Gender Pay Gap Highlights U.K. Economy's Untapped Potential

(Bloomberg) -- It was the birth of twins that prompted charity fundraiser Sarah Griffiths to stop working. While her employer tried to be flexible, she found it impossible to juggle the daily commute into London, manage a team of seven and find suitable childcare that didn't wipe out most of her salary.

Often forced to sacrifice career prospects to look after family, women such as Griffiths are in the spotlight in Britain as new disclosure rules reveal a country in which female workers continue to be paid significantly less than their male counterparts.

Unsurprisingly, the reasons for the pay gap include more men in senior roles, and a greater proportion of women work part time. But the issue is more than one of fairness. For an economy held back by weak productivity growth and skill shortages, the under-utilization of women in the labor force represents a major cost.

“We really need to identify where potential is within our own workforce and population,” said Jana Javornik, director of the Noon Centre for Equality and Diversity in Business at the University of East London. “I think of the gender pay gap as being an intelligent summary -- a measure of all those systemic issues going on. It could be a very good indicator of where to focus strategically and which are the untapped potential.”

More than 10,000 firms and organizations have reported their gender pay gap, with the majority revealing that they pay their male staff more on average than their female employees. The approximately 1,500 that failed to comply by the midnight Wednesday deadline will be contacted next week and may face legal action, Equality and Human Rights Commission Chief Executive Rebecca Hilsenrath told BBC Radio 4 on Thursday.

Economic Boost

McKinsey estimates that eliminating the disparity could add 150 billion pounds ($211 billion) to annual gross domestic product by 2025 by boosting female participation, encouraging them to work longer hours and moving them into more productive jobs such as those in science and engineering. Research by PricewaterhouseCoopers puts the figure even higher.

“Gender pay gap reporting could boost productivity by encouraging employers to explore whether they are making the most of their talent,” said Charles Cotton, who heads the performance and reward research agenda at the Chartered Institute of Personnel and Development.

Read more: Breakdown of the U.K. gender pay-gap

Bringing more women into full-time work through incentives, retraining and better pay, and making traditionally male-dominated professions less daunting, won't be an overnight fix for the labor market. But such measures may become more pressing if Brexit worsens the situation by making it harder to hire European Union workers.

While the proportion of women in employment is at a record high 70.9 percent, that masks a more complex underlying picture. Recent gains have been driven by pension changes that discouraged older workers from retirement.

Women account for almost three quarters of the U.K.'s part-time workers. And women who are neither in work nor looking for employment far outnumber men who are economically inactive. Looking after a family or home is the main reason cited by women for not wanting a job.

For many such as Griffiths, there is little financial incentive to carry on working. According to the Family and Childcare Trust, the average price of 25 hours of nursery care a week for a child under two is now 125 pounds in England, and 184 pounds in central London. While some government assistance is available to help meet the cost, median part-time earnings for women were less than 187 pounds a week last year.

Those who do work part time tend to miss out the wage increases full-time workers enjoy as they gain experience. Female employees with children get about 20 percent less per hour than their male counterparts and can expect to be earning a third less by the time their firstborn turns 20, the Institute for Fiscal Studies estimates.

With men on average earning more than women, that then creates a vicious circle where, for financial reasons, the latter chooses to sacrifice career progression in place of a male partner when they have children.

The pay-gap data has its flaws, with some arguing the figures should focus on any disparity in pay for equal work, rather than a blunt company-wide average, and others misinterpreting to assume that it already does.

Even so, the evidence -- and renewed focus on gender equality -- could help the government to better target measures such as encouraging men to share parental leave, discounted childcare and assisting firms in recognizing underlying cultural inequalities for all workers, not only those with children. That's something Griffiths, who hopes to return to the workplace part time when hers reach school age, would support.

“As a woman that's been educated to degree level and loved her job, it's really gutting,” she said. “For all we talk about equality. I don't think we're very near at the moment.”

To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Andrew Atkinson

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