Episode 70 - A more rewarding workplace

Emily Khan: Welcome to the latest episode of our Business and Focus podcast. I'm Emily Khan and I'm your host for this episode. Business leaders and their workforces find themselves at the centre of a number of interconnected choices around work, reward and equality. The release of our annual Women In Work index is always an opportunity to assess the wider implications connected to gender equality at work. For society, our economy, and the competitive position of both businesses and the UK as a whole. But the findings are only one aspect. How does this filter through into decision making and meaningful actions by business leaders? At a time when so much of the established model around work and reward is in flux, what are the areas of focus that can help us move forward? This is a big complex issue, and as we sit here looking at the results for the third year, it's clear things haven't gotten any easier. We've previously looked at the impact of the pandemic and the implications the green jobs transition will have on the gender pay gap. Now, we also have a cost of living crisis to contend with. But even as some of the bigger issues and themes shift in priority, there is no overlooking that an 18 year old woman today will not see gender pay parity in her working lifetime.

Joining me today to explore these themes and issues are Nabil Taleb, one of our PwC economists working on this years' women in work report, and Katy Bennett, a director from our people in organisation practice. It's great to have you both here, and I have a feeling this is going to be a very lively discussion. So Nabil, perhaps you can introduce yourself first to get us going?

Nabil Taleb: Yes, hi Emily, thank you so much for having me on. It's a really great privilege to be here. I was fortunate to work on the women in work index report this year, and yes, really excited to have this conversation together today.

Emily: Great to have you here. Katy introduce yourself please.

Katy Bennett: Yes, hello. It's great to be here. I'm Katy, I am one of the leaders of our diversity, equity, inclusion consulting businesses, which is a long way of saying I work with our clients on really important topics around diversity, equity and inclusion. I'm also a mum of a toddler, so maybe some of that personal passion is going to come through today when we're talking.

Emily: Brilliant. Look forward to hearing some of it. I share at least some of those things in common with you, in having two children of my own as well. Now this is a privilege for me because it's the third year in a row that I've hosted this discussion and there were some pretty stark takeaways from the last one where we looked at the interset with net zero. Now Nabil perhaps you can give us the run down of the key headlines from this years' report. I've trailed one there in my intro, but bring us all up to speed.

Nabil: Brilliant, yes. Well, I mean, let's start with the good news, right? Last years' blip from the pandemic where we saw the index fall for the first time in its history, hasn't continued. In other words, the average index score measuring labour market outcomes across the OECD (The Organization for Economic Cooperation) has increased. But quite frankly, that is as far as the good news goes. The speed of the recovery that we've seen lags significantly behind what we need to see parity in the workforce. I mean Emily, you've mentioned earlier a woman at the age of 18 entering the workforce this year won't see gender pay parity in her working lifetime. Which is really quite a frustrating and disappointing stat, but also one that reflects the reality of the current workforce. And so I guess then the question goes on to beg what's driving these results? Well, we saw that across the OECD there were improvements in the index score, mainly driven by improvement in female participation in the workforce and a falling unemployment rates. But the gender pay gap between men and women widened across the OECD on average, and when we actually look at the UK and we take a deep dive there, we see that the gender pay gap increased four times more than the average across the OECD, increasing by 2.4 percent. And that's forced the UK to fall down the rankings from ninth to fourteenth place.

Emily: That's a real shock factor stat for those of us based here in the UK. I want to dig right into that as we get going. And when we looked at gender pay through the lens of the pandemic, that was looking at a big global issue that affected all countries in a broadly comparative way, whereas the UK, it feels like we're struggling with the current economic challenge more so than some of our neighbours. So I'm keen to understand is that what is at play for the UK? Is the slightly more difficult economic environment that we're seeing here what is making it so much harder for us to achieve improvements in gender pay parity? Is that the root cause of the downwards slide?

