, Jack wants a salary boost and Jane wants a title promotion – tough luck Jane.

Despite evidence that men and women often value very different conditions at work, the government’s new legislation has made it increasingly harder to ask for anything outside of a pay rise – like title, flexible hours, opportunities to travel, work from home, etc – even if the individual would actively trade a pay rise (or take a partial pay rise) for such benefits.

Furthermore, the fact that women are excelling in higher education and more likely than men to be employed in both full and part-time work post-university is a real achievement on the women’s front. But the government’s extended plan to make companies report on pay quartiles may actually work against qualified young women. Under these new reporting rules, taking on a large percentage of women as your newest recruits (but also lowest earners within the company) will skew quartile appearances. An effort to give more young women opportunity may be undermined by a policy that crudely boxes women and men into groups – without considering age or years of experience.

Kate is Associate Director of the IEA. Kate oversees the IEA’s Media Centre and digital platforms, creating and commissioning content for the website, social media, and ieaTV. Kate regularly features across the national media, including appearances on BBC News, Sky News, Channel 4, Channel 5, ITV and BBC’s Question Time.

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