Gaping holes in fairness

Our businesses are missing out on putting all their best talent to use. Gaping pay gaps are evidence of failures fully to appreciate and recognise the skills and abilities of the whole workforce. They are also unfair.

Since 1975, UK employers have been barred from paying men and women differently for the same work. That was when the Equal Pay Act 1970 came into force, partly in response to the Ford machinists strike remembered to modern audiences by the 2010 film and subsequent musical Made in Dagenham, and partly as a requirement for then-imminent membership of the European Community, as was.

The 1970 Act has now been replaced by the Equality Act 2010, which brings together the anti-discrimination standards from a range of legislation, meaning that there should now be equal treatment across all ‘protected characteristics’, including age, disability, gender, ethnicity, religion and sexual orientation. There will be ongoing disputes around equal pay — and particularly around what forms of work should be deemed equal and so should fairly receive the same pay. But more disheartening is the story revealed by the gender pay gap reporting now made mandatory under a 2016 amendment to the Act. Despite this being the longest-standing area of equalities legislation, the reporting reveals that 78% of companies still pay men more than women. 

These reflections were brought on by a discussion hosted by Tortoise, a vigorous new media operation committed to slow news. This ‘ThinkIn’ covered pay gaps generally and why they are so intractable. The discussion ranged across all forms of pay gap, not only gender but also ethnicity, disability and socio-economic. All are unfair, but the latter was felt by most in the room to be the most intractable and least discussed.

The statistics on socio-economic issues are indeed disturbing. As it happened, later the same day the Education Policy Institute released its latest annual report on education in England. This revealed the extent of the ongoing gap in school attainment experienced by disadvantaged kids compared with their peers. The EPI defines as ‘disadvantaged’ children who were eligible for free school meals at any time in the prior 6 years, and by the time they reach the end of secondary school these pupils are more than 18 months behind their better off peers (and in many UK regions it is much worse than this). The persistently disadvantaged — those eligible for free school meals for at least 80% of their schooling — are nearly a full 2 years behind.

EPI disadvantage now

According to the EPI, this 18-month or 2-year gap represents the accumulation of disadvantage over what is only a few years of life, starting in pregnancy and pre-school as well as reflecting the educational experience. When companies do not act to counterbalance these disadvantages they can only unfairly persist. The extent to which our society is failing to address this persistent unfairness is shown by the EPI’s historic data on the disadvantage gap. Though it has closed somewhat in the last decade, that progress has stalled most recently. The EPI estimates that on the trend of the latest 5 years it will take fully 560 years for the disadvantage gap to be closed. One doubts if our children have that long.

EPI disadvantage history

In a similar way, the second year’s disclosures of their gender pay gaps by UK companies also emphasise just how long unfairnesses persist if they are not addressed very directly. They imply that companies need to be working much harder to ensure that they are properly inclusive of all the talent available to them. Many companies attempt to explain their reported pay gaps by the fact that they have more men in senior positions, or more men in traditionally higher paid roles. But the key question is how to unlock and overturn this differentiation. Merely restating it shows little intent to do so. The simple fact is that such companies are not treating their employees with fairness. There are inherent biases which drive differential recruitment and differential promotion. Only when those differences are actively considered and pressed against will they be addressed.

The gap is now one of fair promotion not equal pay. Companies are in practice failing to make opportunities fairly available to all and thereby missing out on unlocking the talents of their whole workforce.

The gender pay gap is associated with childbirth and the decisions related to the care of children. Disproportionately still it is women who take on a higher burden of the childcare and work more locally and more part time. Promotion is slower for those working part time (though it needn’t be), and pay tends to be lower for those who are less willing to travel for it. Of course, not all individuals and couples reach the same decisions but the simple fact is that still at present women are more likely to take this sort of step back. This drives this particularly striking chart (based on Danish data but likely to be largely universal):

NBER child earnings

Companies can and should play a greater role in this, to retain all their most talented staff. There was much discussion at the Tortoise event of encouraging paternity leave, and equal choices by new fathers and new mothers — the comments both from a personal perspective (“demand more from your partner”) and from a corporate, with one participant revealing that their company, after a year of offering full paternity leave rights, only recently had their first individual taking them up, and then only after specific encouragement. In large part, the move to greater fairness and smaller pay gaps will require a changing of norms.

Some of those norms need to be around the willingness of hiring managers to recruit for difference and promote for difference. Another business leader at the Tortoise gathering noted that she had spent a year saying in talks around the business that she was expecting to be appointing more female heads of country operations, to no avail. It was only when she told recruiting managers that she would scrutinise each employment decision that a greater mix of appointments was made — though this was still only 10% female. Accountability matters, and challenge is needed to change norms.

Businesses need to work to remind all managers that employing people who are similar to oneself is not a model for greatest effectiveness, and that diversity is a good thing in itself for the effectiveness of teams. Just as the best boards are diverse, and the best chairs know that a large part of their role is to work the alchemy of drawing the best from a diverse group rather than hearing similar minded individuals reinforce each other, so the best teams and whole workforces are diverse. Evolution teaches us that extinction happens when species become specialised and too brittle to adapt to new changes and pressures. We know that such pressures are being placed on the global environment; that same challenge, together with the pressure of technological competition, are ratcheting up the difficult environment of the corporate world. Those that are robust and nimble enough may be able to adapt to these challenges, but one thing they are likely to need is diversity to aid their flexibility and adaptability. Fair employment approaches, and pay, are needed.

 

Education in England: Annual Report 2019, Education Policy Institute

Children and Gender Inequality: Evidence from Denmark, Henrik Kleven, Camille Landais, Jakob Egholt Søgaard, NBER Working Paper 24219

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