Nabil: Yes, I mean it's a really important question. What is really driving this? What is the root cause? And we see there's underlying gender norms and expectations of men and women across society, and although they're evolving over time they continue to persist, we still see them everyday. And one area in which they manifest is through this notion of the motherhood penalty. This is basically the concept of women losing, in terms of their lifetime earnings, as a result of having children and raising them, mainly due to underemployment. Now that in itself as a concept actually accounts for a great amount of the gender pay gap. Across the OECD on average I think it accounts for 75 percent of the gender pay gap, but actually when we look at the UK we see that the gender pay gap has increased four times more than the average across the OECD. And I think exactly the points you've been referring to. We've seen rising prices, a fall in relative pay, and let's look at the cost of childcare in the UK comparing that to other countries across the OECD, the UK's childcare's incredibly expensive and often it causes the choice of whether to work or to stay and home and look after children. And so these have all amplified the effects of this. And so for this year's report we wanted to look at this further. And so we've actually looked at the economic benefits of an equal pay parental leave policy and what that would have on women's employment and this gender pay gap in particular.

Emily: Brill, thanks Nabil. Katy, I'm keen to draw you in at this point because these types of policies are the kinds of things you work with clients on and I'm sure you'll have a personal perspective on these challenges too. What are your thoughts on the kinds of themes we've started talking through here?

Katy: Yes, well first of all huge credit to Nabil and all of the team because this data is so powerful and we need it to demonstrate how much work needs to happen. I mean, the motherhood penalty is such a complex combination of different things that, predominately women, but parents and carers, experience throughout their working lives often. And that equal parental leave point is a really important example of the start of that. That first year, usually, of a child's life, where a decision is made of who is taking on that caring responsibility and stepping back from work, but actually when we look at policies, when we look at data within organisations, what's really powerful is it's not just about that year, it's about the knock-on effect of a year of being out of the workforce or perhaps working reduced hours which means you're not investing in development. Perhaps you're not getting the best promotion opportunities, you're not networking, you're not able to take different work opportunities. You may also have financial pressures which mean you feel like you can't look for a different job, you can't give up on existing arrangements that allow you to work flexibly. There are lots of different pieces that all come together. It's also a really cyclical problem because if you have a family where there are two parents working, or with the potential to work, if there is a gender pay gap, economically, on average, we know which parent it makes sense to get out of the workforce. It's going to be the woman.

Emily: Do we see that playing through in the economic picture too, Nabil?

Nabil: Yes, that's right. We do. In the UK over the past year we saw that the female participation rate in the economy fell by 0.5 percentage points, really aligning to this idea of women just leaving the workforce entirely because of these choices, of course we all have to make choices, but these are choices that ultimately, when they become financial choices, that you're forced to make. I think this was a big focus for us, this idea of the ability to choose having the choice, to be able to choose how we engage in the labour market. Within even part-time work we see that the UK suffers in this area. Across the OECD I think the full time participation rate amongst females is about 75 percent. This figure in the UK is about 68 percent. Suggesting that in the UK a lot of mothers actually tend not to work full time they tend to work part time, I guess reflecting these different points that Katy was suggesting. And so it's going to be really interesting to see how the implementation of different policies or the way we approach different challenges will shift the dynamics of how we make these choices in day to day life.

Emily: Yes, and we're clearly already hearing some of that. At the time of recording we're not yet seeing the full budget but there is already some sentiment around looking at childcare costs in order to get more women back into the workforce, coming through in the expectations around the budget. I'm interested in your point there, Nabil, about other countries are a number of percentage points ahead of the UK, perhaps let's look at some of those that are performing really strongly in the index for a moment and whether or not there are lessons we can take from some of those countries as we think about some of the actions we might take.

Nabil: Just from a ranking perspective just to bring everyone up to speed from this year's results. So Luxembourg was the best performing country on this year's index, they moved up on place, it was second last year. New Zealand, which was first last year is subsequently now second, and Slovenia who was third last year still remains in third place. And it's important to think actually what's driving this? This isn't in the past year they've made significant strides for improvement, it's usually that the stats are already incredibly high. Luxembourg boasts the lowest gender pay gap across the OECD, Slovenia has the highest percentage of female participating full time in the workforce, New Zealand across all indicators does really well. And one distinguishing feature is that these conversations around gender pay, around women's participation in employment in the labour market, it doesn't start in one year and the impact doesn't happen in one year, this is conversations that have been happening over the past 50 years, 60 years, which have now been reflected. It's this idea that when policies are implemented in these countries, a gender lens is applied. In Sweden, just as one simple example, they spend more on childcare as a percentage of government revenue that's spent in the public sector than they do on defence.
Now that's not suggesting that we should go ahead and do the same or copy the policy, that's not necessarily, I'm not suggesting that by any means, but what I am suggesting is when you start to internalise some of these concepts, you start to apply a gendered lens into the decisions we make, whether that's as an individual, an employer or government. And so I think that's really something to take away from these countries.

