Centre Write
Thursday, 17 March 2016 15:29

Phillip Salter: Narrowing the gender pay gap

In these enlightened days, nobody apart from the most contrarian of internet trolls, is in favour of discrimination. So how do we explain the gender wage gap – the much-discussed gap between what men and women earn? Do we live in a world of hypocrites? Or are people in positions of power discriminating against women without knowing it?

Perhaps the best place to start in unpacking the gender wage gap debate is to acknowledge that pay can be measured in different ways. By some measures, for example, men are paid less than women. Last year, the Office for National Statistics opened up a can of worms when it revealed “women working for more than 30 hours a week were actually paid 1.1% more than men in the 22 to 29 age bracket and, for the first time were also paid more in the 30 to 39 age bracket.”

However, women on average earn less in weekly wages and there are greater and lesser disparities depending on the industry. Similarly, according to George-Levi Gayle and others, controlling for executive rank and background, women earn higher compensation than men and are promoted more quickly. But this research also finds that women experience more income uncertainty, and acknowledges that fewer women than men become executive managers, women earn less over their careers, hold more junior positions and exit the occupation at a faster rate.

The decision to have and raise children is probably the most significant factor in why women are paid less than men. In an interesting piece of research, Petter Lundborg and others found that having children impacts women’s prospect in the workplace negatively, significantly and for a long time.

And as Ben Southwood of the Adam Smith Institute explains: “Women are on a steady upward trajectory, likely in line with comparable men (as seen in previous studies). They then decide to take time out to have and raise children, and never make it back to their previous trend-line, perhaps moving to more flexible work or less demanding jobs. Even those who go back to similar careers are far behind in experience and have to catch up with movements they have missed.”

Assuming policymakers are not going to interfere any further with women’s preferences for taking time out of the workforce to have and care for their children, the question should be: what, if anything, can we do to help get women’s pay back on trend? Although policies like shared parental leave probably help at the margins, not many fathers are taking up the option. A more radical solution could be to offer a tax break for women returning to work to compensate them for the time they’ve taken out and the cost it imposes on future earnings.

However, such a policy would also need to factor in other preferences besides having children. As David Lubinski says, men seem to prioritise higher pay, risk taking and merit-based compensation, whereas the top three things women valued more than men relate to working a shorter week.

These splits may or may not be socially conditioned, but either way once again I’m not sure policymakers should be using carrots or sticks to goad women to be more like men or penalise men for having stronger preferences to work longer hours.

Even though it doesn’t look as though there’s an easy policy lever to balance things out, technology and new working practices look to offer those women that want to get back on the same pay trend as men after leaving the workforce to have and raise children, as well as satisfy the desire for working fewer hours at less overall cost.

In A Grand Gender Convergence: Its Last Chapter, Claudia Goldin argues that the US gender pay gap exists because hours of work in many occupations (such as law, finance and management) are worth more when given at particular moments and when the hours are more continuous. However, she demonstrates how this has changed in some industries, including biological sciences, pharmacy, optometry, and veterinary medicine.

It might take time to trickle through all our corporate behemoths, but technology and changing views of where, when and how long people should work offers the option for all women to earn the same as men per hour (even if men still choose to work more).

If we really want to narrow the gender pay gap in a way that accounts for women’s preferences, we shouldn’t look to government for quick fixes but for businesses to step into the twenty-first century.

Phillip Salter is the Director of The Entrepreneurs Network. He originally wrote this piece for Bright Blue's Centre Write magazine on The Future of Work.

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