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Gender in the workplace

The influx of women into the workplace during the 20th century has been one of the most remarkable changes in the world of work. But in general, women are less likely to be employed than men, they are less likely to hold senior positions and they are paid less. Economists research the reasons for these gender-based inequalities and evaluate which policies can help to close the gaps.

Across developed countries, women earn 13 per cent less, on average, than men – with that gap ranging from 3.4 per cent in Belgium to a staggering 31.5 per cent in South Korea, according to the Organisation for Economic Co-operation and Development (OECD).

There has been some progress: in 2021, the Fortune 500 listing revealed that there were more women running the biggest companies in the United States than ever before. But that number was just 41, certainly a rise from the two women chief executives recorded in 2000, but still only 8.1 per cent of corporate bosses.

Why is this the case? And what light can economists shed on how this picture has developed – and why it remains so bleak?

Economists at the Centre for Economic Performance (CEP) at LSE have been investigating this question for two decades – and there are no easy answers. In fact, finding ways to tackle the persistent problem of gender inequalities in the workplace is one of the biggest economic challenges of the modern era.

Overlooked and underpaid

The question of “Why, once they have decided they want a job, are women in some countries much less likely to be in employment than men?” was addressed by CEP researchers in 2004. Looking across OECD countries, Ghazala Azmat, Maia Güell and Alan Manning found little evidence to support an array of hypotheses for the unemployment gap — including the suspicion that employers “favour men” for economic reasons.

“One sometimes hears the argument that employers prefer to appoint men because hiring is costly and men are more likely to stick in their jobs or because women are more likely to take time off work because their children are sick”, the researchers state. But “even if this is true it cannot really explain why there is a gender gap in unemployment rates in some countries but not others”, they conclude.

Since the Second World War, the rise of women’s participation in the workforce internationally has been remarkable. In the United States, for example, the employment rate for women more than doubled between 1945 and 2017 – from about 35 per cent in 1945 to 77 per cent by the end of the 20th century. The trend in the UK is very similar.

But getting women into work is just the tip of the iceberg. What economists are now trying to understand is the glacial pace at which this access to employment is progressing towards true workplace gender pay equality given the explosion in women’s workplace participation since the second half of the 20th century.

Remarkably, even when women chief executives are setting their own pay, they still end up earning a lot less than their male peers. CEP research into social entrepreneurs in the UK found that women leaders in this sector earn 29 per cent less than their male colleagues – which the research concludes is hard to explain by discrimination, since all the leaders in the study set their own pay.

Clearly, there are no easy explanations for the continued presence of the gender employment gap or the gender pay gap. And economists know the data can be misleading too. For example, in some countries, the gender pay gap might appear less pronounced because there is a surprisingly high number of women in higher paid jobs. But if the overall employment rate for women is also low, then this relatively small gender pay gap could mask a wider problem: women’s under-employment.

No movement at the top

In 2021, CEP took a closer look at Spain to see if its data could shed light on why gender pay gaps endure. There are good signs: in the early 1990s, only 50 women were active in the labour market for every 100 men. This had risen to 88 for every 100 by 2019, and the rapid incorporation of women into the workforce saw Spain overtake the average participation rate in European Union countries.

But women are still behind men in other market dimensions. They are “over 27 per cent more likely to be unemployed, 10 per cent more likely to hold temporary (fixed term) contracts and over three times more likely to work part-time”, according to researchers Claudia Hupkau and Jenifer Ruiz-Valenzuela. “Not only do women fare worse, but the gender gap in these measures has barely improved over the past 15 years.”

It appears that despite increasing participation, perceptions of “gender norms” about the type of work that men and women can do have persisted, and women in Spain “have not increased their presence in top-level occupations, like managers and directors” since 2011. At the same time, women still dominate “elementary occupations”, such as cleaners and food preparation workers.

Could it be down to education? Seemingly not. Women in Spain have overtaken men in terms of the proportion completing higher education (50 per cent of women aged 25 to 34 held a university degree in 2018, compared with 38 per cent of men). It really is a tough nut to crack – which is why the research continues.

Job perceptions

Many economists argue that there are two key areas on which to focus when explaining the lack of progress: the jobs in which men and women work, and the effects of parenthood.

On the first point, segregation remains a problem, as men are, to date, over-represented in financially rewarding professions.

This is a trend that can partly be explained by stereotyping, which appears to begin even before people enter the workforce. For example, although the share of women achieving tertiary education exceeds that of men, they are severely under-represented in maths-intensive science fields. This means that fewer women go on to work in scientific and technical jobs, and they often work in lower-paid sectors of the economy.

Degree subject is an important part of the explanation for the gender wage gap, and CEP has been at the forefront of research seeking to understand why girls are not following STEM (science, technology, engineering and mathematics) career paths in the same numbers as their male peers.

A 2016 CEP paper looked at why, even among high-achieving groups of students, women tend to gravitate towards more female-dominated professions; and in 2020, the Centre looked in detail at possible reasons for gender differences in STEM participation.

Among the explanations were a lack of confidence among women about their own abilities, particularly in maths, and a lack of “female friendliness” of educational environments. The study concluded that some policy ideas could be tested without making any major changes to curriculum or personnel – such as providing students with more information on their own performance relative to a broader student cohort.

