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Employee Rewards, according to the Office for National Statistics (ONS), men continue to earn considerably more than women. On average, UK men earn £569 a week whereas women earn just £436, equivalent to an annual pay gap of nearly £7,000.(Richter, 2003) What’s worse, is that despite the equal pay legislation in force for more than 30 years, the gender pay gap is one of the worst in Europe.
The gap does narrow down with the level of education women attain but there too women graduates pay lags behind considerably to that of male graduates (approx 15%).(Harris, 2001) The only encouraging picture that comes out of the recent researches is that the gap has somewhat closed down but even there the relative progress has substantially slowed down as compared to past generations.
Analysis and Evaluation
The statement points towards the potential societal impact of pay gap between men and women. Pay differential acts as a major de-motivator for women trying to enter employment or increase their work hours because of which the economy seems to lose out on women’s skills in an era where both soft and hard skills are equally important. Not utilising women’s skills properly means a loss to the economy’productivity and output and the long term economic potential. Narrowing the pay gap would motivate more women to raise their hours of work(part time to full time) or enter employment which would increase employment rate, raise the output of the economy and utilise more of women’s skills.
The total potential benefits of reducing the gender segregation of jobs and increasing women’s employment could be worth between £15 billion and £23 billion or 1.3 to 2.0 per cent of GDP.(DWP,2005) . Businesses can benefit from implementing equal pay and opportunities both in terms of competing in the product and the labour markets (Dickens, 1994). Also, women are less likely to switch jobs than men and thus reduce staff turnover rate for companies which can significantly reduce company costs (training costs etc). EOC findings are in tune with other researches on the same subject which also point out that a significant pay differential exists between men and women working under the same capacity. Research report published by the Government in December 2005 goes a step further and identifies those complex and interconnected drivers behind gender pay differential.
Analysed below are some of the drivers which lead to gender pay differential:
Work Experience and Education Levels – There is a significant level of difference in educational levels and work experience of men and women.Men are identified to hold higher qualifications. With regards to work,women are more likely to take time-off from work to cater to household needs (maternity, child-care and in some cases elder-care). These regular breaks tend to have an impact on their level of work experience and consequently the pay rate. Also, because of family engagements,most women tend to work part-time and part-time work normally require slower levels of qualifications and is concentrated in less well-paid occupations. 43% of women, compared to 8% of men work part time.(Josie al.,2006)
There is a lack of quality part time work as compared to full-time work and women find it difficult to find a job which matches their skills when returning after a career break. The inherent structure of labour market is particularly harsh on women because it seems to severely punish those who at any point in their lives sacrifice career for family by giving them lower status jobs when they return. (Smith,2004) Again, because of household responsibilities and time constraints, normally women can’t afford to travel long distances to get to work.
This too has an impact on the pay differential because this means that women are only left to choose among smaller pool of jobs in their local or nearby areas and limits their career growth opportunities. All this has a cumulative effect on gender pay gap which rises due to women driven by circumstances.
Occupational and Work segregation – Largely women employment is more or less concentrated in certain occupations (60 per cent of working women work in just 10 occupations) (Web 1) Most of these women dominated occupations are low-skilled and consequently low paid. There is occupational segregation even among young workers – the jobs done by young men and women are very different. Researches have pointed out that there is only a small pay gap at the start of employment but this gap tends to widen very quickly and is around 25% by the age of 35which puts a question mark on pay and reward systems. Normally, the pay gap begins to open up when people are in their mid twenties and widens by the time they reach late twenties. (Web 1)
Policies – Policies such as equal opportunities, anti-discrimination laws, parental leave provisions and the availability of child care are likely to influence the behaviour of men and women differently and hence affect gender wage gaps (OECD, 2001; Jaunted, 2003). EEG. Women who are not subject to parental leave might give up their job on having child are more likely to return to work at lower level jobs providing shorter hours and lower pay. Lau and Kahn (2003).
Formal childcare policies, on the other hand, have a positive impact on women’s wages as they might encourage women to get back to work sooner than expected and therefore can potentially go a long way in reducing the gender pay gap .Organisational policies in relation to women taking time-off, tend to play its own part in gender pay differential. Some organisations tend to take a softer approach while others are more concerned of their wage bill and take a more hard line approach.
Promotion and Advancement – Sometimes, even the promotion procedure scan exacerbate gender pay differentials. Promotions, in larger and most organisations, is based on specific performance metrics and have well defined procedures. Experience, ability to work long hours, are some of the important performance metrics for promotion. Women taking time-off because of maternity and other reasons are less likely to be promoted when compared to her male counterpart. This reduces her chances of advancement within the organisation. Due to circumstances, its more difficult for women to get to the top and stay neck to neck with her male colleague.
Pay Systems – Pay Systems are based on various metrics and are quite complex as well. Pay is no longer a quantitative figure just based on the number of hours or days worked, it has become much more qualitative in nature, based on value judgments about pay points for individual employees. (Mars den, 2004) The system normally tends to be harsh on women as they don’t qualify for long service awards and tend to get lower marks in performance monitoring and consequently get excluded from bonus and other incentive schemes because of their time-off. Also, they get excluded from pay enhancements such as unsocial hours payment, weekend shift premium and bank holiday work premium. These workplace practices and the pay systems also exacerbate unequal gender pay to a great extent.
