Will Compulsory Reporting Help Shatter the Gender Pay Gap?

The biggest firms in the UK will have to give details of any differences in salary paid to male and female employees, as part of a plan to publish league tables that threaten to showcase the worst gender pay gap offenders.

However, the initiative is giving firms two years in which to get their houses in order – the first league tables won’t be published until 2018 - a decision that has sparked criticism of what is seen as an unnecessary delay.

“It is a real shame that bosses won't be made to explain why pay gaps exist in their workplaces and what action they will take to narrow them,” said Frances O'Grady, general secretary of UK trade union federation, the TUC.

The UK’s current gender pay gap is estimated to be around the 19% mark, according to the Office for National Statistics. The new compulsory system of reporting comes in the wake of a failed 2010 initiative in which reporting salary details was voluntary and, therefore, only taken up by a handful of companies.

Even now, the director-general of the Confederation of British Industry (CBI), Carolyn Fairbairn, has advised people to exercise caution in anticipating the scheme’s effect on UK business: “The government should consult closely with business to ensure that this new legislation helps close the gender pay gap, rather than ending up as a box-ticking exercise.”

Move follows US plans to combat wage inequality

The announcement in the UK comes hot on the heels of similar proposals put forward in the US.

Whereas the UK’s plan would see all companies with 250 employees or more reporting salary details (c. 8,000 firms in total), the US proposals would apply to those with 100 or more and would also ask for breakdowns by race and ethnicity. “The gap is even wider for women of color,” reasoned US president, Barack Obama.

Although the US proposals are yet to be finalized, the plan is to begin reporting before the end of 2017 and it has already been decided that data will be collated by the Equal Employment Opportunity Commission (EEOC), the same organization which has previously highlighted the lack of ethnic diversity found among employees of big companies, such as Twitter and Facebook, in the country’s tech heartland of Silicon Valley.

Trying to find the root cause of the gender pay gap

Is government legislation calling corporations and companies to account enough to close instances of wage inequality by gender definitively?

Perhaps not; a new study of three decades of wages between 1980 and 2010 conducted by the National Bureau of Economic Research has suggested that the gender pay gap’s biggest problem lies in the paucity of women working in certain jobs and industries; jobs in the STEM fields, for instance, or in the technology industry.

You can tentatively link this problem to the culture one finds in companies in these sectors. But, the study also reiterates the common cultural concern that, at the highest levels of business, women will be more harshly penalized for any time spent away from the workplace. “Specifically the penalties for time out of the office are high among those with MBAs and JDs,” runs an ominous line from the Atlantic.

Fujitsu’s chief executive in the UK and Ireland, Regina Moran, also emphasized the cultural dynamics at play in a BBC report: “Differences in pay are often part of a wider context, as businesses fail to create environments that support women in the long term.”

UBS freezing pay to review disparities

Finance is another industry which has continually drawn accusations of a climate that disfavors women. Many expect that those who are forced to report details of wage inequality will underline this perception. Indeed, the fact that details of bonuses paid will also be required of UK employers will inevitably draw attention to firms in the City.   

One finance company already looking to enact a change in their wage policy is Swiss bank, UBS. This week it announced a pay freeze across its investment bank while a review of any wage inequality in male and female employee earnings is carried out, inequality that it then aims to address. Of course, pay freezes are not often welcomed even if their stated aim comes with the best of intentions. HSBC, for example, has just canceled its own global pay freeze a mere two weeks after announcing its intention to cut costs, in the face of staff unrest.

Transparency over wage inequality could influence choice of employer

Still, an effective system of transparency over salary could influence where both male and female executives choose to work – something which, in turn, could positively influence company policy.

In seven countries in North America and Europe, a Glassdoor survey has revealed that three in every five people would not apply to a company if they knew wage inequality was in evidence there. Among female respondents the highest disregard came from the US, where 81% said they would not want to work for a company with wage inequality between genders. The equivalent proportions among men were found to be highest in Canada, the Netherlands and the UK, albeit at the substantially lower level of around 60%.

Troublingly, the same survey also revealed that a majority of people already think that the gender pay gap is a thing of the past – 70% said they believed men and women were paid equally for equal work at their place of business. In reality, narrowing wage inequality worldwide between men and women has stalled. Released at the end of last year, the World Economic Forum’s Global Gender Gap Report 2015 says that the gap has closed only by 3% over the past decade.