The U.K. is the biggest country yet to zoom in on the explosive topic of the pay gap between women and men. For a third year, employers with 250 or more workers in Britain are reporting “raw” wage data via mandatory annual disclosures with a one-year time lag. It shows the gap between what men and women earn on average across the paid workforce, not like-for-like roles. So far, the exercise has highlighted how women are under-represented in higher-paying jobs, showing why it will take years to narrow the difference.
1. What do the numbers show?
The pay gap has narrowed at about half of U.K. private employers, while at the rest the difference has gotten worse or there’s been no change, according to data filed to the Government Equalities Office in reports last year. Analysis of 10,826 filings by Bloomberg showed the overall figure was little changed, with a mean pay gap of 14.23% on the snapshot date of April 5, 2018, compared with 14.21% a year earlier. The median difference was 13.1%, compared with 13.3%. The disparity in bonus payments however widened to 15.7% from 8.4%. Men in aggregate were paid more at 88% of companies and public-sector bodies. The next set of reports is due by April 5, 2020.
2. How is the gap measured?
Employers submit a blunt, uniform assessment of what men and women earn on average across their workforce. The numbers don’t measure the pay of men and women in the same job or attempt to adjust for any other characteristics. Specifically, companies must report the salary and bonus of all male employees and all female employees on a mean and median hourly basis, the proportion of each gender receiving a bonus and the proportion of men and women in each pay quartile. Publication of an “action plan” showing how employers will try to close any gap is encouraged, but not mandatory.
3. Does that mean companies ignored the feedback?
Not necessarily. The figures reported last year are based on a snapshot on April 5, 2018. Any changes made in the previous 12 months wouldn’t show up until the following year’s report. Many of the plans in place will take time — building a pipeline of senior female employees can mean hiring more women at all levels. On the other hand, some reports have raised concerns about the trajectory of change in certain companies: HSBC Bank Plc’s gender pay gap, for instance, actually got worse. It widened to a mean 61%, in part because just one-third of its highest-paid employees were female. In the financial-services industry overall, the average difference held at 26% in the latest full year of figures.
4. How far is the U.K. from ‘equal pay for equal work’?
That’s hard to say. The phrase refers to the idea that men and women doing the same job at the same company should receive the same salary. The disclosures by U.K. companies don’t provide such comparisons. Reporting on a so-called adjusted basis — taking into account job title, seniority, geography and other factors that can affect compensation — is more popular among U.S. companies, some of which have chosen to disclose their pay gaps under pressure from activist shareholders. Still, in early 2020, Mastercard Inc. reported a gap of 7.8% in a blunt assessment of its pay practices, and Citigroup Inc. said female employees earn 27% less than men on average, an improvement from 29% a year earlier.
5. What’s been the reaction in the U.K.?
Results from the U.K.’s debut survey in 2018 produced widespread criticism and came amid an uproar about how women were paid at the BBC, Britain’s publicly funded broadcaster. The annual reporting is building greater awareness and understanding of the issue, and the information could help women negotiate higher wages, researchers say. In particular, there’s a focus on the lack of women in more senior — and thus well-compensated — positions. The disparity in financial services was described as “astonishing” and “shocking” by Nicky Morgan when she was a member of the U.K. House of Commons and chair of its powerful Treasury Committee. She was also among politicians demanding that some law and accounting firms revise their figures after they classed their top-earning partners as owners, who are excluded from the calculations, and thus potentially understated the gender wage difference.
6. At what point does a wage gap violate the law?
That remains to be seen. The data could potentially provide fodder for existing or future lawsuits under the U.K.’s 2010 Equality Act. The law gives women and men the right to equal pay for equal work, and there’s a framework for comparing jobs by effort, skill or decision making. In early 2019, thousands of women working for Glasgow City Council in Scotland reached a financial agreement over pay discrimination after fighting for more than a decade and staging what was believed to be the U.K.’s biggest-ever strike over equal wages.
7. What prompted the U.K. to disclose the pay gap?
David Cameron, who served as prime minister from 2010 to 2016, made addressing the gender-pay “scandal” part of the Conservative Party’s agenda. Eliminating the difference could add 150 billion pounds ($195 billion) to annual gross domestic product by 2025 by boosting female participation in the workforce, encouraging women to work longer hours and moving them into more productive jobs such as those in science and engineering, according to a 2016 study by McKinsey & Co. It’s also a question of fairness. The U.K.’s Office of National Statistics, which publishes its own analysis, says the gap is caused, in part, by more women working part-time, clustering in occupations with lower pay and taking time out to have children. The discrepancy widens with age, and women’s pay stops climbing at a younger age than that of male colleagues.
8. Are other countries doing this?
Yes. Australia requires firms with more than 100 employees to report annually, collecting data on 40% of the workforce (it reports a gap of 13.9%) . Germany, which has one of the worst gender pay gaps in Europe, also implemented new rules. The European Union is working on rules to be unveiled by the end of 2020; statistics show the bloc has a gap of 16%. Member states Austria, Sweden, Denmark and Finland already gather data. After President Donald Trump took office in 2017, the U.S. moved away from requiring more uniform or transparent disclosures to the federal government.
9. Where is this heading?
After the first round of reporting, a group of U.K. lawmakers suggested ways to make the figures less blunt, in order to bolster enforcement and to require remedial action. However the government rejected the recommendations in order to maintain consistency and from one year to the next. It also declined to increase the number of organizations required to file reports. The U.K. is also considering the possibility of mandatory pay reporting by ethnicity to expose the pay gap for citizens of “Black, Asian and minority ethnic,” or “BAME”, origins. A public consultation ended in January 2019 and already some firms, such as Deloitte, KPMG and broadcaster ITN, have voluntarily released their numbers.
The Reference Shelf
- How and why the EU plans tackle the gender pay gap, and a 2018 report on pay transparency in Europe.
- A Bloomberg graphic of the 2019 U.K. Gender Pay Gap Report.
- The U.K. government website with each company’s disclosure, plus the rules for reporting and a page explaining the wage gap.
- “A Practical Guide to the Law of Gender Pay Gap Reporting” by Harini Iyengar.
- Bloomberg Businessweek examined why companies can’t just fix the wage gap, and a QuickTake explained the global issue.
- Parliament’s Business, Energy and Industrial Strategy Committee report on the first year of mandatory reporting.
- A research paper and Freakonomics Radio episode on “What Can Uber Teach Us About the Gender Pay Gap?”
- The McKinsey report, “The power of parity: Advancing women’s equality in the United Kingdom.”
- Data on the global wage gap from the Organisation for Economic Cooperation and Development.
— With assistance by Hayley Warren, and Aoife White
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