Katy: And I think that's such a great point as well, just recognising the cultural aspects of a lot of this because completely there are structural pieces here. There's the policy, there's the social care options that are available within society, within individual organisations and what they do, but actually all of that perpetuates expectations of what is the role of a mother? What is the role of a father? What is the role of a career? Who does that work? How is that work valued? And that really can build into the way that women are expected to react to becoming parents. I'll share a personal story which I'm happy to do, is that I was, despite the fact this is my day job, I was astonished how I came back to work how many people everywhere in my working life, in my personal life, assumed I would be working part time. Because that's what women do when they have children. That's just become the norm, but that has a huge knock-on effect for their participation in the labour force, to their pay, to for their pensions, if we go really far out.

Emily: Let's dig into that a little bit then Katy and thanks for sharing that personal example, I definitely recognise that from my own experience too, so you work with businesses who are serious about changing that conversation. Serious about implementing policies that create equity both in pay and in a broader sense in their organisations. What's the main message to organisations who want to take this seriously about the types of things that they should be considering?

Katy: I mean the message that I always start with, and I always feel bad starting with it because it's sort of an unhelpful message, is, there isn't a silver bonnet, and there isn't one answer that is the best thing every company could do. And actually the most common mistake that I see organisations making is building their strategies, building their areas of focus based on what their competitors do, what they've heard is really good, what they might've read about in papers as a leading practice or perhaps often ironically some biases they might have, positive biases in a way of where they think help is most needed. And just as we've done at the macro level in a way, the country level in this analysis, companies need to start by looking at their own data and saying 'Do we have a motherhood penalty in our organisation?'. When we look at things like promotion, probability, and how long it takes to move through a role, when we looking at who has access to those amazing leadership programmes you might have, when we're looking at who's working part time and full time, who's taking longer periods of leave or not, and what's happening to them from a pay progression perspective when they come back, that's when you can measure if you have a problem. And if you do, what is the policy? What is the intervention that will have the biggest impact?

Nabil: I think building on this as well, something that was a key feature of this year's report was thinking how do we support and how do we reflect alongside businesses to think what are the type of policies that are able to make a change in our organisations? One of which, which we did a bit of a deep dive into was this idea of equal pay parental leave, and looking across the market and what's being offered by government, what can companies often do to enhance this leave. And looking at existing literature of what other countries are doing undertook a quantitative analysis to be able to quantify these economic benefits. And I think, like Katy mentioned, being able to actually look at these policies, not only within the framework of something that we can just blanket apply everywhere, but actually apply it to our organisations, being able to read the reality of our organisations. Even the stats that we present, these aren't discoveries, these are just explanations of the current reality of the situations. This isn't something we've discovered like we do in the scientific world when we discover something new, this is just almost pulling the blinds down and revealing the current reality of the state of the world. And so being able to actually apply specific policies with that gendered lens do have a massive impact and is a step that organisations can take. And I'm quite keen to actually discuss one of the policies that we looked at as a potential option for this. Equal pay parental leave is a policy where, independent of your employment status and your partner's employment status, you'll be entitled to equal paid parental leave, as the name suggests. So at full pay and extended period of leave. So we did an analysis to see what would be the impacts, perhaps looking more at a societal level, not looking so specifically at just one individual or one organisation, but looking at what's the macro impact of implementing a policy like this. And the results they found were that the benefits extended far beyond the mother. They extended to the father, to children, to family units, to wider society in general, and in particular to these cultural attitudes that often underlie some of these problems that we've been talking about.

