20 June 2024

Labour want to close the gender pay gap – it doesn’t exist


Rachel Reeves has declared that she’s going to – well, assuming she gets elected – finally deal with the gender pay gap.

Rachel Reeves has promised to close the gender pay gap ‘once and for all’ […] if she becomes Britain’s first female chancellor.

This is nice of her. No, really, it is. Finally a politician making an electoral promise that not just can be but will be kept. For we don’t have a gender pay gap now. So it’s done and dusted already. 

Now we do have a difference in average pay between men and women. The Guardian article promoting Reeves’ commitment states: 

The gender pay gap in the UK currently stands at 14.3%, according to the TUC

That’s actually the wrong number – we’ll come back to that – but while there is a difference in average pay it is not, in fact, a gender pay gap. It’s a primary child carer pay gap.

A recent economics Nobel was awarded for research in this area to Claudia Goldin. As her work shows – and she insists – it’s just not true that women are discriminated against for being women. At least, not any more – it certainly used to be the case back in the day, but society has improved since then. What is actually happening now is that people who make different life choices earn different amounts of money. Undoubtedly this one of those Ho, Hum, whocoulddaknowedthat? findings.

If we dig deeper into the numbers we find that among young professionals in their early twenties there is no gender pay gap. A pay gap only really arrives with the likely age of first childbirth. The age at which the gap kicks in has also been rising: in lockstep with the rising age of primagravidae in recent decades. Women with children have – as with all of these numbers, this is the average across the relevant population – a pay gap of about 9% with childless women. This gap then rises, in more gentle steps, for each subsequent child. Fathers also tend to earn more than non-fathers – a similar 8-9% sort of number. So far we’ve shown that, in a somewhat sexually dimorphic mammal there’s something of a gendered response to the arrival of offspring. Another Ho Hum finding.

We can go further into detail. Never-married no-children women in their forties have a small positive pay gap – earning 1-2% more than their male colleagues. As do lesbians in fact.

We’ve also got Occam’s Razor to guide us here. The above gaps are all we require to explain the observed earning gaps between all men and women once we adjust for the effects upon those with and without children. There is, that is, no room left for direct discrimination against women. 

No one at all is saying that it didn’t happen in the past – the question is whether it does now. And the answer, as best we can see, is that no, it doesn’t. Not at any scale and not across our society, whatever we might be able to claim about one or more instance in detail.

This isn’t the end of the matter, of course. It might be that we don’t want to have a pay gap between mothers and non-mothers. But it’s important to start with a clear understanding of the facts. And as further proof that this isn’t about gender discrimination, when it’s the father – or any other male – who becomes the primary child carer then they too suffer the same pay penalty. That is, this is not a mothers’ pay gap, it’s a cost that falls on any primary child carer.

Huge effort therefore is going to be invested by a new Labour government in a gender pay gap problem that is already solved. Which is a pity – we could have used that effort to do something more useful.

But there’s also another lesson for us all here. That Hayek was right. The centre never will have enough accurate information to be able to manage or direct an economy in any detail. Our proof is in the TUC’s claim of the gender pay gap being that 14% and change. They get to this figure by defining it as ‘the gender pay gap for all employees’.

We’ve all been told not to do that. By the Statistics Ombudsman no less. It is misleading to use the ‘all employees’ numbers. For part-timers get paid less than full-timers and 75% of part-timers are women. Mashing the figures together gives us a fallacy of composition. So, you know, don’t do that. 

A more accurate description of the pay gap is around 6%. This difference is easily enough explained by the primary carer penalty, as already detailed. But the TUC is insisting upon a misleading, juiced-up figure and therefore that’s where the political effort – and undoubtedly our money – will go.

Much the same will happen with the proposals in Labour’s manifesto to make large firms report on disability and ethnicity pay gaps. For example, it was long true that black women had the highest hourly pay in the country. The national numbers (from the same source as all the gender ones above, the Office for National Statistics’ earnings survey, ASHE) did not take account of the concentration of black women in London, where pay is markedly higher than other areas of the country. 

We just don’t get good numbers at our population size of 67 million people. Even when this could be possible we always do find those who would influence national policy feeding us inaccurate ones – thanks, TUC. 

Or, as Hayek explained, the centre never will have the information to make good and detailed management decisions for something the size of an economy. Our proof? We no longer have a gender pay gap, and yet leading into the election we’ve a promise to solve what doesn’t exist.

Ho Hum.

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Tim Worstall is a Senior Fellow at the Adam Smith Institute.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.