Oral evidence: Gender Pay Gap, HC 584Tuesday 15 December 2015
Oral evidence, 15 December 2015.
Witnesses
Neil Carberry, Director for Employment and Skills, CBI, Ann Francke, Chief Executive, Chartered Management Institute, and Monika Queisser, Senior Counsellor and Head of Social Policy, Organisation for Economic Cooperation and Development, gave evidence.
Chair
Thank you for being with us this morning. It is incredibly helpful to have your input into this, our second inquiry as a newly formed Select Committee, looking particularly at the gender pay gap and how it affects women over the age of 40. You know the form, I think, which is that Committee members ask a number of questions, and colleagues will join us throughout the session. To start, please give us your names and the organisation you represent.
Neil Carberry
I am Neil Carberry. I am the director for employment and skills at the CBI, and on its behalf, may I say how pleased we are that the Committee has been established?
Ann Francke
I am Ann Francke. I am the chief executive of the Chartered Management Institute.
Monika Queisser
I am Monika Queisser. I am head of social policy at the OECD and I am in charge of the OECD-wide gender initiative.
Chair
Thank you for being here. We have a number of questions to get more of a feeling of your understanding of the issue.
Jess Phillips
Perhaps it is just me, but the evidence is not very clear about the relationship between the gender pay gap and the economic gain to the nation. If the pay gap is narrowed, what effect will that have on the economy? Although I feel that it would have an effect, can you provide me with clear evidence that that would be good for the economy?
Ann Francke
I can kick off. McKinsey has just released a study—I highly recommend their excellent work to the Committee—that showed that gender equality across the globe would add $27 trillion to the economy. That is a remarkable statistic and is much bigger that the combined contributions of China and US. Closer to home, your own Women’s Business Council’s report, which was published two years— I am sure that the Committee is familiar with it—says that gender equality would add £35 billion to the UK economy by 2030. On a macroeconomic level, ample data exist to support that finding, but on a microeconomic level, looking at the performance of companies, I stress that that is absolutely the case. To cite McKinsey again, the biggest correlation they found in their global study of gender diversity was in the UK, where for every 10% increase in senior management diversity, firms added 3.5% to their bottom line.
Jess Phillips
How much, sorry? 3.5%?
Ann Francke
To the EBIT—the profit, the bottom line.
Neil Carberry
May I build on that? That would be the evidence on which we would rest our case. Of course, closing the gender pay gap is just the right thing to do, but it has commercial upsides. The macroeconomic data are pretty clear, and Ann has shared that with you, but organisational behaviour studies also show that diverse groups make better decisions. By definition, you would expect the kind of effects that McKinsey has identified to be happening in organisations that are more diverse. From a labour market point of view, the fact that we have a gender pay gap is, by definition, a sign of an inefficiency, and therefore resolving it is commercially important to our members.
Chair
Monika, may I press you on this?
Monika Queisser
At the OECD, we have also done some macroeconomic studies, particularly because that was requested by the G20, to look at the macroeconomic benefit. However, on a macroeconomic level, it is very difficult to go very deep into details. It was not possible with our models to look at the gender pay gap and consider the macroeconomic impact on economic growth, but we did look at labour force participation of women, which shows that that can provide a very strong boost for economic growth across the world, but particularly in those countries where ageing has already progressed quite rapidly. For countries such as Germany, Japan and China, the macroeconomic impact of closing or even reducing the gap between the labour force participation of men and women is massive. It is so big and convincing that the leaders of the G20 for the first time adopted a target in their final declaration at Brisbane to close the gender gap in labour force participation by 25% by 2025. That is a political goal, and broader than what you are trying to achieve, but it is a very important political signal of the economic benefits of greater gender equality in the labour markets.
Chair
Within that, what progress has been made to achieve it?
