FT report highlights gender pay gap variations

At first glance, people may wonder why the gender pay gap is so important in finance. Aside from the obvious reduction in income when comparing the hourly rates of men and women, there is a significant knock-on effect on pensions, investments, and savings. The recent report by the Financial Times is in-depth and demonstrates that while progress has been made, there is still a long way to go.

 

Gender pay gap falls to record low

 

Starting on an encouraging note, the data collected and analysed by the Financial Times (from the Office for National Statistics) shows that the UK gender pay gap has fallen to a record low of 9% in 2023/24. While this is a moderate reduction from the 9.2% figure 12 months previous, it is encouraging. On the flip side, if the rate between 2011 and 2023 continued, it would take a staggering 29 years for the gap to be closed!

 

Only when you begin to look behind the headlines do you see the real picture. For example, there is a significant variation in the hourly rate for men and women across different sectors.

 

Financial sector

 

If we look back to 2017, the median difference between the hourly rate of men and women (as a percentage of men's pay) stood at 22.50% in the financial sector. While there have been improvements, the rate has only fallen to 21.50%, encouraging but not a huge fall.

 

To put this in context, as of 2023, the median difference in hourly rates for different sectors was as follows:-

 

· Construction 22.89%

· Education 20.63%

· Mining 19.30%

· Info and communication 15.00%

· Professional and scientific 14.10%

· Energy 12.90%

· Waste and water 7.80%

· Manufacturing 7.33%

· Real estate 7.40%

· Other services 6.40%

· Transport and storage 6.35%

· Administration and support 5.90%

· Retail 5.64%

· Public admin defence 4.05%

· Agriculture and fishing 3.50%

· Arts and recreation 1.90%

· Healthcare 1.47%

· Accommodation and food 0.40%

 

While the FT survey included median and mean figures, many people believe that the median figures give a more accurate impression.

 

Discrepancies emerging amongst different-sized companies

 

Whether these are historical or cultural variations that are proving difficult to break, more than 10,800 of the companies that submitted data reported a narrowing gender pay gap. Interestingly, of the 580 companies that employ more than 5,000 people, 185 saw the median pay gap increase.

 

For example, over the 12 month period, the median pay gap at British Airways increased from 32% to 37%, impacted significantly by a lack of women in high-paying roles such as pilots, engineers and senior management. If we turn our attention to retail giant Next Plc (particularly the company's Next Retail division) in the year 2023/24, the pay gap widened from 8.1% to 17.3%.

 

In recent years, the number of women holding influential high-income roles has increased, but there is certainly more work to be done in this area.

 

The impact on long-term finances

 

At first glance many people will take the annual gender pay gap variations at face value, perhaps not appreciating the long-term impact. Whether looking at pensions, wider retirement planning, investments or savings, the annual shortfalls are striking, but it is a reduction in long-term compound returns on which we should be focusing. Remember, you could be investing for more than 40 years in your pension!

 

Summary

 

It's important to recognise progress in recent years, much of it prompted by new legislation. We've also seen the introduction of ESG playing a big part in ongoing improvements, but even this new trend/movement is becoming difficult to monitor effectively.

In a best-case scenario, based on rates of progress between 2011 and 2023, it will take 29 years to reach gender pay parity in the UK. The independent OECD data analysis suggests it could take 43 years to reach parity. In the meantime, many women are missing out on significant income and, as we highlighted above, compound returns.

 

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