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The Impact of Women's Position in the Labour Market on Women's The impact of women’s position in the labour market on pay and implications for UK productivity Professor Sylvia Walby and Dr. Wendy Olsen Report to Women and Equality Unit November 2002 Views expressed in this report are not necessarily those of the DTI or any other Government Department The impact of women’s position in the labour market on women’s pay and implications for UK productivity Contents List of Tables and Figures 6 Summary 8 Introduction 12 Section 1: The concept and measurement of productivity 14 Productivity Gender Productivity per ‘worker’ or per ‘hour worked’? Measuring the value of economic outputs Pay, productivity and labour force size Secondary effects of increasing women’s productivity and pay Section 2: Review of the gender pay gap and possible implications for 22 productivity levels in the UK Introduction Skills deficits Returns to education Educational qualifications gap Employer-based training gap Other learning initiatives The nature and extent of labour market rigidities and failures Insufficient flexibility and support to allow work/life balance Introduction Interruptions Interruptions for family care Childcare Elder care Flexibility 2 Variations in the impact of children on women’s employment Tax/benefit effects on women’s participation in paid work Ethnicity Women’s working time preferences Occupational and industrial segregation Part-time working Employers’ views on working time Sticky floor International comparisons Discrimination Regional, industrial, firm and sectoral structuring of the labour market Unionisation Public sector Industrial sector and firm size Region Returners: a key group with low productivity The business case and the whole economy case Decomposing the pay gap, and understanding the implications for productivity Key elements in the gender pay gap and their implications for productivity Section 3: Quantifying the pay gap and examining the implications for productivity 51 Introduction Analysis of the components of the pay gap The British Household Panel Survey Selection and definition of variables Decomposition of gender differences in pay, and the implications for women’s productivity Discussion of the decomposition of the components of the gender pay gap and implications for productivity Disaggregating the components of the gender pay gap Making the link between pay and productivity: what this analysis of pay might be able to tell us about women’s productivity levels and the implications for the Government’s productivity agenda 3 Section 4: Survey of women’s occupational mobility surrounding childbirth 68 and circumstances under which they would choose more training, education and employment Introduction Women’s occupational mobility surrounding childbirth Staying with an employer over maternity The occupational structure of part-time employment Reasons for working part-time Circumstances under which women would take more paid work Barriers to training and education Conclusions Appendices 78 Appendix 1: Data, definitions and equations Appendix 2: Gender segregation and associated wage/productivity levels Appendix 3: Regression equation details Appendix 4: Decomposition of the gender pay gap Appendix 5: Describing the BHPS data and variables Appendix 6: Polling data Bibliography 156 4 5 List of tables and figures tables Table S.1: Components of the pay gap per hour worked Table 1.1: International comparisons of productivity Table 1.2: UK GDP, 2000 Table 2.1: Highest qualification level attained by sex, 1996. Table 2.2: Economic activity of women by age and highest qualification level attained and of men by highest qualification attained, 1996. Table 2.3: Economic activity of women of working age, by age of youngest dependent child, 2000. Table 2.4: Economic activity by ethnic group, Great Britain, 1999. Table 2.5: Part-time employment as percentage of employment, international comparisons, 1999 Table 2.6: Gender pay gap for employees, EU, 1995. Table 3.1: Education variables Table 3.2: Means of explanatory variables Table 3.3: Simulated changes which bring women’s levels up to men’s levels of each factor Table 3.4: Summary of education levels in British Household Panel Survey 1999/2000 Table 3.5: Components of the pay and productivity gap Table 4.1: Occupational mobility between best job before having children and current job Table 4.2: Occupational mobility over childbirth Table 4.3: Circumstances under which women would have stayed with the same employer over childbirth Table 4.4: Reasons given by women for working part-time Table 4.5: Circumstances under which women would take (more) employment Table 4.6: Circumstances under which women would take up training or education 6 Table A1.1: Hourly wages and log of hourly wages among employees and potential workers and average net household income Table A1.2 Weighted average wages including median wages Table A1.3: Proportions who were employees in 1999 (weighted) Table A1.4: Explanatory variables among employees and potential workers Table A2.1: Gender segregation and wages Table A4.1: Regression results with education categories Table A4.2: Regression results with education scale (years) Table A4.3: Simulated changes which bring women up to men’s levels of each factor Table A4.4: Predicted mean wage for education qualifications, men and women Figures Figure 3.1: Components of the gender wage gap Figure 3.2: Impact of a change in gender segregation Figure A2.1: Association between wage rates and gender segregation in occupations 7 The impact of women’s position in the labour market on pay and implications for UK productivity Summary Introduction This report investigates the impact of women’s position in the labour market on women’s pay and considers the implications for UK productivity and productivity growth. Gender relations in employment have often been addressed in terms of equity, justice and discrimination. The focus here is rather on whether and if so the extent to which women’s position in employment has implications not only for their pay, but also the UK’s productivity and economic performance. The government has identified problems of skills deficits and market failures as important barriers to raising productivity to the level of competitor countries. These problems have a gender dimension. The skills deficits are gendered in that women have lower levels of educational qualifications than men do. Failures in the market for labour, stemming from out-moded rigidities due to occupational sex segregation and discrimination against women which limit the flexibility needed to enable women to combine caring and employment so as to achieve work/life balance, prevent the most effective deployment of labour. Well-functioning labour markets reward workers according to their performance and skill. When markets for labour fail, this interferes with the best allocation of resources and lowers the productivity of the British economy. The report discusses some of the gender implications of the different ways of measuring productivity. It reviews the literature relevant to understanding the causes of the gender pay gap and tries to draw some tentative conclusions about how analysis of the gender pay gap can inform our understanding of the UK’s economic performance, in particular our levels of productivity. Original statistical analysis of the British Household Panel Survey is conducted in order to identify the relative size of the components of the gender pay and productivity gap. Data collected in a new national survey reports on women’s occupational mobility over childbirth and childcare and women’s own perceptions of the barriers to their more productive employment. Why productivity matters Productivity is the largest single component of economic growth. So raising the productivity performance of the British economy and making progress towards closing the productivity gap with our international partners is vital to the aim of increasing the country’s growth potential. (HM Treasury,1999c,1.12). Productivity is one of the key components of the level of economic output and of the rate of economic growth. Productivity is a measure of the extent to which economic resources are used effectively in an economy. The UK has lower rates of productivity than comparable countries including the US, France and Germany. Raising the level of productivity in order to raise the rate of economic growth is a priority in government economic policy. Policies that raise productivity are actively pursued. 8 Measuring the gender dimension of productivity The measurement of productivity per gendered worker is a challenge since it is not possible to measure directly the value of the different contribution of men and women workers to any given output. The procedure adopted here is the current Treasury method of measuring the productivity of government services. This is to assume that wages are the best available proxy for productivity. This method has the disadvantage that any reduction in wages as a result of discrimination artificially affects the size of the measure of output. Nevertheless, wages are the best available proxy for measuring gendered productivity. Whilst this approach has been taken in this report to enable the authors to draw some tentative conclusions relating to women’s position in the labour market and UK productivity, the problems of using pay as a proxy for aggregate productivity (outlined in detail in the Report) mean that it is not appropriate simply to use pay as a basis for estimating aggregate potential gains to the economy
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