Transcript - Episode 2: Closing the gender pay gap: the potential $2 trillion prize

Hannah Audino: Hello and welcome to the second episode in our economics podcast series. I’m Hannah Audino, an economist at PwC. I’m joined here today by my colleagues Jing Teow and Shivangi Jain to talk about gender equality.

The theme for this year’s International Women’s Day is “be bold for change”, a posh toward achieving greater gender equality and we’re talking today about our new Women in Work index. So Jing can you give us a brief overview of what the index is about?

Jing Teow: Sure. The Women in Work index is a measure of gender equality in the workplace and combines five indicators of female economic empowerment such as participating in a workforce, the gender pay gap and so on. These are combined into a single index for 33 OECD countries which allows us to compare how well each country is doing against their peers.

Hannah: So once again the Nordic countries do very well on this with Iceland, Sweden, Norway taking the top three spots. But what about the UK?

Jing: So over the past year the UK has improved slightly, moving up by one place to 13^th position and this is down to improving economic conditions which have led to better employment prospects, not only for women, but also for men.

Hannah: The gender pay gap gets a lot of headlines every year and this year is no different. So Shivangi can you tell us how far the OECD has come in closing the pay gap and how the UK performs on this measure.

Shivangi Jain: So clearing progress is being made. The average pay gap across the OECD for example is falling gradually to 16% over the past 15 years. For the UK the pay gap is slightly higher than the average and so there’s no doubt that there’s still a lot of room for improvement.

Jing: I think that’s right and unless policies are put in place to speed up the pace of change it could really take a while until we achieve complete parity and if for example the OECD progresses at the same pace it has historically it could take almost a century for the pay gap to close completely and the UK, which has seen faster progress, could close its gap by a quarter of a century but this still seems incredibly slow - I’ll almost be retired by then!

Hannah: So the UK under pay gap is around 17%, is that correct?

Jing: Yes.

Hannah: Now does this mean that women are getting paid less than men for doing the exact same job?

Jing: So this is where it gets really interesting for me. A lot of people assume that the pay gap shows women being paid less than men for the same jobs but actually the truth is a lot more complicated. The pay gap that gets on the headlines is unadjusted, meaning that it only compares the difference between the average pay for men and women who are working full-time and it doesn’t account for other factors that also influence pay, such as education levels, your years of experience, the sector or the region in which you work and so on.

Hannah: So it’s not a like for like comparison?

Jing: It’s not a like for like comparison and so the figure doesn’t really tell us much about equality at the workplace and we need to dig a little deeper.

Hannah: So what about direct discrimination? How far does this go to explain the gender pay gap?

Jing: And so this is the question right: is overt discrimination alive and well? There have been several studies on this. There was one recently put out by a job site and they used their own salaried database for hundreds and thousands of jobs as well as the personal characteristics of the people who work in those jobs and once you adjust for all these different personal and job characteristics, the pay gap falls significantly. In fact less than 6% for the UK and they found similar results as well for countries like the US, France and Germany. What this shows is that there is, or there could be, some discrimination going on, but it is far from being the only factor at work.

Hannah: Ok. So how about women taking time out of work to care for their children?

Shivangi: When women take time out of work to care for families or children, they do lose out from pay progression from the time that they spend out of work and this in itself contributes to the pay gap because their progress is halted up to the point when they stop working. But as far as this they also face challenges when they try getting back into work and that’s not commensurate with their skills or their prior experience. The other thing is that women also tend to work in lower paying sectors and occupations.

Hannah: Like education and health and social care?

Shivangi: Yeah exactly.

Jing: I mean all this is to say that women and men can’t have different preferences for the types of work that they do, but clearly you know there are many women out there who do aspire to achieve more with their careers but are limited by the lack of opportunities as well as flexibility in the workplace.

Hannah: So Jing earlier this year you did a study on women returning to work. Can you tell us a little bit more about that?

Jing: Yes sure. So this study was about the employment prospects of women returning from career breaks and the study found that up to two-thirds of highly skilled professional women, and we’re talking about doctors, lawyers and engineers here, who’s skills and experience are under-utilised precisely because they end up in lower skilled work or work fewer hours than they would like, so it is a real issue.

Hannah: And why should businesses take note?

Shivangi: Well I mean from the business perspective, they’re clearly losing out for not being able to get the best talent available for fill their senior positions and this is really worrying. A CBI survey for example shows that more than two-thirds of businesses are worried about shortages in high skilled workers. There’s also a fantastic prize at stake when achieving greater gender equality at work. Our analysis for example shows that fully closing the gender pay gap across the OECD, could boost female earnings by almost US$2 trillion and for the UK it could be a gain of almost £85 billion.

Hannah: The top performers like Iceland and Sweden, what are they doing differently and how can the UK and other OECD governments learn from this?

Jing: Often women end up in lower paying roles and occupations because they offer greater work-life flexibility. Now the UK government has introduced shared parental leave which can help rebalance the way in which caring responsibilities are shared within families but the Nordic countries have gone a step further by introducing ‘use it or lose it’ quotas for shared parental leave to incentivise take-up, especially by fathers, so the UK could emulate that.

Hannah: Could you expand on what’s ‘use it or lose it’ is?

Jing: So the principle behind shared parental leave is that both parents get to decide for themselves how to divvy up the leave and that’s why it’s called you know shared parental leave but by introducing these quotas what it means is that each partner has a specific quota that is only for themselves to use and it’s non-transferable and what that means is you know if you don’t use the leave you basically lose it and that encourages take-up, especially by fathers.

Hannah: Yeah that’s a great idea. And child care costs must also be a factor. I came across a stat in your study that said that families in the UK spend around a third of their income of child care where in the Nordic it’s around less than a 10^th - that’s a massive difference.

Jing: It is shocking isn’t it? I mean many women want to come back to productive work and further their ambition but by the time you factor in all these child care costs it just doesn’t make economic sense for them to come back and do work. Making affordable child care more readily available can help get more women into work and it would also boost the number of women who are in full-time employment which is where the UK falls down on the index.

Hannah: And what about businesses? What can they do to help level the playing field?

Shivangi: Yes so there’s a lot more that businesses can do to be more agile and to drive real change on the ground. One key area for example is the lack of flexible opportunities at more senior positions. A salary rate by Timewise recently showed that only 6% of advertised roles with a salary of over £20,000 in the UK are actually available on a flexible basis. This sounds ridiculous but if you think about roles with six figure salaries this actually falls to 2%.

Hannah: Wow that’s ridiculous.

Jing: It is pretty terrible.

Shivangi: Yeah exactly and this makes it really difficult for professional and highly skilled women to get back into work at a level that’s commensurate with their prior experience and skills. So there’s clearly a lot more that businesses can do to make flexible working available at all levels, so that all their employees, including men and women, can manage family commitments around work.

Jing: I think that’s right and we need to see more cultural change as well within businesses, especially on how performance is assessed and rewarded. So typically individual performance is measured based on input such as working hours and that encourages face time at work and this model needs to change towards one where the emphasis is on outcomes and employees should be told ultimately as long as you’re delivering what you’re supposed to, you should be able to work where or when you need to. Retention programmes are also another way of encouraging more women back to work and not just women as well but also men, especially after a career break by providing coaching support as well as networking opportunities.

Hannah: Well thank you very much Jing and Shivangi. It’s been a great discussion and thank you for listening. If you’d like to read more please head to our website, pwc.co.uk/womenin work and please subscribe to our channel for future podcasts.