6. Discuss the causes of the gender pay gap and why it matters. Evaluate policy responses and consider how the gender pay gap may be closed.
Why in this XXI decade still exist gender pay gap, What is the government doing against this reality ? What we can do in our organizations?
Notwithstanding critical advances in removing gender disparities in the workplace in the course of the most recent years, gender pay gaps still persevere, and women keep on being reliably overrepresented in low-paid segments. To build future economies that are both dynamic and inclusive, we must ensure that everyone has equal opportunity. (World Economic Forum, 2017) When women are not integrated the global community loses out on skills, ideas and perspectives that are critical for addressing global challenges and harnessing new opportunities. (Schwab, 2017).
The gender pay gap was defined as the difference between the employment wages of men and women (Bisello and Mascherini, 2017). In the recent Global Gender Gap Report made in 2017, showed that UK was ranked in the 15 position out of 144 countries, here they measured countries with their progress towards gender parity across four thematic dimensions: Economic Participation and Opportunity, Educational Attainment, Health and Survival, and Political Empowerment (World Economic Forum, 2017). This year in April 2017, the gender pay gap on median hourly earnings for full time employees decreased to 9.1% from 9.4% in 2016, this is the lowest since the survey began in 1997, this is likely to be connected to the introduction of the National Living Wage. Therefore men are still being paid £100 a week more than women, one of the reasons is that, higher proportion of women work in occupations such as administration and caring, with tend to offer lower salaries. (Office for National Statistics, 2017).
Therefore, this essay aims to critically analyse the causes of gender pay gaps at the board level, focusing on the situation in the UK and the reality of the gender equality. It will also evaluate the different policies and strategies adopted by UK to overcome these barriers. Finally, will propose some strategies to eliminate the gap, supported by many different initiatives from Scandinavian Countries.
The first part of the paper will discuss the principal reasons for the gender pay gap and the reality of UK. The second part will examine why is so important the equality in gender pay and the implications of these like economic and social costs. The third part will review the different regulatory strategies, specially the Equal Pay Act 1970, Equality Act 2010, Gender Gap Report, which have been implemented in order to eliminate the gender gap in the UK and some implications related to these initiatives. Due to the limitations of the scope of the essay, it will focus mainly on data related to UK. To finalise, the last part of the essay will analyse European strategies as a case study to consider validate options to minimise the gender pay gap and the importance of different stakeholders, who play an important role with the need of policy responses to promote the elimination of this gap.
Principal Reasons and reality
On a global level, the International Labour Organization (ILO) has noted that ‘without targeted action, at the current rate, pay equity between women and men will not be achieved before 2086. The UK pay gap for full time employees in 2013 was 19.7%, in 2014 19.1%, last year in 2017 closed with 18.4%. The reasons for the gender pay gap is the result of various other factors related to labour market conditions connected with legal, social and economic realities. In UK, the Occupational segregation has a strong difference between man and women in studies like science, technology, engineering and maths subjects, women are more likely to be working in occupations that attract lower levels of pay like administrative, caring, service, etc, this is linked for example with the high salary gap between man and women in engineering business or financial sectors. in 2013, male doctors earned 40% more than female doctors (Rimmer, 2016). Of the 289 occupations for which it is possible to calculate the gender pay gap using ASHE data, 251 shows a pay gap in favour of men.(Angheluta, Mihoreanu and Costea, 2016) The Impact of family, Women prefer to work part-time to be able to accomplish the family responsibilities, therefore more likely be employee by low salaries and not take managerial positions, however the statistics showed that median hourly pay for part-time employees was 5.1% higher for women than for men. Also because the women dedicated a time to childcare, when they returned to work, this missed continuity in the labour market affected the future earnings of women, that is why the gender gap is higher when women are in their 30s or 40s, and is connected with the higher gender gap with women after the birth of their first child. Booth in 2003, develop the theory of “loyal servants” model of gender pay gaps, according to which employers can exploit the likehood that family commitments typically limit female mobility more than male. Also Babcock and Lascheser in 2003, argue the theory hat women do not ask for promotion and pay rises, even when is in a position of strength. However the differences between generations is important to measure the gender pay gap, because in the 1970s, female employees, whether working full-time or part-time, were much less well qualified than their male counterparts (Harkness, 1996). Now the population of women has become much more highly educated and this is linked with the rapid rise in education levels of women, workers who are more highly educated tend to have higher earnings. Other factor is the region, UK had a negative pay gap in Northern Ireland because of the majority of women in public sector with high salaries, on the other hand London has 14.6% gender pay gap in UK. Other factor is the persisting austerity policies which resulted from the global economic crisis and which still dominate the European political stage. (Bettio, 2015). Lack of budget in public investments in key social services, in the social infrastructure, childcare is too expensive that women prefer to take care of the kids and in some occasions also adult care. Another important reason is the prevalence of discrimination that still exist is some organisations specially because in some sectors in UK there is the perception of discrimination related to the high incidence of equal pay claims in place.