Monika Queisser
A lot of countries have been making a lot of progress—obviously countries for whom this has been on the agenda for many years, notably Scandinavian countries—with full support for working parents, much more sharing of paid and unpaid work, and much more fluid part-time and full-time. Full-time is not the same in every country, and that is a very important point. Looking at the part-time debate we had in the previous panel, full-time is not the same thing in all countries. So in some countries where there is a lot of part-time, often men in full-time routinely work 44, 45 hours. In Scandinavian countries you see much more compressed working-hours behaviour than in many of the more polarised countries. So Scandinavian countries have been on the file for many more years and offer a lot of interesting policy examples and lessons.
Jess Phillips
I recognise the big, broad-brush issues, but with your members at the CBI do you draw on evidence for the potential gain of increasing women’s participation in the workforce? Are there strategies around that that you have seen that have worked? If so, why are they not being more widely adopted? If the bottom line is the driver, one wonders why everyone is not just getting on board.
Neil Carberry
Sometimes in the board room you pull levers and they do not appear to be attached to very much. There has been a real upswell of concern about the need to make progress on this at senior levels in the business community. Of course the Davies review and the board room agenda were part of that, but that is a small part of what businesses need to address in this space. The big challenge is to address some fundamental cultural factors within businesses. It is about how line managers view things like flexibility, who flexibility is available to and what the capacity for job redesign is—as Monika was saying—to enable workers to find a solution that works for them and for the business. We are doing some work on this at the CBI at the moment, and I think the most important thing that we are getting back from members is the need to move away from viewing things like flexibility as an employee benefit, rather than as something we do to organise how we are as an organisation to make profit and to engage in retaining talent. This is a country in which the labour force might be getting smaller over the next few decades. Talent retention, in the face of skills shortages that are already going on, is commercially important to our members. We are seeing a lot of that starting to happen, whether it is increased commitment to growing apprenticeship schemes at the entry level or looking at things like returnerships for parents who have perhaps taken some time out of the labour market. I was talking to Vodafone recently about what it is doing down at Newbury with its returnerships. There are all sorts of programmes just starting to kick off, but pushing them through out from the corporate centre into how line managers react is the really critical challenge.
Ann Francke
I want to echo that, because a lot of the issues are cultural, as Neil says, and one of the biggest areas is like what we call a glass pyramid. You have women at the bottom, but by the time you get to the middle, they have gone from 40% or 50% to 20% and then single digits at the top. That pattern, by the way, has not changed in 10 years, so the notion often put forward that says, “Oh, it’s fine, because we’ve solved the gender pay gap at the lower levels so it will go away,” is actually flawed. At CMI we have measured gender pay at junior, middle and senior levels for 40 years and I can tell you that in 2005 the pay gap for senior women was less than it is today. That may be a very surprising thing to hear. The reasons for that are cultural. There are far too few women in senior positions. We talk a lot—I heard this in the last session—about the motherhood penalty, but we need to look more broadly than that. Again, if you look into the organisational studies, the cultural issues affect non-mothers as well as mothers. It is about the culture of success; it is about how we define who is successful; it is about the long-hours presenteeism, rather than designing work around the modern lifestyle. Companies that embrace more progressive policies absolutely benefit economically. They get higher engagement scores and higher productivity. It has to shift away from, as Neil said, a benefit for the employee to a benefit for the organisation. The organisations that embrace it, whether it is Unilever or Timpson, see concrete material gains in their productivity and results.
Chair
I want to bring Monika in, but before I do, Ann, you said that the motherhood penalty affects non-mothers. Where is the best evidence base to look for that?
Ann Francke
Bain did a very good study recently that examined the attitude of women at the beginning of their career, the middle of their career and towards the top. It found that women, whether they have children or not, are far less ambitious in the middle and latter parts of their careers because they don’t like the definition of success. One of the verbatims was, “If I have to go to another conference where I hear a man saying how they smashed the targets, stayed up all night looking at the Excel spreadsheets and nailed the deal on the golf course, that is not aspirational to me. I don’t aspire to that.” That is one of the quotes from the study. That is the study I would recommend, because it shows that it is endemic to women, not just mothers.
