Best way to fix UK gender pay gap would be financial penalty for failure to comply
Good intentions are sometimes insufficient. That may be the case when it comes to closing Britain’s gender pay gap. Prime Minister Theresa May could speed things up by aligning the interests of women with those of investors.
The UK government has taken the laudable first step of asking all but the smallest employers to publish figures revealing the differences between male and female earnings. Though many thousands have yet to report, the disclosures are startling. When it comes to hourly pay, the average gender pay gap at HSBC is 60 percent.
There are many reasons. Childcare responsibilities mean women are more likely to work part time or turn down high-octane, high-paid jobs. Females are also overrepresented in lower-paid roles, such as cleaning or administration. But differences in hours worked, age, education, occupation, and so on, explain roughly a third of Britain’s gender pay gap, Eurostat estimates.
Ideally, increased pay transparency would encourage women to negotiate harder. But the broad-brush figures companies report may not help, because they are mostly skewed by the lack of women in the upper ranks.
Meanwhile, UK employers all insist that they respect the law on equal pay for equal work. There’s little scope for an employee to judge the truth since, generally, no two jobs are exactly alike and no two employees have the same career path.
The government can help. For example, it could reverse the burden of proof on equal pay. Iceland requires employers to demonstrate they comply with that law, threatening those who don’t obtain the appropriate certification with fines. A more drastic option would be to impose penalties on companies that fail to make much progress in narrowing the gender pay gap over several years.
Companies will hate the idea of coercion and insist such initiatives work best when bosses embrace gender equality. And it’s true that some employers, including in the finance sector, make commendable efforts to hire, promote and retain more women. But financial targets are usually more pressing. The quickest way to close the gender pay gap is to attach a price tag for failing to just do it.