From a logical standpoint, we should be forgiven for thinking (even assuming) that men and women are paid the same amounts. That salaries are determined by, and reflect appropriately, skill, training and abilities, and could not possibly be influenced by something as inconsequential as your sex…but no, the gender pay gap remains a very real concern in both the United States and the United Kingdom (and many other countries).
In the Global Gender Gap Report 2015 prepared by the World Economic Forum, the UK was ranked 18th out of 145 countries and the U.S. 28th with respect to how well economies are leveraging their female talent pool (based on economic, educational, health-based and political indicators). While the UK has improved on its 2014 position (26 out of 142), the U.S. actually fell 8 places. Further, the current table means that both the U.S. and UK are ranked behind Rwanda, the Philippines, Nicaragua and Namibia, to name only a few countries faring better than the U.S. and UK. Though only a glimpse into a complex issue, the Global Gender Gap Report raises important questions about how we can change this unfortunate status quo.
Pay inequality is, in fairness, given regular coverage in the media. The actress Jennifer Lawrence made headlines recently when she released an essay expressing her disappointment on discovering how much less she was paid than her American Hustle male co-stars. Lawrence concedes that her problems are not “exactly relatable,” but her point is well made. Media coverage alone, however, will not fix the problem.
In the UK, new regulations are being put in place requiring employers with 250 or more employees to conduct an “equal pay review” and publish their gender pay gap starting in 2017. A league table will be published starting in 2018. Theoretically, a result of these new regulations will be that a company disclosing a significant gender pay gap would suffer reputational damage, and the ensuing negative publicity would prompt the company to make improvements to address the problem. However, the new pay gap reporting regulations in the UK are only a small part of a much larger focus on equality generally.
Closing the pay gap is not just about fairness – of course women deserve to be paid the same amount as men for the same job – but there are also serious economic implications tied to closing the gender gap that we should bear in mind. For example, as reported in the UK Parliament, the Society of Biology has stated that “increasing women’s participation in the UK labour market could be worth between £15 billion and £23 billion,” that is 1.3% to 2% of GDP. In Scotland, it was estimated in 2012 that “a doubling of women’s high-level skill contribution to the economy would be worth as much as £170 million per annum to national income.” Ann Francke, the chief executive of the Chartered Management Institute, considersthat “publishing league tables will drive diversity, bringing benefits not just to women but to business. Closing the pay gap will open the talent pipeline, increase management quality and boost productivity.”
While the new regulations have been lauded by many as a positive step, it may be surprising that not all women agree. Carolyn Fairbairn, the first director general of the Confederation of British Industry, in an interview with City A.M., notes that the issue is “very complicated” and that the publication requirements are unlikely to help because they do not take into account factors such as the mix of part-time and full-time workers, or sectoral differences.
The gender pay gap is of course a hugely complex issue, with many contributing economic and social factors. Even if the new regulations will not single-handedly close the pay gap, they are a step in the right direction and an important marker in the efforts to close the gender gap more generally. This is an international issue we will watch with great interest.
To read about developments around the pay gap in the U.S., read our article “Obama’s Push for Equal Pay.”
Julia Keppe is an associate in Debevoise’s London office.
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