Importance of close the gap
Numerous international studies agree that a decrease in gender inequality in the labour market can lead to substantial macroeconomic gains. (Daly, 2007). Also more equal employment opportunities and better access to the labour market for women have been identified as a key dimensions for archiving inclusive growth and a sustainable social system in Europe. ( European Commission, 2013).
Related to this assumptions, there is some evidence from Eurofound that quantified this lost due to difference in gender pay gap, according to the data, Europe lost €370 billion in 2013, 87% of this amount represents the earnings losses and missing welfare contributions to the economy because of the women’s exclusion from jobs, 13% corresponds to the public finance transfers and welfare state benefits received by non-working women.( Eurofound, 2016). Closing the gap by bringing women’s earnings up to the level of men’s would increase revenue from National Insurance and income tax; it would decrease the amount paid out in tax credits. Also, the UK Commission for Employment and Skills (UKCES) quoted research suggesting that the underutilisation of women’s skills costs the UK economy between 1.3% and 2% of GDP every year.The government needs to support the elimination of the gap and see this as an investment to improve the economy.
Also is important to consider the impact that the gender gap has in our societies. Many authors link the idea that paid employment brings psychosocial benefits (Tay,2011). Eurofound European Quality of Life Survey confirms that in addition to the importance of work to reduce poverty and deprivation, also contributes significantly to a more positive perception of women’s lives, higher levels of social inclusion and economic security and greater empowerment. Diversity of leadership in the organisations generates a positive impact on productivity and performance. Organisations with gender-diverse profiles at senior levels make a better financial return than those who do not.
There are several strategies and agreements that UK is part of because of the European Community like the Treaty of Rome for equal pay made in 1957 or the European Pact for Gender Equality in 2011 made tackling the gender pay gap a priority. In 2013, the Commission’s Social Investment Package reaffirmed the need of reduce the Gender Pay Gap and disparities. In 2014, the Commission published a recommendation on pay transparency to encourage member states to facilitate wage transparency in companies. In 2015, the initiative “A new start to address the challenges of work-life balance faced by working families” to help the parents with the care of children in the working life. Also the Strategy for Equality between Women and Men 2010–15 proposed by the EU Commission. In 2016, The initiative “Strategic engagement for gender equality 2016-2019” focus in the increase of women in labour market, economic independence and equality in decision making. However if the country do not establish local compulsory regulation with radical approaches to reduce the gap, this will take more time. Now, lets see the real local initiatives that UK has in place recently. The identification of the reasons behind different pay schemes is extremely relevant against the backdrop of UK legislation. The Equality Act of 2010, which replaced the Equal Pay Act of 1970 and the Sex Discrimination Act of 1975, aims to secure equal pay for men and women in the UK (Schulze, 2015). The last amendment in the Equality Act 2010, provides that from 2017 all the companies private or public with more than 250 employees are required to publish data of the gender pay gap in their organisation and proposed a fine in case of failures.
