14 November 2019

Why ‘Equal Pay Day’ is nothing of the sort

By Morgan Schondelmeier

Today marks ‘Equal Pay Day’, a campaign pushed by the Fawcett Society which purports to highlight the day of the year from which women ‘work for free’.

Their argument is that ‘gender pay gap’ calculations show women are being discriminated against in comparison to their male counterparts so drastically that their annual earnings are 13.1% lower. It’s a powerful headline — surely anyone in their right mind would be outraged at the idea that they are working for free. But look a little closer, you can see the faults in their logic and the insidious effects of their fear-mongering.

When discussing issues of discrimination, it is important to ground criticism in fact. There are clearly instances where minorities, women, people with disabilities, among a myriad of others, face genuine workplace discrimination. Unfortunately, the way gender pay gap statistics are portrayed risks badly misrepresenting the position of women in the workforce.

The so-called gender pay gap is calculated from the Office of National Statistics’ reporting of wages across the economy. While the raw data can be used for meaningful analysis, the gender pay gap calculation manipulates the figures to fit a narrative of discrimination. By taking aggregate salaries of men and women across departments, firms, and the entire economy, and then simply dividing the results by the percentage of men and women, we see an incomplete and, frankly, useless picture. None of this reporting takes into account genuine reasons for differences in pay between men and women: such as experience, age, job role, hours worked, or education levels.

For example, EasyJet had a 2018 gender pay gap of 47.9%. One might think this is an appalling injustice, but it is down to the fact that 95% of their pilots are male and 79% of their cabin crew are female. Again, you might think, isn’t a disgrace that they have so few women pilots? Firstly, the pay gap itself isn’t the cause of any discriminatory practices. The salary of a cabin crew member is rightly lower than that of a highly trained pilot. On the number of women pilots they have, actually EasyJet has more than the market average. Their issue is the number going into the profession in the first place. And EasyJet have taken proactive steps to change this — they aren’t the villain in this story, they’ve actually managed to increase the number of female pilots on their staff by 73% in three years.

In fact, when do you begin to control for these, an entirely different picture emerges. For example, the gender pay gap has disappeared for women under 40, is skewed in favour of women in part-time work and in regions of the country like Northern Ireland. However, none of this is noted in the Fawcett Society’s reporting. One might think that their exclusions of these facts are deliberate misrepresentations just designed to get headlines.

It is already illegal for men and women to be paid differently for equal work. But the debate has instead shifted to conflating discrepancies between pay across experience, skill, and education levels with discriminatory pay practices. This is incredibly harmful to the debate surrounding gender equality.

Top-down policies designed to redress a perceived gender imbalance could have negative impacts on women if companies see them as being prohibitively expensive to employ. If forced to meet a target of ‘equal pay’ across the average of an entire company, women in low paying jobs will be the first to go. In the case of EasyJet, it would be much easier to fire swathes of female cabin crew and hire men to take their place, thus creating the appearance of a more equitable division.

Instead of the ‘gender pay gap’, the difference in earnings over the course of a lifetime should be called ‘the motherhood gap’ as women often take hits to their earnings and career trajectory after taking time off after having a child. It is not a bad thing, but simply the reality when it comes to lifetime earnings — a large reason why, when aggregated, it appears women are being discriminated against based on gender. But instead of painting all women as victims, the conversation would be much more productive were it switched to discuss ways in which we can empower women.

For example, companies offering equitable and flexible parental leave is an important shift in the culture of male-dominated fields and allows families to plan what’s right for them. If companies prioritise equitable benefits surrounding parenthood to men and women, the UK may begin to follow in the footsteps of the Nordic countries, where the earnings gap has fallen but productivity and real earnings have not. That it’s more expensive for men to take time off to raise a family is a part of the real reason why they tend not to do so, and why there continues to be a ‘motherhood gap’ in the first place.

This policy is also a very attractive prospect to potential – and current –  employees. Competitive benefits packages will go a long way towards attracting and retaining top talent in a competitive labour market — whether male or female. The ability to take time off of work to raise a family in a way that can be customised for each situation is a very compelling benefit. In tight labour markets like we have now, you would rightly expect benefits like equal time off to be in the package designed to entice new staff to join or retain those looking elsewhere.

PR campaigns like Equal Pay Day might sound virtuous and make the public feel like a problem is being solved, an injustice corrected. But at the end of the day, instead of peddling meaningless – and even misleading – statistics, we should focus on the progress already made and implement policies which will actually make women better off in the workplace.

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Morgan Schondelmeier is Head of Development at the Adam Smith Institute