Gender Pay Gap Reporting and the Global Push for Equity

By John Bostwick, Managing Editor, Radius

Last year, the UK government started requiring organizations with 250 or more employees to gather statistics about their gender pay gaps, or “the difference between the average earnings of men and women, expressed relative to men’s earnings.” (The statistics do not indicate pay disparities between men and women who do the same jobs, a practice that was banned in the UK with the Equal Pay Act of 1970.) All organizations had to publish their numbers by April 5, 2018, so the first year’s results are in.

It’s useful to put the recently published numbers in context, particularly in order to gauge how individual companies’ statistics stack up against the UK’s national average. This sounds simple enough, but I found it difficult to clearly determine the national average.

For example, Bloomberg reports that the UK’s national average for the gender pay gap based on hourly wages is 17.4 percent, while The Guardian says the average is 18.4 percent “as calculated by the Office of National Statistics.” The New York Times indicates that the UK’s gender pay gap was 18.1 percent in 2016 “according to the Office for National Statistics.”

Meanwhile, the actual Office for National Statistics (ONS) website indicates that the pay gap was “9.1 percent in 2017.” The Financial Times may have gotten to the heart of the matter when it says that ONS data show an “18.4 percent gap for full- and part-time workers, a 9.1 percent pay gap for full-time workers only, and a negative 5.1 per cent pay gap for part-time workers only.” The Financial Times’ own analysis shows a 9.7 percent gap.

These discrepancies or seeming discrepancies hint at the complexities and possible inaccuracies of the UK reporting initiative. Shortly before the publishing deadline, The Guardian reported that “questions have been raised about the quality of some of the data being filed, some companies having entered zeros in all fields, reported mathematically impossible bonus gaps and removed key workers.”

The Guardian also reports that some respondents have essentially fudged their numbers while remaining compliant. For example, four out of the top five UK law firms at the time of the article had not included partners’ compensation in their calculations, and partners “tend to be better paid and disproportionately male.” The Guardian adds that three top accounting firms initially filed numbers that did not include partner pay, but later resubmitted numbers so that partner information was included. (Bloomberg explains that companies that do not submit partner data argue that since partners co-own their organizations, they aren’t strictly speaking employees.)

There are other caveats. For instance, some UK companies, such as Ryanair, have employees based in Ireland, which is not included in the survey. Dionne Pohler, a professor of HR and industrial relations at the University of Toronto, summed up the situation, telling The Globe and Mail that the “gender pay gap is a complex issue, and results should be interpreted with care.” As an example, she notes, “There are things that happen pre-labor market — for instance, if women on average in a particular firm have less education or less experience, then the question is: what are these numbers telling us? Is [the gap] because of discrimination … or something prior to entering a firm?”

Probably needless to say, employers and pay-equity advocates have expressed concerns about the UK initiative. The Financial Times reports that Institute of Economic Affairs representatives “suggested that the failure of the 14 data points that employers must report — including the mean and median hourly pay gap and the bonus gap — to incorporate job comparison, age and previous work experience rendered them ‘next to useless.’”

The article also points out that bonus pay-gap numbers don’t account for whether employees work full or part time, which can lead to misleadingly high gaps. It adds that “a large number of employers have also complained that staff misunderstand the number, and often believe it reflects men and women not being paid equally for doing the same job.”

Equal-pay advocates have complained not only that companies can manipulate numbers (such as not including partner data), but that the law itself is toothless. The New York Times explains that companies “won’t face penalties even if they report discrepancies year after year … [and] businesses are not required to address some of the biggest causes of the pay divide.”

Others are more optimistic about the efficacy of the new law, acknowledging the transparency it provides and, perhaps most importantly, its potential to inflict reputational damage. Jon Terry, an HR advisor at PwC, points to the power of public shaming for companies that might report large gaps, telling The New York Times, “The gender pay reporting really smacks them in the face. … If they have a pay gap of 18 percent, they will get a lot of negative press.”

Karen Gill, who cofounded an organization to advance women in business, agrees that the new law’s public component is critical to making it an important first step towards pay equity. She told The Guardian that, over time, companies that don’t close gender pay gaps will be exposed and suffer the consequences: “Women are going to use this tool. It’s a talent game, and they won’t get the best talent unless they deal with it.”