Chair
I saw lots of nodding from Monika. Would you like to elaborate on that?
Monika Queisser
For us, this is very interesting because we work with Governments, and we look at policy and at what policy makers are doing and can do. For us, it is very interesting to hear that perspective from business, because the cultural factors within business echo the cultural factors within societies. Some very conservative OECD countries still believe that a woman can maximum work part time and that she should do everything she can, even if it means forsaking her original profession, to be there most of the time for the children. We have done something very interesting. The availability of seamless childcare, which is something that Scandinavian countries have, and parental leave policies, which are the other most popular lever at the moment for policy makers around the world, is very much related to the gender pay gap. We found that the gender pay gap is smaller in countries that provide better public childcare and in countries that have better parental leave arrangements. The most recent trend has been to have non-transferrable leave for fathers. That is good in many different ways. It is obviously good for families, because it is good for the engagement of fathers with children, and it is also good for women, because it enables them to work more. In Finland, for example, an employer’s hiring a man carries the same risk, in terms of people missing time out of work, as hiring a woman. If we had a situation like that in more countries, the risk would become the same. Earlier, people were saying that we have to think about the long term. Far more women are now graduating from university in all OECD countries. What is that going to mean for men in the longer term? When we talk to policy makers in Scandinavian countries, they always say to us, “It’s not about gender anymore. Please do not talk about women.” Yes, it’s about gender, but it’s also about men. That means that men will have to accommodate to a new role as well, which involves much more care giving, quite simply because women in many cases will have the higher salary. Households act in very, very rational ways. They are very economical, because you calculate whom it pays more to reduce hours. The tax system plays a role in some countries, but, surprisingly, most countries now have quite neutral tax systems. Intra-household negotiation plays a big role, just as intra-business negotiation plays a big role.
Mims Davies
I am interested in presenteeism—a fantastic word that I have just learned—and how it affects the UK, our working practices, the gender issues it raises and how other countries might not have the attitude of, “I do more hours; I am there first and last.” That might mean that people are taking that shared parental leave because they don’t feel that just by showing up they are doing a good job and being there for the longest hours. Who wants to pick up on that? How is the UK doing compared with other countries in scaling back that feeling of presenteeism?
Ann Francke
Probably the worst place in the UK for that culture is the City, and if you look at the City it has the fewest females in its leadership. It also has one of the biggest gender pay gaps, because it is bonus-driven. At senior levels in the City men are taking home far bigger bonuses than women are. In rankings, the UK is obviously behind the Scandinavian countries; it is also behind the US in terms of promoting a long-hours culture. However, there is research in the UK from EY showing that if everybody worked flexibly, £11.5 billion—I think that is the number—would be added to the economy. Attitudes to flexible working here are changing. If you look at the companies that are doing well in employee ratings as the best places to work or that have higher engagement scores, you will inevitably find that they have flexible working. I brought along this little booklet, which I am happy to leave with you. John Timpson wrote it about how flexible working is great for him, not his employees. Culturally we are starting to see that shift. It is extremely high on the wishlist of millennials—it is No. 1 on the wishlist of the millennial generation, and it is as important to men as it is to women, which is great. Anything that the Government can do to encourage that is a very good thing.
Chair
May I just ask a supplementary to Ann before we move on? Is it not true to say that the problem here is that full time means all the time, and part time means only some time? [Interruption.] Yes, I think Jess and I have similar experiences of part-time working. Is that not really the issue; that you are basically not going to be at the end of the phone all the time? Why is that such an issue for business, when it is not for the NHS? We have doctors and GPs working part time very successfully.
Ann Francke
I think it is anything we can do. A reporting transparency culture has a role to play in this; one that emphasises outcomes over face-time is most welcome, as is encouraging new business models, moving away from hourly billing, for example, which is real anathema to gender equality. Anything we can do to focus measurements on outcomes rather than face-time will be a big step in the right direction. Again, that will yield better results because part-time workers can actually contribute more. If you have a great person, that person is going to be great whether they are working part time or full time. If you have a dud, they are going to be even more of a dud. That is an even bigger drain if they are there all the time.
