Read: The earnings gap still holds us back

For all the progress that has been made in other areas, one enduring sign that we are not making the most of all the talent that’s available in the country remains the stark pay gap between men and women in the workplace. 

A recent Institute for Fiscal Studies report (‘Women and men at work’, IFS Deaton Review of Inequalities https://ifs.org.uk/inequality/women-and-men-at-work) compared official earnings data for more than two million 20-55 years olds between 1995 and 2019. It showed that in every element of labour market earnings – employment, working hours and hourly wages – the inequality gap between men and women is still significant. In 2019 the average working-age woman in the UK was less likely to be in work, worked eight fewer hours a week if she was in work and earned 19 per cent less an hour on average than her male counterpart. 

There has been some improvement over the last 25 years. The IFS report showed that the gap in total average earnings has decreased from 53 per cent in the mid-90s to the current 40 per cent. 

But that progress is glacially slow, particularly when you consider it is now more than 50 years since the Equal Pay Act was passed. Furthermore, the reduction is largely explained by the fact that women are now more likely than men to have a university degree. So many women are, in effect, now more qualified than their better paid male colleagues. 

Traditionally, the greatest difference would have been seen in the hourly earnings of the least qualified women. It is still true that the gender gaps in overall earnings are biggest when comparing the earnings of men and women with the fewest qualifications. Men who left school aged 16 or earlier were paid 17 per cent more an hour than women. This gap is thankfully closing, helped by the introduction of and increases to the national living wage. 

Among those at work however, it is now the highest educated women who face the biggest hourly wage penalty, with male graduates earning 23 per cent more an hour than female graduates. And at the top of the earnings distribution, nine out of ten are men. A woman 90 per cent of the way up the female earnings distribution earns about the same as a man 75 per cent of the way up the male distribution. 

Much of this disadvantage is, of course, still down to the impact of having children on women’s earnings. Women are more likely to take parental leave and to opt to reduce their hours to work part-time, often taking a more family-friendly but less well-paid job. Some take a career break or do not return to work at all. That has a cumulative impact on their earnings and pay progression further down the line, with the report showing that the average 50-year-old graduate spent 3.7 years working part-time which meant their hourly wage aged 50 was 7.7 per cent lower than if they had worked full-time for those years. Many will work part-time for a great deal longer.

Choice at work should, of course, include the option to prioritise other things than climbing the career ladder at full tilt when your family is young.

However, this ongoing suppression of women’s wages cannot simply be attributed to parents making a positive life choice. For too many, the culture in their workplace means that temporarily stepping away from the promotion fast stream to have kids turns out to be an irreversible one-way decision. More companies will need to provide guaranteed options for flexible working to tackle this problem, as well as other family-friendly policies that will offer women the chance to match their progress at work to their talent. 

Going further to give families the choice of properly sharing responsibilities within families is also key. Here, the UK still lags behind other countries which are using public policy to enable genuine equality in the workplace. In Scandinavia, for example, support for parents does not tend to be geared round the assumption that the father will stay at work while the mother takes maternity leave or a career break while the children are young.  

The best purpose-led organisations and businesses are already delivering inclusive policies that acknowledge the challenges that employees may face around childcare and other caring responsibilities. They are listening to their workforce to provide solutions that will enable every member of staff to thrive, increasing productivity and, with it, earnings capability.

Levelling up by making full use of the talents of men and women equally benefits both employee and employer. It also makes sound, long-term economic sense for the country. 

Rt Hon Lord Walney, Crossbench member of the House of Lords & former Labour MP for Barrow & Furness