In the United Kingdom, for example, the statutory right to demand flexible working conditions, which includes for instance job sharing, homework- ing, part-time work and flexitime, has been gradually expanded, and since April 2014 it covers all employees with at least six months’ service, as opposed to only parents of young children and caregivers.
Also other countries like Germany, Italy and the UK reveal that an investment of two per cent of GDP in the care industry would increase overall employment between 2.4% and 6.1%, depending on the country
The UK Government proposed a voluntary approach to improving the gender balance in company boardrooms, but an EU initiative under negotiation in Brussels sets a radical approach requiring a minimum compulsory quota of 40% representation for each gender helping talented women to make it to the top and have more opportunities to break the glass ceiling in Europe.
European Strategies and solutions
Countries like Estonia used a global strategy with legislation, reducing gender segregation, improving the reconciliation of family, promoting gender mainstreaming, improving situations in organisations.
Public Childcare are one of the principal reasons contributing too increase more women in full time labour employment and in the same time reduce the gender gaps because this is link with the part time jobs. Swedish public childcare provides high quality access and flexible childcare service plus pre- school for children between 3 to 6 subsidies by the government.
Quota systems, helps to increase the opportunities of women in more positions, this minimize the gap. Norway was the first country with quota law and equal pay regulation, these with sanctions against the companies did not comply. Denmark, Greece, Austria, Slovenia and Finland have introduced gender requirements in legislation for the composition of the boards of state-owned companies, In overall, the significative improvements were in countries with legislative action.(Suff, 2015).
Adult Care, In Germany there is an strategy called “2012 Family Care leave Act” this supports all the employees that have to take care for relatives in long term periods, with this they can work just 15 hours per week. The same happen in Netherlands with the “2001 Dutch Work and Care Act” with short term leave with 70% of salary.
Income transparency, establishment of equal pay reports, In Austria companies with more than 150 employees have to report the staff income and share the pay gap with the employees, this reduce the pay gap in their country. Online tool called Logib, has developed in Germany, Luxembourg and Switzerland to enable companies to analyse, compare and see if equal pay exist between employees. This initiative will work in UK to help the organisations to understand the current labour wages per position.
Parental leave, this will give the option that not just the mother will have to take the responsibility of the childcare this can be share with the father.
The organisations public or private need to understand the reason of these gap internally and with that results proposed realistic strategies to eliminate the gap. Train talent women and create a succession plan for the employees.
The role of HR Practitioner, responsible to monitor the recruitment and talent management, flexible working and reward system, this to improve the gender gaps since the beginning and in the day to day of Women.
The government have to play a role of encourage organisations to proposed flexible working options for women, retain their staff and the quote of women in place but giving the support to explain in detail before to put penalties.
Policy Makers needs to consider more provisions to support the childcare and paternal support.
Product of the Recession in 2008, the women employment rate increased slightly.
The economic crisis have made worse the women’s disadvantaged with lack of policies to improve the participation in the labour market and the reduction of budget to public services and welfare provisions
Furthermore, equality pay between women and men is a matter of fairness and has positive effects that go beyond the economic and social effect. It has been shown that greater equality can also lead to substantial macroeconomic gains and is conducive to a greater level of well being and social inclusion for women. (Bisello and Mascherini, 2017)
However is important to recognise that more women participation does not automatically imply a equal pay or conditions. The persistent presence of a gender pay gap and significant occupational segregation must also be addressed through appropriate policy responses. The introduction of a mandatory quote in the local regulation with a timeframe development is an important step to eliminate the gap giving more opportunities to women in the labour market. Possible explanation for the Gender wage gap include the human capital theory introduced by Becker in 1985, suggest that women are less likely to accumulate the same amount of human capital because they anticipate shorter working lifetimes as they plan to rear children.