The gender pay divide: more than a dollars and cents discussion

Why is your boss so fixated on bridging the pay gap? And are government and advocacy groups getting in their way? Asks Bennet Nichol

 

According to the World Bank nearly half of the world’s women work, and in developed countries women make up between 40% to 50% of the total workforce. This gives them significant influence in workplace negotiations and unions, however governments, sports people, economists and businesses all report that men are on average paid more than women.

This has been given a title, ‘the gender pay gap’ – a popular phrase applied all over the world to ask business leaders whether workplace discrimination may be afoot in their organisations.

There have been laws in place in most western countries for a number of years, to ensure that men and women are equally paid for the same job. From as early as 1969 the Australian government began to introduce legislation to ensure equal pay, the UK passed the Equal Pay Act in 1970 and New Zealand did the same in 1972. It may come as a surprise, but in the USA The Equal Pay Act was passed and signed by President Kennedy 56 years ago. So, if it’s illegal to pay men more than women for the same job, surely the “gender pay gap” should close?

Common conceptions

Despite 40 years of equal pay legislation and an initial close in the apparent pay gap, there is still a whopping 15% difference between the average wage of men and women. So in 2012 the Australian Government launched a statutory agency, the Workplace Gender Equality Agency (WGEA), to provide a resource for businesses to help them understand workplace gender equality and also ensure they are adhering to specific requirements set by the law. Despite even these efforts, the gender pay gap in Australia has stubbornly remained largely unchanged.

Perhaps the metrics and the presumptions of the WGEA and other regulators are causing more harm than good? These organisations work around the key assumption that the gender pay gap is an adequate benchmark to measure the wider issue of women’s representation (equality) at work.

The gender pay gap is calculated by adding together the wages of all women, working out the average per woman, doing the same with men, and then comparing the difference as a percentage, or the official ‘gap’. 

To many this seems like a simple but effective measure to judge workplace gender equality. However, as many women in the workplace will attest to, the issue is far more nuanced than a simple percentage gap in pay.

A poor measurement tool

The gender pay gap percentage as a measurement fails on more than one level. Most significantly, it does not measure like-for-like positions. By simply lumping all women’s wages and comparing the average to a man’s average wage, in a single sweeping stoke the key factor that determines someone’s wage – their position – is eliminated. Using this as a tool to enforce equality is about as sophisticated as smacking your TV with a hammer to fix the picture.

PwC, one of the world’s ‘Big Four’ auditors and professional services providers, employing over 250 000 people globally, released their gender pay gap report earlier in 2018 with surprising results. On a like-for-like basis (comparing men and women in identical roles) they had a pay gap of 0.3 percent. Company wide and not taking into account position the pay gap was 12.3 percent.

PwC’s 12.3 percent gap reveals a more complex issue. Women and men are not paid differently (not least of all because it’s against the law), but hold positions at different levels. The simple division of men and women’s pay doesn’t provide the information that employers are looking for.

Fewer women in the boardroom

There are very large gaps in gender representation across various fields. For example in Australia, the mining sector and the construction industry are 83 percent male. Healthcare is 80 percent female, and the education and training sector is 63 percent female.

“It would take an extra 19,000 AUD of pay to boost a woman’s life satisfaction by the same amount that a man would gain from an extra 8000 AUD of pay”

Women and men dominate different fields and for all sorts of reasons, and a potentially dangerous job in mining will pay substantially more than a teaching position, which will impact on the pay gap. However the big battles in pay gap advocacy seem to take place around the startling difference in women’s representation at managerial level.

Boardrooms are where all they key decisions are made, the big picture stuff. Most importantly, it’s where the culture of an organisation is directed, but it’s where women are represented the least. A Pearson Institute for International Economics paper suggests that bringing 30 percent more women into corporate leadership roles increases profitability by 15 percent, which undoubtedly is a strong incentive for shareholders to attract more women to the top jobs.

Women represent 5% percent of fortune 500 CEOs, only 17 percent of CEOs in Australia, and there are no women CEOs in New Zealand’s top 50 companies (although its interesting to note that half of New Zealand’s public sector organisations have women CEOs). The long term data shows that women’s representation at the highest level of business is growing much slower than their participation in the general workforce.

Understanding why more women are not sitting in boardroom is a topic of contentious debate. in 2017 Award-winning behavioural scientist Francesca Gino at Harvard Business School presented the findings of a survey on workplace Happiness, based on data supplied by 30,174 managers and non-managers. The findings indicate that most women who occupy senior management positions are less satisfied than men in the same position. This is not due to a lack of competence or drive, rather that top level positions present benefits that appeal more to men than to women – the C-suite is laden with prestige, money and power at the cost of time.

The study reveals that overall, women have more life goals than men and they value them higher. Flexibility and time are more important to them than than money or prestige.

In economic terms, “…it would take an extra 19,000 AUD of pay to boost a woman’s life satisfaction by the same amount that a man would gain from an extra 8000 AUD of pay,” writes Gino in the Scientific American. “What this translates into is a clear recommendation for organisations and their leaders: if they are serious about the benefits of female leadership, they may need to pay more for it.” A suggestion which may not sit well with male colleagues in like roles, and anyway, is illegal.

Gino’s findings reinforce recommendations of other reports that highlight ways to attract both men and women to higher positions in organisations. These include, the possibility of restructuring managerial work and how it’s paid, providing breathing space for leadership positions and allowing for more flexible career paths. Perhaps most importantly, she suggests this approach could lead to a happier workplace.

As well as doing their day jobs to run successful businesses, executives are currently obliged to address an important issue with one arm tied behind their back. The reason for this is government bodies and gender equality advocates are measuring their efforts using the wrong tool for the job, and a crude one at that. Understanding genuine equality and opportunity in the workplace is more complex than a simple dollars & cents argument.

 

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