In this piece, Professor Vicky Pryce, Centre for Economics and Business Research (CEBR), discusses the sources of gender inequality in the UK’s economy, as well as the policy measures needed to address them.
The economic case for gender equality in the workplace and the need for further government action
Research and a proliferation of books, including mine, highlight that women, society and the economy suffer because of gender inequality.
Gender equality economics is now mainstream Economics
The recent Nobel Prize awarded to Claudia Goldin underlines that free markets aren’t efficient when it comes to gender.
Motherhood isn’t the only reason for gender inequality but it does count for a large percentage of the pay gap, just under 8% for full time employees and 14.3% for all employees, including part-time in the UK. According to the IFS, the gap starts to rise to reach 21% in the 12 years after the birth of a first child. Three quarters of mothers report discrimination due to pregnancy. Availability for dependents reduces mobility and economic opportunities. It dumps domestic chores on women and means employers can offer them lower wages. Significantly, covid and lockdowns put greater stress on mothers, who were more likely to quit or reduce hours, also affecting pensions. DWP data shows women aged 55-59 have an average private pension worth £95k compared to men’s £145k, and pension tax relief favours higher earners, where women are fewer. Unfreezing lifetime pension allowances will widen this gap. And Bupa research showed that almost 1m women quit jobs because of menopause. At least the law now allows topping up for a full state pension.
Women working part time end up, on average, working at least one level below their skills level, with 38% of women working part-time versus just 14% of men, and being paid one third less during their working life than men. Concentrated in lower paid occupations such as teaching, nursing and social care, and office admin, even here women remain underrepresented at the top. The gender pay gap in education is 22% and in health care and social work some 14%.
Isn’t it just a matter of choice?
Putting aside that ‘it takes two to tango’ for conception, women’s employment and wages have improved when governments intervened. Such interventions include enforcing the right to maternity leave and protecting jobs thereafter. Markets had deprived women of choice and the economy of human capital, as decisions to quit, work part time or move to lower paid occupations to be able to fit it all in has often been because no other choice is viable.
Women are as ambitious as men, when not discouraged by employers. Overall, the ONS report that a Blinder-Oaxaca decomposition only explains 36% of the gap by identifiable factors such as age, occupation, length of holding the post etc. and this is for those women working full time compared with hourly rates for men also working full time. Motherhood here is a smaller issue and yet with 64% remaining unexplained, this must surely also include an element of conscious and unconscious bias keeping women behind irrespective of whether they are mothers or not.
Has working from home changed things?
The gradual return to the office after Covid has become ‘as flat as a pancake’. Many expected hybrid working to help women, but Government and some large firms are resisting. In any case: nursing; caring; teaching, cleaning; and most retail jobs are hands on – it’s higher paid professional occupations where tasks are often done remotely and where women are less represented.
Who makes hiring decisions matters
Contrary to the ‘Queen Bee Myth’, people tend to ‘recruit in their own image’, but only 9% of Footsie 100 CEOs are women. Nearly one in seven HR decision-makers rate men as better for top jobs and nearly one in five admit being reluctant to hire women they thought might start families. Women tend to depart earlier from the promotion pipeline, not just because of having children but also because of sexism, overt or unseen. Witness the sexual harassment in the NHS, and the City, with a gender pay gap of some 31% , provoking an new HM Treasury Committee inquiry. Reduced competition for posts is of course another market failure!
Child-care costs matter
An increasing proportion of women quitting cite high childcare costs. The Family and Childcare Trust reports the average cost of full-time childcare as £263 pw in 2021. With pre-tax median earnings around £700 pw, that’s a big chunk of post-tax earnings. UK childcare costs are the highest in the G20 after the US. Although the Government, after similar pledges from Labour and Lib Dems, is extending eligibility for free nursery access up to 30 hours pw where both parents work at least 16 hours pw, no longer just for 3- and 4-year-olds, and down to two-year-olds from September 2024, and down to nine months from September 2025. There is serious concern about whether the funding that will be available will be enough to cover these extra places and that will need to be looked at. But at least the UK is finally catching up with other European countries by making the pill available to buy over the counter!
Many gender-based market failures remain
As Professor Sarah Smith wrote in her review of my book, Women vs Capitalism, (am paraphrasing slightly..): ‘there are clearly still too many market failures that keep it [gender inequality] alive — from information asymmetries [which keep women out of studying subjects that could earn them more], [to going] for jobs that depend on networking [which women are less able to engage in], to the failure to value caring [which is mostly done by women], [to inadequate] childcare support, flexible workplaces, gender quotas – and to behavioural factors (implicit bias, for example) emphasised by economists such as Iris Bohnet.’
This despite evidence that diversity is good for performance.
Recommended policy measures
Evidence-based guides, from the Government Equalities Office and Behavioural Insights Team, include: how to set effective targets; how to establish diversity leads and task forces; how to run structured interviews to counter bias; and how to increase transparency in progression, pay and rewards.
But nudges have proved inadequate. Stronger medicine is needed:
- Ensuring adequate funding for nurseries so that the free-places scheme is not negated by nurseries closing and inadequate provision.
- Enforcement of shared paternal leave, as in the EU’s Work Life Balance Directive.
- Flexible workplaces, where hybrid working and work flexibility isn’t just a ‘right to ask’ but part of almost all job offers.
- Increased pay transparency, so we can compare our pay, as in Nordic countries.
- Time sensitive gender quotas for executive positions, varied to reflect legacy realities to ensure development pipelines so women don’t quit or go part-time through disillusionment.
- Quotas extended beyond boards. Being on the board seems to make little difference. The emphasis is switching to executive levels, where progress has been slower.
- Further consideration of a universal basic income to reward unpaid work.
- Legislation to tackle conscious and unconscious bias.
- Name, shame, and impose sanctions on employers failing to address gender inequality.
Conclusion
Human capital is essential for a strong economy. Much emphasis is placed at present by all three main political parties on achieving better productivity. It goes without saying that harnessing the full potential of the female labour force should benefit them, their families, society and the economy, reduce staff shortages, enhance growth and also improve public finances. But it won’t happen on its own without extra government intervention in the shape of strengthened measures to achieve this.
About the author
Vicky Pryce is Chief Economic Adviser at the Centre For Economics and Business Research (CEBR); a Fellow and on the Council of the Academy of Social Sciences; Visiting Professor at Birmingham City University (BCU) and King’s College, London; Chair of the Economic Advisory Council of the British Chambers of Commerce; and a former Joint Head of the UK Government Economic Service.
Image Credit: Benjamin Child, Unsplash