Emily: Thanks Nabil. I love that suggestion. Katy, give us a reality check. How would that work in a business? If people wanted to introduce something like equal parental leave.

Katy: Equal parental leave is an incredible policy. It is genuinely equal, and it does address some of those challenges that we see in the data. I think what I do want to acknowledge is that it is a very expensive policy, and therefore from a commercial perspective, going back to that data piece, we need to be really clear what the business case for doing is, because it is going to take some work to get there and recognise that actually on an individual organisation perspective there will be great commercial benefits but they may not be where you expect. So for example, if I think about what would make an employer incredibly attractive if they introduced equal parental leave, but would make the organisation really attractive to senior men who perhaps want to take more leave. That's where you're really enhancing leave. Now I'm not saying that's a bad thing, but I'm saying what it might actually do in the short term is increase your gender pay gap because you would have more talent who happened to be male, who were fathers or were planning to become fathers, joining your organisation. And it's important to understand that and be honest about that, because I totally totally buy into and see the social benefit of this, but we need to be able to acknowledge that wider picture.
The other thing I'd say is a policy is only a policy if it doesn't have the culture or the processes around it. You could have the best policy in the world but if everyone goes 'I'm not going to take that because it'll impact my career', you haven't solved anything. And that piece of it is really really important, and actually could be harder to do than the policy work itself.

Emily: We've talked about exactly that phenomenon you describe there Katy in previous episodes of this, where focusing in one area and trying to do the right thing in one place, actually you create an unintended consequence which is, you move backwards in a way that you weren't expecting. And it sounds like that's a risk around this policy and probably many policies when trying to get this balance, because it's complex, as you say, and drives that need for a very bespoke approach for your organisation, your employee base, and the employee base you want to attract in the future. Is that fair?

Katy: Yes, I think that's right. And to be clear, I'm not saying that's necessarily a bad thing. The challenge of any one metric is it's going to be sensitive to things that might be the right decision in the long term, actually okay more men join but increasingly more women join too and you've created a culture where being a parent is seen as something that everyone does and everyone's more supported to do, well that's incredible for creating an inclusive culture, for creating a place where mothers and fathers and everybody thrives and gets the best opportunities to succeed. . So I'm not saying don't do it because of the gender pay gap, I'm saying we've got to really be very clear about the bigger picture, particularly because you've got to get that commercial business case right when you're talking about some quite expensive policies.

Emily: That vision you paint there of what getting this right looks like feels like a nice place to start trying to draw this to a close, guys. And on this series we always try and finish with something actionable, that people who have been listening might do, if they've been interested in this conversation, if they want to take it a bit further, something they might do next. Katy, maybe I will come back to you seeing as you were going there anyway with an actionable next step, with a tone of hope as you were using then, that listeners might want to follow up on.

Katy: So I suppose at an organisational level, I would say, ask these questions of your data. If you're responsible for this, ask if you have a motherhood penalty. Look long and hard at the way things are working and test if they're fair. At a personal level, I suppose I would say feel empowered to think about what you want, not what society expects you to do, I say that recognising economically you have to make the decision you have to make sometimes, but I really love the messages that Nabil shared about the positive impact for families, for everybody, when you get this right. And for me personally, and at a business level, that's amazing.

Emily: Brilliant. Thank you Katy. How about you, Nabil? One action or something you'd love to see.

Nabil: Yes, I think exactly like Katy said. In the short term making sure that things work with our organisations. But also understanding that these policies that we want to implement go far beyond our own organisations. They impact society. They change culture. And they have benefits firstly to women and foremost to women, but also to wider society, the economic benefits are huge in all domains. And so, for organisations to really apply that gendered lens in all their decisions and really see things within the long term as well as the short term to see what's most effective for them.

Emily: And that feels like a very good place to bring this to a close. Thank you both so much for being such excellent guests and bringing so much energy to finding a way forward on this topic. And thank you listeners for joining us. If you'd like to dig into the women in work findings, please go to pwc.co.uk/womeninwork for the full index, and don't forget to subscribe to keep up to date with all our latest episodes. Thanks everyone, see you next time.

Participants

• Emily Khan
• Nabil Taleb
• Katy Bennett