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The first step to tackling the gender pay gap is to understand it

Date: 23 August 2016
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If you’re a woman, you will earn less than a man.” So said Theresa May in her first statement as prime minister. She was, sadly, right. The gap between men and women’s wages is one of the most persistent features of the labour market. In fact the average hourly wage of women is about 18 per cent less than the average hourly wage of men. The gap in weekly earnings, at 36 per cent, is much bigger because women are far more likely to work part time.

The first step to tackling this gap is to understand it. New research published today by my colleagues at the Institute for Fiscal Studies suggests that I, at least, still have a lot to learn about what is happening.

My first misconception was that, while things might not be great, they were at least getting better. Well up to a point, but nothing like so much as I had thought.

The wage gap has fallen in recent years. That 18 per cent gap stood at 28 per cent just 20 years ago. That looks like big progress. But it is progress only of a sort. Much of it is driven by the fact that women now have much better education relative to men than was the case 20 years ago. They are now more likely than men to be educated to degree level. That’s good news for women. The bad news is that among the university educated the wage gap between men and women has barely shifted in those two decades. Women with degrees, on average, have wages just as far behind men with degrees today as they did in the mid 1990s. The same is true of women educated to A-level standard. Only among the least well educated has there been a clear catch-up.

It’s worth dwelling on that. In the past 20 years there has been no progress at all in closing the wage gap between highly educated women and similarly well educated men.

The second crucial point, which I had known but the sheer scale of which I had underestimated, is the extent to which this wage gap varies across the life cycle and according to whether the woman has children. For those without children working at least 20 hours per week, the gender wage gap is “only” about 10 per cent on average and “only” about 6 per cent for those aged under 35. But for women with children over about 11 years of age the wage gap with men is, staggeringly, more than 30 per cent. Women with teenage children have hourly earnings about one third less than men at a similar point in their life cycle.

Part of that gap arises because, after the birth of children, women take far more time out of paid work than do men. In fact men’s employment rates barely respond at all to the birth of their children. Women spending time out of work lose out on pay progression. They find that it is costly not just in terms of losing out on pay when out of work, but because they end up earning a lot less than they would otherwise have done when they eventually return to work, about 2 per cent less for each year spent out of paid work. This apparent wage penalty is higher, at 4 per cent per year out of paid work, for better-educated women. Since women with children lose an average of four years’ labour market experience relative to men this clearly accounts for an important part of the gender wage gap.

However, it is not just being out of work that seems to create a wage penalty later on. Being in part-time work does too. That’s the third important fact that might lead us to a better understanding of what is going on here. It is well known that on average part-time workers earn a lot less than full-time workers, not just in total as a result of working fewer hours, but much less per hour worked. Women are much more likely than men to work part time, and this has always been an important part of the “explanation” of the gender wage gap. Of course it’s not really an explanation, just another wage gap.

It is women with children who tend to work part time. So that growth in the wage gap after childbirth is associated with an increased proportion of women working part time. And here was my third misconception. What does not appear to be happening is that as women move from full-time to part-time work their hourly wage immediately falls.

The part-time problem arises from the fact that, once you start to work part time, you lose out on the wage progression that full-timers enjoy. You might start off on the same hourly wage as you would have done if you’d stayed full time, but the wage increases grind to a halt. That’s a big part of why the wage gap grows inexorably in the years after childbirth. Women lose out not only from taking time out of the labour market but also from reducing hours of work, and these effects cumulate over time.

What all this suggests is that we may have a big problem in the way in which we organise work in the UK. Training, progression, promotion are much harder to come by if you work part time. We can all think of reasons why this might be true, from cultures of presenteeism to losing out on informal interactions down the pub. What is clear is that there is still an awfully long way to go to make workplaces work effectively for half the population.

This article was first published in The Times and is reproduced here with permission.