Forcing employers to report their gender pay gap works. Now we need even more transparency

The government is already consulting on ethnicity pay reporting.

Nearly 50 years after Barbara Castle introduced the pioneering Equal Pay Act, the UK economy is still scarred by a large gender pay gap.

On average, women are paid nearly a fifth less than men per hour, and the pay gap in the UK is higher than in most advanced economies. While the gap had been closing, progress has stalled in recent years. If it continued to narrow at the rate we have seen since 2011, it would not close until 2072.

The government introduced the requirement for large employers to report various data on their gender pay gap in 2016. In the belief that transparency would push employers to act, the then-Prime Minister David Cameron’s aim was to close the gap within a generation, as transparency would “cast sunlight on the discrepancies and create the pressure we need for change, driving women’s wages up”.

The most detailed assessment so far of the impact of the new law shows his hopes were well founded. The new analysis by IPPR suggests that the regulations are having the desired effect. The research shows that the first round of annual reporting has both raised the profile of the gender pay gap, and pushed employers to take action.

The official gender pay reporting website saw over half a million views in March and April this year, and in Parliament, in the seven months January to July 2018, there were more mentions of the gender pay gap than in the five years from 2010.

A survey of affected employers, conducted as part of the research, found the law had spurred 75 per cent to calculate their gender pay gap for the first time. Most had also conducted more detailed analysis, looking at root causes, and pay gaps within teams.

Crucially, the regulations also appear to have stimulated employers to take action to tackle the problem. Four in five employers (80.6 per cent) have considered or taken further measures to reduce inequalities as a result of the regulations.

Changes to recruitment practices were the most commonly highlighted measures taken to address the issue in our employer survey. Nearly half (46.2 per cent) of those who had taken action in response to the regulations had adjusted their recruitment practices, including ensuring gender-balanced shortlists and changing the wording in adverts, job descriptions and person specifications. One in three respondents mentioned measures to ensure better gender diversity at senior levels, including support to develop and promote women within the organisation. One in five highlighted flexible working.

This prompts the question whether transparency should be applied to other pay inequalities that are rife in the UK economy. The ethnicity pay gap, varies by gender and ethnic group, and the disability pay gap is 7 per cent for women and 13 per cent lower for men. Within companies, the pay of FTSE 100 lead executives increased five times faster than all full-time employees between 2000-2014. Low pay is also a serious problem. In 2017, two-thirds of people living in poverty were in a household where someone is in work, and nearly a quarter of employees earned below the real living wage in the same year.

To help solve all this, IPPR argues that reporting requirements should be extended in an annual “Fair Pay Report” submitted by employers to the Government Equalities Office.

The government is already consulting on ethnicity pay reporting, and has announced plans to require listed companies to report the ratio between their chief executive’s salary and the median salary – a sign that further change is coming soon. In addition to these measures, each organisation’s Fair Pay Report should include their disability pay gap, and the proportion of employees paid below the real living wage. The threshold for reporting should be lowered from organisations with 250 or more employees to 50 or more, so that more of the workforce is covered.

On its own, transparency will be insufficient to tackle the UK’s unfair pay problems, which requires addressing the root causes. Earlier this year, the IPPR Commission on Economic Justice set out a plan to hardwire prosperity and justice into the economy.

Barbara Castle would surely be disappointed to see the snail’s pace of change in recent years. Today’s campaigners, however, should be encouraged by the possibility that change now underway could eliminate inequalities much faster.

Lesley Rankin is a researcher at the Institute for Public Policy Research (IPPR). The Fair Pay Report: How pay transparency can help tackle inequalities, by Joe Dromey and Lesley Rankin, is out today.