Personality traits – There is an inherent difference in personality traits of men and women which in a way is also responsible for gender pay gap. Normally, women are intrinsically less competitive in nature than men, they tend to have less confidence in what they are doing an dare not so effective negotiators. Each of these characteristics play major hand in pay reviews and promotions eeg. self confident people do significantly better in the labour market. (Josh et al., 2006) Because women lag behind in these competency traits, they stand less chances of progression than men.
Other factors which affect gender pay gap as pointed out by the government Report (2005) are job grading practices, appraisal system sand retention measures and discrimination. (Web 2)
Most of the drivers discussed above are interrelated and piggyback on each other. They tend to have a cumulative effect on gender pay gap.
Redressing the issues and challenges
There are challenges which organisations and the government face. Some of the challenges can be overcome by favourable policies while others such as personality traits are inherent in the societal structure and are very difficult to deal with.
The foremost challenge in front of the government is to narrow the qualification gap between men and women. Men, generally are more qualified than women and it goes without saying that the higher the qualification the more the chances of a better salary. The big issue is to match the skill set which can be overcome by providing women with appropriate training to broaden their skill set. Employers look more for skill set than qualifications, training should be specific to suit employer’s requirements.
Another challenge here, is to train a wider base of women workers and to provide them with some sort of financial support. Organisations can provide measures available to those working part-time under which they have the right to request flexible working.They can make provisions to help women return to labour market with job search and skill acquisition.
Another issue staring in the face of the organisations is the pay and reward system. It is utmost important that organisations recognise the business case for achieving pay equity and having reward systems base don merit and therefore the legislation and policies can be updated or modified to narrow the gap. Pay policies can be aimed to directly and indirectly tackle gender wage discrimination. The issue here is, that organisations may be more interested in reducing their wage bill rather than narrowing the pay gap, and this is where the government policies come in.
It’s a huge challenge for an organisation to manage the pay gap and reduce the wage bill at the same time. Similarly, it’s challenge to the government t come with a favourable policy which doe snot in any way reduce profitability of the organisations. Policies should include measures to tackle occupational segregation between women and men, which should be reviewed at regular intervals(Pfeiffer,1998) Labour market policies, in general, exacerbate gender pay gaps, these policies should be looked into and amended accordingly .According to the OECD (2001),.
Creating awareness of tax/benefits system is another challenge which can be redressed. It is believed that tax system gives an incentive to work part-time which may potentially contributes to a part-time 'trap' for women and thus exacerbate the gender pay gap. (Inhering, 2000)Organisations should increase awareness and make employees understand the relationship between part-time employment and the tax/benefits system.
Overcoming occupational and gender segregation is another major challenge for organisations and the government. Government can reduce gender stereotyping by encouraging women to study male-dominated subjects and undertake vocational training in dominated occupations This can help reduce occupational segregation among young men and women entering the labour market which might help narrow the gap at the top as well. It has been pointed out by Dorado et al, 2004that statutory minimum wages compress the bottom of pay distribution and are likely to reduce gap between men and women at the bottom.
The minimum wage does play its part in narrowing the wage gap as women are more likely to work in lower paid jobs. When the national minimum wage rate were increased from £4.85 to £5.35 in October 2006, 70% of the beneficiaries were women. (Web 3) Government can try to redress the issue by constantly looking into the lower wage issue and making sure they make their best efforts to narrow the gender pay gap. Besides looking into the minimum wage rate, pay reviews can be carried out to identify pay discrimination and policies should accordingly be developed to reduce gender pay differential.
The challenge facing organisations and the government is to look into the factors that cause wage differential and then to proactively chalk out policies to negate those factors so that women’s skills are properly utilised. In the long term, organisation will only tend to gain from maximal utilisation of women’s skills.
The government, organisations and the trade Union shave to work together to bridge the pay gap and have to work in partnership to develop policies. Genuine commitment should also be demonstrated from senior management. The pay differential might suggest that women are not making full use of their skills which is very bad for the economy as a whole. Therefore, women should be encouraged in every possible manner to make the most of their skills. The fact that the differential is low at the beginning and widens at the top seems to suggest, that what happens in the labour market is much more important than what happens before the entry which means action should be taken before women enter the labour market.
The reasons for pay divergence should be intricately looked into by organisations and the government and the policies should be drafted accordingly. The persistence of the gender pay gap emphasizes the need for multi-faceted policies targeted both on increasing the female labour market participation rate .Therefore, policies should not necessarily be directed where the problems are greatest but where the policies will have the most effect.
It might be worth pointing out that the pay differential will always exist because the basis of the pay differential lays in the basis architecture and the structure of the society which cannot be changed.As Compton (2005) points out that while increased participation by men in caring and domestic work would make employment progression easier for women, men cannot be expected to contribute long hours to domestic work if they are spending long hours in employment. Women would have to sacrifice work at some point of their career and this will most often than not, be an impediment to their workplace success.
As a result,women are always likely to pay some price for taking periods out of paid employment as experience is valuable to employers but the employers should ensure that the price currently paid by women who take career breaks, does not seem to be disproportionate. The organisational and the government policies can only help narrow the gap but some differential will always exist. Also, from an employers perspective,employers may be reluctant to commit themselves to reduce gender pay gap because this may mean an increase in their wage bill. But, the achievement of equal pay for work of equal value is essential not only as a matter of social justice, but also for sound business reasons.(Corby,2003) The business world needs women skills and the organisation, society, government and the trade unions have to makesure that women skills are not lost due to gender pay gap.
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