While the education pipeline might explain why some high-paying careers are male-dominated, it does not explain the underrepresentation of women in other highly remunerated jobs – such as those at senior management level.

Here again, economists have researched why this might be. High-income careers typically develop in competitive environments, so individuals who are unwilling to compete or are particularly risk-averse may not embark on those careers. Some studies have found that women are less likely than men to engage in competition – even when they are equally able as men – and they tend to be more risk-averse than men. But such psychological factors seem to explain only a small part of the wage gap.

Family fortunes

The main barrier that women face in the workplace is related to the role that they play at home. Higher paying jobs are likely to require continuous employment, long/inflexible hours or unpredictable schedules. These are hard to combine with the time and dedication needed to raise a family. Evidence shows that while men’s earnings trajectories do not seem to be dented by the arrival of children, motherhood is associated with a sharp and persistent drop in women’s earnings.

This is the case in several countries, characterised by quite different parental leave provisions and family policies in general, so the motherhood penalty cannot be explained by institutional factors alone.

Picture of nursery. Source: Photo by BBC Creative on Unsplash
Spending on early years is associated with more equal gender outcomes. Photo by BBC Creative on Unsplash.

Claudia Olivetti and Barbara Petrongolo have found evidence of nuanced consequences of family policies on women’s employment. All high-income countries now have policies in place designed to make it easier for people to balance their working lives with their family commitments – measures that include shared parental leave, childcare support and flexible work arrangements. Comparing these policies, the researchers found that relatively short (up to a year) parental leave entitlements are associated with better employment and wage outcomes for women, probably because they allow them to return to their pre-birth job.

But longer and more generously paid entitlements may be detrimental to women’s employment for all skill levels, but especially for the less skilled. For the college educated, longer parental leave seems to be associated with wider wage gaps. This is perhaps because skilled women have more to lose from missed career advancement opportunities.

The one policy that is, across the board, associated with more equal gender outcomes is spending on early childhood education and care, a policy that makes it easier to be a working mother.

Another way that mothers balance childcare and employment is to work part-time. The majority of women in the UK will work part-time at some point in their lifetime and so, the types of jobs that are available on a part-time basis, are crucially important in influencing the economic opportunities for women.

Manning and Petrongolo found that while the earnings of full-time women had been rising relative to men’s, this was not true of the earnings of part-time women. In 2003, the average hourly earnings among women working part-time in the UK were 22 per cent less than women working full-time – this is the part-time pay penalty and it appears to be due to restrictions on the types of jobs available for those wanting to work flexibly.

Mind the gap

In 2020, working life was hugely disrupted by the Covid-19 pandemic. In May 2020, a CEP analysis found men and women experienced fairly similar furlough rates and earnings losses. But earnings losses for mothers were larger than for women without children. Mothers were also more likely to have lost their jobs than fathers – although overall the incidence of job loss in the UK was relatively low compared, for example, with the United States.

To a large extent, the pandemic replicated pre-existing patterns in the division of childcare, but with a much higher overall load. Before the pandemic, mothers did, on average, twice as much childcare as fathers (16/17 hours a week compared with just below 8 hours a week). With the first UK lockdown, mothers did an extra 9.5 hours and fathers an extra 6.9 hours – so the gap widened.

But there is a minority of families that go against the tide. Before Covid-19, fathers were mostly in charge of childcare in only 2.5 per cent of households. During the first lockdown, this had risen to 18 per cent – still a minority but sizeable.

The important question is whether this will affect gender roles in future. Evidence has also shown that “forced” changes in gender roles due to some external, unforeseen shock, may have permanent consequences – accelerating the evolution of norms and so perhaps creating a substantial redistribution of home production loads in these households and easing the breakdown of traditional gender roles in the longer term.

Will the fact that men and women have been able to work from home encourage a more shared approach to parenting, and perhaps lead more managers to make flexible working a normal part of employment? Or on the flip side, could an even more two-tiered system develop – with those who are able to attend the office more regularly handed the plum jobs, while those preferring to work at home miss out on promotions?

As ever, conclusions will not be easy to draw, but economists will continue to ask these questions.

Expert contributor: Barbara Petrongolo
With thanks to: Chris Parr

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Using targets to close the gap

One question that economists have considered in depth is the extent to which legislative change, or the introduction of targets, can drive improvements in the gender pay gap.

There have been many attempts to push companies towards increasing their gender diversity at senior levels, including the UK government-backed Hampton-Alexander review, which was launched in 2016 and set a target that one in three board positions at FTSE 100 and 250 companies should be held by women by the end of 2020.

The target was met as the number of women on the boards of those firms rose from 682 to 1,026, although discrepancies remained. For example, just 17 of the chief executives across all 350 companies, were women when the review concluded.

Likewise, there is some evidence that the compulsory reporting of gender pay gaps by UK companies is having an impact. Employers in England, Wales and Scotland with at least 250 employees are required to publish gender pay information each year (with the exception of 2020-21, which was affected by the coronavirus pandemic).

CEP research published in 2021 found that, in those employers affected by the legislation, the wage gap between women and men fell by almost one fifth (19 per cent) on average. This suggests that making employers more accountable for their pay gaps can result in significant change.