Scotland retains top three position in PwC’s latest Women in Work Index

• Scotland remains third in rankings of UK regions between 2020 and 2021
  
• Female unemployment rate falls to 3.4% in 2021
• Scotland’s female full-time employment rate improves from 61% to 63%
• Overall index score, based on five metrics, fell by 0.2 points between 2020 and 2021

The latest iteration of PwC’s Women in Work Index sees Scotland retain its top three position among the UKs nations and regions.

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.

Despite its overall Index score falling by 0.2 points between 2020 and 2021, Scotland demonstrated relatively strong performance across all five indicators, in particular a low female unemployment rate of 3.4% (below the UK average of 4.4%) and a slightly higher than average female full-time employment rate (64% compared with the UK average of 62%). Relatively narrow wage gaps and participation gaps - 11% and 6.2%, respectively - also contributed to Scotland’s high Index score.

The small absolute decline in Scotland’s Index score was driven by a fall in the female labour force participation rate (73.2% in 2021 compared with 74% in 2020) plus stagnation in wage gap - which remains the same as 2020 - and a widening participation gap.

Among the regions, Northern Ireland topped the Index, after increasing its overall score by 6.3 points - showing improvements across four of the five key indicators including the lowest female unemployment rate (3.1%) and gender pay gap (5%). Northern Ireland took the top spot from the South West, which only moved one spot to second overall, thanks to its low participation rate gap (5.5%) and high female participation rate of 77%.

PwC’s report highlights a number of factors at play that could be impacting the UK’s performance in the Index - which showed an absolute decline, with the country dropping five places to 14th in the 2021 rankings - including the affordability of childcare.

Claire Reid, Deals partner at PwC Scotland and Head of Forensics and Restructuring for PwC UK, said:

“It’s encouraging to see Scotland retaining its place among the top three UK nations and regions in terms of women’s employment outcomes, but the small absolute decline in index score does go some way to demonstrating the impact of the pandemic on women in work - which has evidently been felt across the UK as a whole. Whilst families in Scotland are provided with more generous free early learning and childcare in comparison with other parts of the UK, the fall in labour force participation rate, as well as participation and pay gaps, make it clear that barriers associated with childcare - such as cost and provision - alongside the increasing cost-of-living remain for women in work in Scotland. There is still work to be done at a local and national level, to level the playing field and provide equity as well as equality.

“Investment into skills will continue to be key in creating more inclusive workplaces and equal opportunities for women from all backgrounds - particularly from an early age. Programmes like TechSheCan, which is avidly supported by PwC in Scotland and encourage and empower young women and girls into considering careers in tech, are vital to ensuring more favourable employment outcomes for women.” 

The UK-wide picture

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 UK, 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. 

About the research:

1. The five indicators that make up the Women in Work Index are: the gender pay gap, the female labour force participation rate, the gap between male and female labour force participation rates, the female unemployment rate, and the female full-time employment rate.
2. The full Women In Work Index can be found here.
3. To request an interview with our economists please contact Rebecca Lloyd (rebecca.d..lloyd@pwc.com) or David Bowden (david.bowden@pwc.com) 

* The full report is a forthcoming publication by the PwC Economics team in Spring 2023