Why does the gender pay gap still exist?
What does the average UK CEO look like to you? He is a 55-year-old white male with a private school education, Cambridge University degree, and earns over £4 million per year working in the finance sector, according to People Managing People, who aggregated data of CEOs from the FTSE100. After feeding this data into an AI model - alongside data on the CEOs’ physical characteristics – a visual representation of the average CEO was born: a silver-haired, blue-eyed man modelling a navy suit. His name is Andrew.
To put these numbers perspective, one must earn more than £180,000 per year, pre-tax, to be considered a top 1% UK earner. By stark contrast, the median annual salary for full-time employment in the UK is £33,000 – a long way from the multimillions in Andrew’s pay cheque.
But, if the UK’s top earners are men, what does this mean for women? According to the 2023 Gender Pay Gap in the UK report, men earn 14.3% more than women, on average – and the gender pay gap is reflected among CEOs, too. As of 2022, the gender pay gap among FTSE 100 CEOs was 23.5%, with men earning £4.3 million, compared to women who earned £3.4 million, on average. This distortion is further perpetuated by a striking lack of female representation in the FTSE100, with there being only nine female CEOs, none of which are women of colour.
What is the gender pay gap?
A pay gap is the percentage difference in the average hourly earnings between one demographic group and another – typically men and women – and is a key indicator of inequality in the workplace.
In the UK all organisations with more than 250 employees must report their gender pay gap annually. Some organisations voluntarily publish pay gap data for ethnicity, disability, sexual orientation and social mobility as well as for gender. For the purposes of this paper we will focus on the gender pay gap, but the principles are the same for other demographics.
How the pay gap is calculated
The pay gap is calculated and reported in two ways – mean and median:
- The mean is a traditional average – calculated by add up the hourly pay of all female employees and dividing the total by the number of female employees.
- The median is the middle number when all individual hourly pay rates for women are lined up from the smallest to the largest.
The same calculation is done for male employees and the difference is calculated as a percentage. The difference is the gender pay gap.
The effects on women far exceed what’s in the monthly pay packet
The wage disparity affects women in several ways, with longer-term implications that far exceed what is in the monthly pay packet. For instance, the pay gap can influence family planning decisions, with 1 in 5 women delaying having children due to career or financial concerns.
Lower lifetime earnings also results in less money for the retirement pot, meaning a greater chance of financial insecurity later in life for women. For example, in 2019, almost 60% of 22–59-year-old working women saved into their pension, compared to 66% percent of men. This disparity is mainly because women are less likely to be in paid employment, compared to men, according to the Institute for Fiscal Studies (IFS).
The IFS also found that, on average, women contributed £2,600 per year into their pensions, compared to men, who contributed £3,400. Again, a disparity in average earnings is the main contributing factor, but despite earning less overall, women contributed a higher percentage of their pay (15%) into their pensions compared to men (13%).
For women who earn significantly less than men, the income inequality can have adverse effects on mental health, too. A study by Colombia University found that women affected the most by the pay disparity were four times more likely to experience anxiety, and almost 2.5 times more likely to experience depression.
Addressing the gap is essential, both from an individual perspective but also for fostering a fair society. More and more organisations are waking up to the need for gender equality at work, and the dial is moving towards positive change. For example, the pay gap has decreased 3% over the last four years – but inequality prevails as long as the gap exists.
Equal pay v gender pay gap
Since the introduction of the Equal Pay Act in 1970, it has been illegal in the UK to pay men and women differently for work of equal value, so it is important to understand that the gender pay gap is different to equal pay. A gender pay gap arises due to the structure of the organisation, where typically most of the top earning employees will be male and the lowest earning employees will be female. It is this imbalance that causes the gender pay gap.
Inequality prevails as long as the gap exists
Despite the pay gap decreasing over the last few years, it remains a challenge. However, the stubborn hurdle of gender pay equality is not exclusive to the UK; it a problem which exists worldwide, even within societies considered the most gender equal.
Iceland is the only country to have closed more than 90% of its gender gap, and has been acknowledged for 14 consecutive years, by the World Economic Forum, for its progression towards gender equality.
For example, Iceland has successfully integrated more women into STEM (science, technology, engineering and mathematics) careers – a profession notorious for having an underrepresentation of women. In addition, Icelandic legislation requires businesses with more than 25 employees to prove that they are paying equal wages to men and women. But despite these positive movements there are still advancements to be made.
In a protest against the gender pay gap and gender violence, Iceland’s Prime Minister, Katrín Jakobsdóttir, recently joined thousands of women in a workplace strike. Women and non-binary people were encouraged to partake in a one-day walkout, refusing to participate in paid and unpaid work, including household chores.
Despite Iceland being held in high regard for its commitments to gender equality, it is evident that there is still room for meaningful change. Having the backing of Jakobsdóttir is a powerful tool, so what else can leaders do to promote gender equality in the workplace?
What contributes to the gender pay gap and how can leaders overcome these hurdles?
Understanding the complexities of the gender pay gap is essential in order to successfully address and reduce it. Set out below are some of the contributing factors, which business leaders should seek to identify and address within their organisations.
Intersectionality – the interplay between other protected characteristics, such as race, age and sexuality - is an important concept to consider when discussing the gender pay gap. For example, the gap widens when isolating data for women of colour. Women from ethnic minority backgrounds earn even less, with there being a 31% pay gap for Pakistani women, a 28% gap for Bangladeshi women and an 18% gap for black Caribbean women.
This intersectional disparity is a result of the compounding effects of discrimination and bias in society, highlighting the critical need to address these inequalities from multiple angles. Business leaders can begin by segregating employee data by protected characteristics to explore the interplay between them. Drilling data down by the following characteristics will help leaders to spot disparities between certain groups:
- Age
- Gender
- Sex
- Sexual orientation
- Disability
- Pregnancy and maternity
- Race
- Religion
- Marriage status
Childcare responsibilities also play a significant role in the gender pay gap. Despite positive movements in recent years, women still tend to bear a disproportionate share of caregiving duties. These responsibilities often lead to career breaks, reduced work hours and less engagement in high-demand, high-paying jobs. Employers need to provide more flexibility and support for working parents, including enhanced parental leave policies, on-site childcare facilities, subsidised childcare and the endorsement of work-life balance.
Unconscious bias – the implicit, ingrained prejudices that affect thoughts and behaviour – can influence hiring, promotions and salary decisions, often to the detriment of women. For example, a survey by HiBob found that 16% of women received promotions, compared to 23% of men. Leaders should implement unconscious bias training in the workplace and seek to foster an awareness of these biases as a start to highlighting and mitigating implicit prejudice.
In addition to the above, pay transparency is another way to combat the gap. Companies should be required to disclose their gender pay gap data publicly, making it easier to identify disparities and take positive action to address them. Leaders should ensure that women are paid the same as their male counterparts, implementing strong anti-discrimination workplace policies and holding all employees accountable.
Organisations should also offer ‘returnships’ for women who are returning to work after a career break. A returnship is an employment programme which offers the opportunity to reintegrate back into work after extended leave, without having to start in an entry-level role. Such opportunities offer women a structured and supportive environment to refresh skills and rebuild their professional networks, to encourage – rather than hinder – career advancement.
Finally, organisations should implement mentorship and sponsorship programmes to provide guidance, promotion and support to women in the workplace. Mentoring programmes can offer advice on career advancement, skills enhancement and self-advocacy. Sponsorship programmes can support the anti-bias agenda by mitigating the effects of unconscious bias that exist in the workplace, providing visibility for women around promotions, key projects and career opportunities.
