On average, women in paid work receive about 18% less per hour than men. IFS research published today (23 Aug), funded by the Joseph Rowntree Foundation, ‘The gender wage gap’, by Monica Costa Dias, William Elming and Robert Joyce, shows that the wage gap is smaller when comparing young women – before they become mothers – with their male counterparts. Women coming back from maternity leave on lower hours suffer low hourly wages as a result of poor pay progression means the gender pay gap increases year-on-year following childbirth. The gap widens consistently for 12 years after the first child is born, by which point women receive 33% less pay per hour than men. 

The widening of the hourly wage gap after childbirth is associated with reduced hours of paid work, but not because women see an immediate cut in hourly pay when they reduce their hours. Rather, women who work half-time lose out on subsequent wage progression, meaning that the hourly wages of men (and of women in full-time work) pull further and further ahead. In addition, women who take time out of paid work altogether and then return to the labour market miss out on wage growth.

The gender pay gap is the lowest it has ever been but we want to make our country a place where everyone can succeed at work. That’s why from April 2017 the Government are – for the first time ever – introducing a legal requirement for large businesses to publish information on how much they pay their male and female staff. By highlighting the pay gaps in our workplaces we can help drive businesses to remove the barriers that can hold women back.

They have also introduced shared parental leave, doubled the amount of free childcare available to working parents and are working with employers to ensure that women, no matter their age, have the support they need to stay in the workforce.

Gender pay gap vs equal pay - what is the difference?

  • Paying individuals different amounts for the same job, or paying them different amounts for equivalent work is illegal and has been for the past 45 years.
  • The gender pay gap is the calculation of the difference in the average hourly pay received by men and women.
  • Women are more likely to take time off work to take on caring responsibilities, such as childcare or looking after elderly relatives. This can lead women to leave the workforce altogether or return to work in lower paid roles, or on a part-time basis, while their male counterparts might continue to progress in their careers.
  • There is also evidence that women are less likely to ask for promotions or pay increases and there are still some negative connotations around flexible working and productivity that can lead to gender-based bias in the workplace.
  • All together, these factors lead to a gender pay gap for men and women.

In response to the IFS report, a Government Spokesperson said:

We want to make our country a place where there is no limit on anyone’s ambition or what they can achieve – that means making sure everyone, regardless of their gender, can succeed at work.

The gender pay gap is the lowest on record but we know we need to make more progress and faster. That’s why we are pushing ahead with plans to force businesses to publish their gender pay and gender bonus gap – shining a light on the barriers preventing women from reaching the top.

We have also introduced shared parental leave, doubled the amount of free childcare available to working parents and we are working with employers to ensure that women, no matter their age, have the support they need to stay in the workforce.

"If you’re a woman, you will earn less than a man." - From Theresa May’s first statement as Prime Minister

"Last year Britain was ranked 18th in the world for its gender pay gap ... We can and must do far better." - From Jeremy Corbyn’s campaign speech in July 2016

Gender wage differentials remain substantial and, as evidenced by the quotations above, a hot topic in policy debate. Inequalities between men and women are clearly of direct interest in their own right. In addition, poverty is increasingly a problem of low pay rather than lack of employment.

The proportion of people in paid work is at a record high, and female employment has risen especially quickly, particularly among lone parents. Two-thirds of children in poverty now live in a household with someone in paid work. In an age when the main challenge with respect to poverty alleviation is to boost incomes for those in work, and when so many more women are in work than in the past, understanding the gender wage gap is all the more important.

Detailed findings include:

The gap in average hourly wages between male and female employees has been falling over the past two decades ...

  • The current gap of 18% compares with 28% in 1993 and 23% in 2003.

... but not among graduates or people with A levels

  • For the mid- and high-educated, the gender wage gap is essentially the same as it was 20 years ago. It is only among the lowest-educated (those with less than A levels) that the gender wage gap has been steadily declining. The other main driver of the fall in the overall gender wage gap has been an increase in the education levels of women relative to men.

The gender wage gap increases gradually after the arrival of children. Possible explanations include mothers missing out on promotions or simply accumulating less labour market experience

  • A big difference in employment rates between men and women opens up upon the arrival of the first child and is highly persistent. Before the first child is born, the employment rates of men and women are almost identical. But between the year before and the year after the birth of the child, women’s employment rates drop by 33 percentage points for those with GCSEs, 19ppts for those with A levels and 16ppts for graduates – while barely changing for men. By the time that child is aged 20, women’s employment rates still have not caught up again with men’s.
  • By 20 years after the birth of their first child, women have on average been in paid work for four years less than men and have spent nine years less in paid work of more than 20 hours per week.

Taking time out of paid work is associated with lower wages when returning ...

  • Comparing women who had the same hourly wage before leaving paid work, wages when they return are on average 2% lower for each year spent out of paid work in the interim.
  • This apparent wage penalty for taking time out of paid work is greater for more highly educated women, at 4% for each year out of paid work. The lowest-educated women (who actually take more time out of paid work after childbirth) do not seem to pay this particular penalty, probably because they have less wage progression to miss out on.

... and working low numbers of hours is associated with less wage progression 

  • There is no immediate drop in hourly wages on average when women reduce their hours to 20 or fewer per week. Instead, the lower hourly wages observed in lower-hours jobs appear to be the cumulative effect of a lack of wage progression.
  • The hourly wages of women working half-time (or less) appear to do no more than change in line with economy-wide wages. In other words, the wages of these women appear not to benefit at all from increases in labour market experience. This is true for high- and low- educated alike.

Robert Joyce, Associate Director at IFS and an author of the report, said:

 “The gap between the hourly pay of higher-educated men and women has not closed at all in the last 20 years. The reduction in the overall gender wage gap has been the result of more women becoming highly educated, and a decline in the wage gap among the lowest-educated.

 “Women in jobs involving fewer hours of work have particularly low hourly wages, and this is because of poor pay progression, not because they take an immediate pay cut when switching away from full-time work. Understanding that lack of progression is going to be crucial to making progress in reducing the gender wage gap.”

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