The Perennial Pay Gap: Is it all that it seems?

A closer look at the gender pay gap statistics.

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Courtesy of Wikimedia Commons

You don’t have to have been paying much attention to current social justice issues to have heard of the dreaded ‘gender pay gap’ which looms ominously over the careers of half of the country, Lancaster’s students included. Theresa May’s first statement as Prime Minister even included the line “If you are a woman, you will earn less than a man”, but is this all that it seems?

The implication here is obviously one of discrimination, or of unequal pay for equal work simply on the basis of gender, and outrage would be justified were this taking place. However this has been illegal since the Equal Pay Act of 1970, which has since been superseded by the Equality Act in 2010, both of which render it illegal to pay a woman less than their male colleagues for the same work. Yet the figures still remain: according to a 2016 Institute for Fiscal Studies report, British women were on average payed 18% less per hour than their male counterparts, so surely this must be a smoking gun for pay discrimination happening behind the scenes, right? Not quite.

The two key phrases which are so often overlooked here are “on average”, and “per hour”.

These figures can be extremely misleading as they are collected as an aggregate of all of female earners, compared with all male earners. This does not take into account differences in job, age, time spent in the work force, or qualifications. It also lumps part time and full time earnings together, despite women being three times more likely to work part time than men (part time hourly wages tend to be lower than full time hourly wages), and as such to simply compare these the two aggregates of male and female earnings is effectively comparing apples to oranges; all you stand to prove is that they are different fruits.

A much more nuanced view of the statistics is required if you wish to draw any substantial conclusions, and the figures drastically change when you begin to control for the relevant factors. For women aged 22-39, in the same working circumstances as their male counterparts, the pay gap almost entirely disappears. This is only intuitive, as if it were possible to hire women at a fraction of the price of men, and still see the same levels of productivity, businesses would be exclusively hiring women in order to undercut the competition.

From 35-39 onwards, however, the pay gap begins to widen. It’s tempting here to suggest that systemic oppression occurs at the higher end of the corporate ladder, where women are excluded from reaching board-rooms or executive positions, causing a larger pay gap in the older age brackets. The disparity between males and females in executive roles is certainly something we can see, as women make up only 23.2% of board positions. We must be careful not to be guilty of conjecture here, however, as there are factors which may cause this other than sexism. Claudia Godlin, Henry Lee Professor of Economics at Harvard University, claimed that these disparities may exist “because the labour market incentivizes them to work differently.” Goldin suggests that in the corporate world, it is more lucrative “for one partner to work 80 hours and the other not to work at all than for both of them to work 40 hours each”, as at the top of industries such as law or finance workers are incentivised to work double or even triple an ordinary working week, for example if a lawyer is expected to be available at all hours during the night and day. Goldin claims that women are much more likely to take reduced and more flexible hours than men, who are more likely to take on extremely high working hours, which would lead to them having a higher chance of climbing the corporate ladder. Goldin proposes a solution to this, stating that “the gender gap in pay would be considerably reduced and might even vanish if firms did not have an incentive to disproportionately reward individuals who worked long hours and worked particular hours.”

There may be some who claim that the structure of the labour market benefitting men over women is evidence of structural discrimination which must be overcome, however this is dubious, as many of what are arguably the least desirable jobs in society are dominated by men, from rubbish collectors to sewage workers. Furthermore it has been found that men compose up to 97% of workplace deaths. So while the labour market may appear to benefit men in one area, it also acts to their detriment in others.

In any case, the gender pay gap has been consistently been a divisive political talking point for decades, driving a wedge between men and women in the process. It is exceedingly popular for politicians and talking heads alike to acknowledge and denounce the pay gap, though as Sheila Wild, a former head of age and earnings inequality at the Equality and Human Rights Commission said: “Basically, the statistics on the gender pay gap are so various and so nuanced that almost anyone can take anything out of it and say what they want”, harking back to Mark Twain’s observation that “there are three kinds of lies: lies, damned lies, and statistics”.