Gender pay gap widens after pandemic bump, but in the long-term, commuting and childcare kills wages

Sarah Coles, personal finance analyst at Hargreaves Lansdown, comments on ONS employee earnings data, showing gender pay gap widens after pandemic bump, but in the long-term, commuting and childcare kills wages.

Key points from ONS data:
  • The gender pay gap among full-time employees widened in April 2021, to 7.9%, from 7% a year earlier, but it’s still down from 9% in April 2019.
  • Among all employees (including part-time workers) the gender pay gap increased to 15.4%, from 14.9% in 2020, but is still down from 17.4% in 2019.
  • Under the age of 40, the gender pay gap is 3% or below, and has been since 2017. Over the age of 40 it’s 12%.
  • London is the only region where the pay gap hasn’t budged since 1997.
Sarah Coles said:

“The gender pay gap widened in the year to April, but it’s not as bad as it looks. On first glance, a year of the pandemic appears to have reversed trends that saw a decade of progress on the gender pay gap. However, on closer inspection, figures show that changes during the pandemic could hold the key to closing the gap much further and faster in future.

“This isn’t a reversal of the trend: it’s a bump caused by the pandemic. When the 2020 study was carried out, more men were furloughed, and half were on temporarily lower pay, so the gap looked smaller than it actually was. When the 2021 study was done, the position was reversed, so it looked larger than it really was.

“Meanwhile, within the figures are indications of where the gap is coming from, and how to close it. Only 36% of the pay gap can be modelled according to things like occupation, age and tenure. The rest comes from decisions we make about how we live.

“Children make an enormous difference, but the gap doesn’t widen when women take time off with their first new-born, at the average age of 31. It’s later, when they reach 40, that it opens up, so the relationship between pay and parenting is more complicated.

“What’s more likely is that more women have to work flexibly around caring needs. This may mean working part-time, or taking on roles that require less travel or shorter hours, and over time they are overlooked for promotion and pay rises. Many of them may be back at work full-time in their 40s, but by that stage their male counterparts have reached managerial levels, so the gap widens. The ONS analysed its data and found that it’s the move into management at the age of 39 that widens the gap.

“The role that commuting plays shouldn’t be underestimated. People in London and the South East have longer commutes on average than elsewhere in the country, and London is the only region where the gender pay gap has stubbornly refused to fall since 1997. This is not a coincidence. ONS analysis found that when changing job, women are more likely than men to accept lower pay in favour of a shorter commute. The fact they tend to shoulder the burden of caring responsibilities mean they have to be closer to home to avoid needing to use childcare for 12 hours a day.

“It means changes during the pandemic have the power to alter the pay gap significantly, enabling more women to work more flexibly, without it affecting their pay and promotion prospects. So before organisations rush back into the workplace, it’s worth understanding the enormous gains to be made by building in more flexibility.

“Things are changing very gradually. The largest drop in the pay gap between 2019 and 2021 was among managers, where it fell from 16.3% to 10.2%. But more flexibility could be the single most important change to affect the gender pay gap if organisations embrace it effectively.”

Other pay data from the release:
  • Average pay for full-time employees was £611 in April 2021, up 4.3% on a year earlier; the biggest jump since 2008.
  • Average annual pay for full-time employees was £31,285 for the tax year ending 5 April 2021, down 0.6% on the previous year.
  • Across all jobs, average weekly earnings were up 5.3% in a year (3.6% adjusted for inflation).
  • However a year earlier they were unchanged, and down 0.9% after inflation, reflecting falls during periods where more people were furloughed or on shorter hours, and a subsequent recovery.

 

Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay