Thursday, 23 July 2015

The Truth About Gender Pay Differences - Things Aren't As They Are Made Out To Be

David Cameron wants to force companies with over 250 employees to disclose gender pay gaps. He's doing this because he has swallowed the ubiquitous myth that women are systematically unfairly discriminated against in the workplace. 

The reality is, there isn't much of an unfair pay gap between genders, despite common myths to the contrary - although there used to be, but for good reason. Britain has changed a lot in the past few decades, from a manufacturing-based economy to a service-based one. When physical labour was the driving force in the economy, male labour was valued higher, so it was easily understandable why there was a gender pay gap.  

However, as service-based industry has emerged more prominently, coupled with increased technology that make domestic jobs less time-consuming, and women's lib, the wage gap has narrowed so much that it has equalised. In fact, if you measure just male and females in their 20s and 30s, females earn slightly more. Obviously this tails off in the late 30s and 40s as motherhood becomes the primary driving force in the re-introduction of a wage gap - but it's not to do with discrimination, it is to do with biology and life choices.

An easy way to tell the public that there is a discriminatory gender pay gap is to distort the picture by including the maternity/child-raising years in the overall figures. The pay gap over their careers factors in women leaving work to have children, and taking part-time jobs in motherhood. This skewed reality is a bit like a school publishing pupils' attendance records, including the summer holiday in their statistics, and then claiming pupils are spending lots of weeks not attending school. To get a fair statistic on school attendance you must obviously only include the weeks when pupils are due to be in school. Similarly, to get a proper reflection of gender pay, you must focus on the comparison when both men and women are pursuing careers with both eyes on the job market. That's why, when this is done, the years between ages 22 to 39 show women earning slightly more than men. From the ONS report:

"Hourly earnings figures reveal that, in April 2014, women working for more than 30 hours a week were actually paid 1.1% more than men in the 22 to 29 age bracket and, for the first time were also paid more in the 30 to 39 age bracket. So women in full-time work aged between 22 and 39 are now, on average, earning 1.1% more than their male counterparts."

It certainly is the case that people's differences do contribute to different decisions having to be made in society that will affect their career and job prospects. But what we mustn't let people get away with is the idea that businesses systematically discriminate unfairly at will. Let me explain why that notion is wrong.

When Minister for Women and Equalities Nicky Morgan says "Businesses need to value diversity in their workforce and pay attention to the role of women in their organisations.” - she is being disingenuous in trying to claim to be on the side of women by painting a slightly false picture of the extent to which businesses do value both genders equally. For fairly obvious reasons employers would not discriminate against women because it wouldn’t be in their interest to do so.

While there'll never be a completely fair market, nor a perfect solution to the dual desire of motherhood and optimal career pursuits, it's logical that businesses won't discriminate against women for the sake of it because if they do they will lower the pool of quality, and their profits too. Suppose there are two free schools - one set up by Jack and one by Jill - and 40 teachers for hire (20 women and 20 men). Jack is a misogynist and Jill isn't, so Jack discriminates against the women. Who is likely to have the better staff list of teachers? Clearly it's Jill. Jill looked to hire the best staff out of a male & female pool; Jack looked to hire more men, meaning he increased his chances of picking gender over quality. This plays out all through the market. A restaurant with a sign saying "No women" (pretend it's legal) would lose out on half the population's custom, and more once you factor in all the males that would go somewhere else because of it. Unfair discrimination is bad for business, and any half shrewd business person knows this, so would be a fool to discriminate.

There are other wage differentials to note, but they are driven by other factors, namely the differential in abilities and in preferences. Men and women are different in a number of ways - and it's no bad thing that those differences are reflected in market patterns. There are substantially fewer female bricklayers or garage mechanics than there are males, just as there are substantially fewer male nurses and primary school teachers than females. The reasons are primarily down to abilities and in preferences, not systematic discrimination.

The same is true of other work factors - risky work, manual work, driving work, outdoor work, long shifts and unsocial hours - it's not that there are no women in these roles, it is simply that males outnumber them, again due to abilities and preferences. Equally, if you focused on the skills and preferences for, say, social care, bookkeeping, personnel officers and child-care workers you'd see a similar pattern in the other direction, with women outnumbering men in those roles. Naturally, the labour value of all these jobs is dictated by all the above factors and more.

Moreover, generally you'll find two other key reasons why men earn more on average than women do. One is that women tend to be less competitive than men, because they do not have he same biological and socio-cultural needs to be as concerned about status as men do. The other reason is that men are, on average, more likely to put their skills towards more scalable earnings (inventing, engineering, technological advances, etc) - because men are much more geared towards working with things, whereas women are more likely to work with people (as ever, these are all on average, there are always many exceptions, of course).

The upshot is, yes, I grant you, evolution has made females prisoner of their biology in respect of child-bearing - but nevertheless having children does affect women's roles and pay, which is why, as women are having children later, there is no evidential pay gap between women and men in the first two decades of their working lives, but an evident one as women go into their forties, and often work less, or take on lower paid roles for parental flexibility.

Generally, discriminating harms discriminators too - and while some people are arguing that the gender make-up engenders discrimination, the reality is that gender make-up engenders outcomes that in most cases (most, but not all) aren't discriminatory at the root.