West Midlands moves up the ranks in PwC’s Women in Work Index

The West Midlands has seen a small improvement in its ranking in the annual PwC Women in Work Index, moving from 11th place in 2020 to 10th place in 2021. Whilst the labour force participation rate fell by 1%, the gender pay gap slightly narrowed from 16% to 15.5% in 2021. The Index, first launched in 2010, is a weighted average of the five indicators that reflect women’s participation in the labour market and equality in the workplace, and analyses female economic empowerment across 33 OECD countries.

Whilst the West Midlands ranking moved slightly, the East Midlands saw one of the most improved performances in 2021, moving from 7th place to 4th , with the region’s gender pay gap narrowing from  19% to 16%.

Becky Clayton, Deals Partner at PwC Midlands, said: “The Index demonstrates the impact the pandemic had on women in work, especially in the West Midlands. Whilst indicators in the West Midlands remained fairly stagnant, the East Midlands saw significant improvements, highlighting the disparity across the regions. It is clear that we still have work to do, locally and nationally, to address some of the core barriers for women in work, including childcare provisions and the associated cost of childcare, as well as the cost-of-living crisis.

“It’s key that investment into skills continues to be an important way to address inequality through creating inclusive workplaces and equal opportunities for women from all social backgrounds. For example, PwC in the Midlands supports the Tech She Can programme, developed to encourage and empower more women into technology careers. As the Government continues to push the levelling up agenda and the Treasury considers expanding free childcare hours in England, businesses and local governments must work together to create more opportunities for women in the workplace.”

UK Wide Results

The UK saw a significant widening of the gender pay gap by 2.4 percentage points to 14.4% in 2021 - four times the average increase across the OECD as a whole. Combined with a slight fall in the female labour force participation rate, the UK’s absolute index score declined by two points in 2021, and led to a relative fall to 14th in OECD rankings compared to 9th in 2020.

While the UK remains the leading economy across G7 peers at 69 points on the Index, the gap between the UK and second place Canada has narrowed to just two index points.

Since the COVID-19 pandemic, the UK’s progress towards gender pay parity has been in reverse, and the UK female labour force participation rate fell 0.4 percentage points between 2020 and 2021, during a time of labour market recovery across the OECD. The rising costs of childcare threaten to make these results even worse, with more women being priced out of work altogether.

Childcare and the cost of living crisis:

The report highlights childcare affordability issues for families in the UK. In 2021, childcare costs relative to average income were one of the highest across OECD countries. Net childcare costs represented almost a third of the income of a family on the average UK wage. This compares to as little as 1% of income in Germany.

Since 2015, childcare costs in the UK have risen dramatically, while income growth has slowed. Average nursery costs per week rose by more than 20% between 2015 and 2022, while average weekly earnings rose by 14% (both in nominal terms).

Upcoming research from PwC* shows that an increase in the number of government-funded free childcare hours could generate a significant increase in the size of the labour force. 

Larice Stielow, senior economist at PwC, says:

“An 18 year old woman entering the workforce today will not see pay equality in her working lifetime. At the rate the gender pay gap is closing, it will take more than 50 years to reach gender pay parity. If the rebound from the pandemic has taught us anything, it is that we can’t rely on economic growth alone to produce gender equality - unless we want to wait another 50 years or more.

“The motherhood penalty is now the most significant driver of the gender pay gap and, in the UK, women are being hit even harder by the rising cost of living and increasing cost of childcare.  With this and the gap in free childcare provision between ages 1 and 3, more women are being priced out of work.  For many it is more affordable to leave work than remain in employment and pay for childcare, especially for families at lower income levels.”

The role of parental leave policies in eliminating the motherhood penalty:

While affordable childcare could help more women back into the workforce, in order to tackle the motherhood penalty at its root, the report explores solutions that could help to redistribute childcare more equally between women and men. This would assist in shifting societal attitudes about gender roles. While the UK currently offers a statutory shared parental leave scheme, take up by fathers is low (estimated 2-8%), mainly due to affordability issues, with payment to fathers only at the statutory level (capped at £156.66 per week, among the lowest in Europe). 

The analysis suggests that, as a result of fathers taking more paternity leave, an additional 720,000 women in the UK could remain in full-time employment (over a 20 year analysis period), thus improving the UK’s overall ranking on the Index. Moreover, it estimates that the incidence of postpartum depression would fall - with an estimated  230,000 mothers and 240,000 fathers no longer suffering over the analysis period, which could save the NHS around £1.4 billion. 

The benefits are not limited to parents - as a result of fathers spending more time with their children in their early years, around 66,000 children every year (10% of births) could attain better educational outcomes -  scoring one grade higher in either Mathematics or English at GCSE once they reach high school age. This is also estimated to lead to an increase in their lifetime earnings of £330m.

Zlatina Loudjeva, Partner in PwC’s International Development team, said:

“Rather than post-pandemic recovery for women, we’re seeing the opposite when it comes to closing the gender pay gap. With both a reversal in the UK’s progress on the index, and a widening of the gender pay gap, it’s clear that it was not a COVID linked issue alone and therefore, ‘business as usual’ simply won’t cut it. This is a question of equity but also a pertinent economic issue as the UK faces labour shortages. There is also a business cost of talent retention.

“We can no longer talk about the impact of COVID-19, it is clear that the cost of childcare in the UK and attitudes towards childcare need urgent focus and action, with government and business to work together to help mitigate the confluence of shocks that have occurred over the last few years so that women are not priced out of the workforce. 

“There is no panacea, nor a one size fits all policy, that will solve the problems for women at work today. We should consider enhanced parental leave policies and more flexible working so that all parents can balance work and caring responsibilities, alongside tackling the cost of childcare, to help create a more equitable and prosperous society for all. The index shows that this is doable and a number of OECD economies are leading the way through successful interventions.”

The Index: how the UK regions fare 

Northern Ireland ranks first amongst the countries and regions in the UK, overtaking the South West which was the top-performing region for three years  before this year. The South West now drops into second place, while Scotland remains third (unchanged from last year).

Northern Ireland boasts the smallest gender pay gap (only 5%), and a higher female full-time employment rate than most (the third best across the UK at 64%). However, it has the lowest female labour force participation rate (70%) of all countries and regions in the UK.

Wales saw the largest decrease in its absolute Index score, as well as the most significant fall in rank between 2020 and 2021 - from second to sixth place . This was due to marginal deterioration seen across the majority of indicators.