Closing the gender pay gap will empower women and deliver economic growth

If we want to be a high-growth country, we might start by tackling a problem which is as old as capitalism itself: the gender pay gap.

For many years the statistics have shown that girls outperform boys in the classroom, but this hasn’t translated into equal pay, or equal opportunities in the boardroom.

While the pay gap between men and women has been narrowing, it has narrowed slowly, and there is no guarantee that progress will always continue.

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This is an issue we cannot ignore. Not just for moral reasons – in a modern liberal democracy, no one should be held back from achieving their goals because of their gender – but for economic ones, too.

PwC has estimated that closing the pay gap across the OECD could increase total female earnings by $2 trillion (£1.6 trillion).

As Keir Starmer said when launching Labour’s five missions in Manchester: “Growth demands we unlock the potential of every worker.”

Shadow chancellor Rachel Reeves has made it clear that closing the pay gap would be a priority for a Labour government.

She pointed out that women still face significant structural barriers to progressing their careers; not least the availability of affordable, flexible childcare.

Last year the number of job vacancies in Britain rose to a record level while the cost of living crisis continues to bite.

This is adversely affecting women, who are having to reduce their hours of work because of the cost of finding someone to look after their children.

Closing the gender pay gap would strengthen the economy as higher wages would encourage more women to either enter the labour market or extend their working hours.

Figures from the ONS show the pay gender gap for full-time workers actually grew in both 2021 and 2022.

While that almost certainly reflects a correction of the short-term disruption caused by the pandemic – for example, the fact men and women were not equally likely to be furloughed – it reminds us that progress is not inevitable.

We can’t just wait for things to get better. We have to make things better.

In 2022, men working full-time jobs earned 8.3% more than women.

We know the gap gets bigger as men and women get older (for full-time employees aged 50-59, the gap is 11.7%). We know that is, in effect, a tax on motherhood.

And we know the gap is very wide in some powerful professions (28% among financial managers and directors, for example, and 26% among newspaper and periodical editors).

But these are only headline findings. They don’t tell us what is happening in individual workplaces, which is where real change happens.

I am a passionate believer that transparency is one of the most powerful tools we have to drive that change; that where unequal pay is concerned, sunlight is the best disinfectant.

Since 2017, any employer with a headcount of 250 or more has been required to record how much more men earn than women (or very rarely, vice-versa), as well as how pay is split at different levels of their organisation, and how any bonuses are distributed between male and female employees.

But this information is only as powerful as the use to which it is put.

It only leads to change if the data is noticed and understood. Otherwise, it is just the proverbial tree in the forest that no one hears.

I have been pleased to see that employers have taken their duties seriously, and that public awareness of the data – the headline pay gaps, at least – is very good.

The data is driving positive change. But there is more we can do.

That is why the Lead 5050 Equity Index is so valuable.

By looking at progress over time and allowing birds-eye comparisons of different regions and sectors, the index gives both readers and employers themselves a deeper understanding of the problem of unequal pay.

It allows us to see, for example, that some industries are making far faster progress than others; it allows us to see that individual employers that have the most equal pay are often the most successful in their fields.

And by using all the available data – equal (or unequal) pay at all levels of an organisation, as well as the headline overall pay gap – it gives those companies, and their clients, a far more comprehensive view of how they are being run.

It also allows immediate, fair comparisons with other employers in the same sector, and same region.

If we are going to solve the problem of unequal pay, we need first to properly understand it.

That doesn’t mean looking at one bit of data, once a year. It means looking at all the data, all the time. It means putting it in context.

And it means drawing the right conclusions, which encourage employers to do better. This isn’t just about naming and shaming, although that might sometimes be necessary.

It is about empowering employers, employees and the wider public with the tools they need to make the right choices.

Discussions I’ve held with organisations like Lead 5050 highlight a number of changes that could be implemented to Britain’s mandatory gender pay gap reporting to make it work better.

Organisations should be required to submit accurate data on the number of employees and also include details of dividends received by directors, partners and employees as pay to provide a more accurate picture of the pay gap.

It would also be beneficial if employers were required to list parent companies and subsidiaries so that their data could be linked more easily, to give a better overall picture of an organisation’s performance on the gender pay gap.

As part of the gender pay gap reporting regulations organisations should be forced to provide direct contact details so the information can be checked and questions asked to reduce inaccuracies and prevent organisations from submitting false information.

Closing the gender pay gap isn’t just the right thing to do morally – it’s the right thing to do to grow the economy by empowering more women to enter the labour market or to extend their working hours.

Jess Phillips is Labour MP for Birmingham Yardley and shadow minister for domestic violence and safeguarding