The gender pay gap: it’s not as simple as it looks

February’s announcement that all UK companies with more than 250 employees will be required to publish details of their gender pay gap has pushed the issue centre stage again.

The usual headlines, repeated ad nauseam, are that British women’s average annual earnings are 19 per cent lower than men’s. The picture is similar in the US, where women reportedly make 77 cents on the dollar compared with men. Among full-time academic staff, the average gender wage gap in the UK is 11.3 per cent, according to an analysis last year by Times Higher Education.

But do these figures really help in the debate on equal pay? The crucial question is whether women get paid less than men for doing the same job. According to the THE analysis, full-time female professors earn 5.8 per cent less than male professors. But even with such apparently comparable data, it is still not straightforward to conclude that discrimination is operating.

Some gender pay gaps within the same occupation are due to observable characteristics, such as educational attainment, previous experience and level of productivity. Others are due to things more difficult to measure, such as negotiating skills, diligence, determination, aptitude and networking.

Furthermore, although society might regard it as unethical, it can be “rational” from an employer’s point of view to discriminate on the basis of perceived future risks from employing women, such as absences for pregnancy or caring responsibilities. All this points to the obvious fact that it is difficult to find cohorts of individuals matched in all characteristics that might determine pay.

Regarding UK academics, my guess is that the pay gap is partly driven by the research excellence framework cycle, whereby high-performing academic staff are enticed to rival institutions with offers of higher pay. If men are more mobile than women and move or threaten to move each REF cycle, then a gender pay gap will develop, especially if, as has been suggested, men are also better negotiators (including over “retention salaries”).

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If the gap is believed to be inequitable, and if female academics can’t be persuaded to enter the REF transfer market, an alternative solution might be to carry out a job evaluation for female academics vis-à-vis male “matches” in their fields. However, even that would probably not be perceived as fair unless there were a roughly equal balance of men and women making remuneration decisions. And it would often be difficult to match “apples with apples” given the small sample sizes in most departments.

The reasons for gender pay gaps in other occupations are varied, and do not necessarily involve discrimination. For example, some corporate clients are willing to pay extra for an experienced “personal lawyer” to be available at the drop of a hat. If female lawyers cannot or choose not to be available 24/7, a gender pay gap may well open up – this is rational discrimination again.

By contrast, Harvard University economist Claudia Goldin argues that in many US medical specialisms, gender pay gaps have been eliminated. This is because patients do not require, for example, a “personal pharmacist” each time they visit a hospital, so men do not command a higher premium if they are more flexible. It is also worth bearing in mind that some female lawyers may well value not having to be always available. In other words, personal choice may determine some of the gender wage gap.

When thinking about this issue, it is also instructive to note that, according to University of New South Wales economist Geni Dechter, US female college graduates with dark hair initially get paid 9 per cent more than their blonde colleagues. We can all dream up discriminatory and non-discriminatory reasons for this (blondes being perceived as dumb, for instance, or perhaps preferring certain lower-paying sectors), but the case illustrates the difficulty of teasing out “causes” for even quite substantial wage gaps – especially when you consider that the blonde/brunette gap is eliminated within five years.

Once we have isolated their causes, we can begin to work out the costs and benefits of narrowing gender pay gaps that are unjust or discriminatory. Simple headline-grabbing statistics and claims are unlikely to help us get there.

Keith Cuthbertson is professor of finance at Cass Business School, City University London.