The recently published numbers have (perhaps) already revealed some striking hypocrisy. The New York Times notes that the data reveal the fashion and beauty industries — which target female buyers and employ mostly women — have some of the worst gender pay imbalances out there. The article observes that the fashion industry in particular cashes in “on selling female empowerment via T-shirt slogans and social media hashtags.” Given those practices, the recently published numbers reveal the industry “is starting to look like the employer equivalent of the emperor’s new clothes.” Other industries that show notably large gender pay gaps include banks, airlines and pharmaceuticals.

The Guardian found some similarly eyebrow-raising results when they reviewed the numbers. The paper examined the UK pay-gap statistics of subsidiaries of companies listed in The Times Top 50 Employers for Women, which was published last April. It found that over 90 percent of those subsidiaries actually pay women less than men on average, and nearly half of them have a gender pay gap that's greater than the national average. (The Guardian puts the national average at 18.4 percent.)

One trend that emerged across virtually all industries is that more men than women occupy higher-paying jobs. The Financial Times summarizes: “The average company is 52 per cent male but has a top pay quartile — the highest-paid 25 per cent of earners — that is 63 per cent male.” The article says that “even among majority-female employers, many have majority-male top quartiles, hinting at a glass ceiling preserving a men’s club at the top.”

In short, the pay gap exists largely because of the types of jobs men and women fill. CNBC explains, for example, that at Facebook, pay disparities arise from “unequal representation.” It reports that in 2017, “women made up 35 percent of Facebook's global workforce, represented 28 percent of leadership roles and 19 percent of technical positions.” This affects not just salaries, but other compensation such as bonuses. Bloomberg says that “about as many women as men earned bonuses at HSBC in the UK last year, but because women are in lower-paid positions those bonuses were 86 percent smaller than those earned by men.”

The bottom of the pay pyramid, then, typically has more women. The New York Times reminds us that this isn’t just the case in the UK, but around the world: “No matter the country, men often hold a disproportionately large number of high-level positions, while women — especially mothers — tend to populate lower-paying fields and jobs with more work-time flexibility to take care of families.”

None of this is likely to come as news to anyone. The new UK statistics, however, are an important bit of evidence — even if the evidence is somewhat flawed — of pay disparities between men and women. UK authorities are, moreover, not alone in taking steps designed to expose pay disparities. The New York Times notes that Australia has mandated pay-gap reporting for some companies, while Germany is set to do so. Iceland actually now requires companies to prove they pay men and women equally. (The Obama administration proposed a rule that would have required companies to report how much they paid employees, along with information on sex and race, though that was halted by the Trump administration in August.)

Critically, some high-profile companies are publically addressing the problem. Goldman Sachs’ reported UK pay gap for its mean hourly rate is a glaring 55.5 percent. In response, its leaders sent a letter to employees acknowledging the problem. The letter indicates that Goldman Sachs pays women and men equally when they’re in similar roles, but that women are underrepresented in senior positions. They've pledged to hold themselves “accountable to providing more opportunities for women and diverse professionals to rise to the highest levels of our firm,” and the company has a goal of having women make up 50 percent of its incoming analyst class by 2021

In its Gender Pay Gap Report 2017 to 2018, Facebook UK pledges “to increase representation of women in technical and leadership roles across the company.” EasyJet’s CEO Johan Lundgren announced he would “voluntarily reduce his salary to match that of his predecessor, Carolyn McCall,” and says that his company is “trying to attract more women into a career as a pilot” and intends to hire 20 percent female pilots by 2020. The mining company Anglo American pledged in its UK Gender Pay Gap Report to redress the imbalance of women in leadership roles and to “ensuring, in the first instance, at least a 33 percent female representation on our ExCo and those that report to that ExCo.”

There are other examples, which many of the articles I've referenced attest. So while some companies may be cynically making money peddling #MeToo T-shirts while doing nothing to actually promote deserving women to positions of leadership within their organizations, it’s clear that many prominent players in the global economy, and many global regulatory authorities, are starting to take real action to expose and narrow gender pay gaps.