Neil Carberry
I was just reflecting, while Ann was saying that, on a conversation I had with a senior partner of a City firm years ago. They said, “The problem with all this is that if my client phones up and wants someone in Lagos on Monday morning, that person has to go to Lagos on Monday morning.” I said, “Oh, really? What, they want is somebody from your firm? Surely they don’t want one particular individual from your firm, because that is saying that that individual is the service you supply, rather than the outcome of the excellent service that your firm supplies.” We are on the cusp of a couple of big changes that will help with this. We are on the cusp of a couple of big changes that will help with this. While technology has the capacity to have people on all the time, whether they are full or part time, it forces you to be much clearer about your expectations of people and when they are on and when they are off. Many of us have had times where we have said to our employers, “I’m not doing anything in that box.” The other thing is that I think it is not a women’s issue. City firms have started saying to me in the last couple of years, “We don’t know how to deal with millennials in the same way as we have before. The model is: we get them in, we pay them quite a lot of money, they work hard, they get mortgaged up and they stay.” That is not where young men and women are now. That is not their expectation of the labour market. Those two things force you towards what Ann was talking about: a much clearer definition of what people’s input is, and then the real challenge, coming back to what I said earlier, is getting managers to manage on outcomes. If you are in the office, that is not production. Production is the outcomes that we have asked you to deliver, and that is a clearly and strongly held view among the chief executives in our membership.
Chair
I am keen to move on to the next area of questioning, because I am not chairing this as well as I chaired the last session. I apologise.
Maria Caulfield
First, I disagree that the public sector is not similar in that sense. If you talk to any GP who is part time, you find they are full time really; they just get paid part-time hours. It is the same for teachers. We have heard in this and the previous session about the benefits of closing the gender pay gap and that the gap really does exist, however you measure it, and that the organisations in the public or private sector that do manage to do it perform better, so what can we do with those organisations that, even with that strong argument, are not moving towards closing their own gender pay gap?
Ann Francke
Transparency. I applaud the Government initiative to require firms with over 250 employees to report on gender pay. Please do it by level of manager or quartile; if you publish a single number, it is misleading. Also, it needs to be tracked over time, because you will see 6% for the younger generation of managers and 35% for the older women, but that 6% could become 35% over time, unless you track it over time. That is a huge driver. I would encourage you to have companies report on the levels of management by gender as well. Transparency is one of the most effective policies the Government can adopt to drive change. Again, looking to the McKinsey study I cited, the firms that made the most progress between 2012 and 2015 were those that set targets and measured against them. So that is the single biggest thing you can do.
Neil Carberry
To build on that, the CBI had doubts about section 78 of the 2010 Act. As you have heard from me already, we back action and feel that businesses should be doing more, but we were a bit worried that it would become a highly process-driven, tick-box exercise and not the kind of thing that drives real action within companies. We are working with Ann and others in the GEO to try to make sure that the outcome is a good one. There are two things the Government can do: test the actions that companies say they are doing in response to the data, not just the data; and help people understand the difference between equal pay and the gender pay gap. There are instances of illegal equal pay and that is a contributor to this, but there is the law and there is enforcement around that. These are much deeper cultural factors. We have talked about things inside business. The other thing is that there are bits of this that Government control, such as careers advice, which is not very good for anyone. It is particularly not very good for young women. We did a study a couple of years ago of 2,000 young people and what came back very clearly was that young women and young men got different careers advice. Young women got much more down an academic route; young men got a range more towards the vocational side. If you want to know why the largest gender pay gap is in skilled trades, it is because there is no impetus towards addressing that and opening up some of those routes in for young women in the school system.
Chair
We are focusing here on older women. A lot of them will be coming back into your organisations and businesses after having career breaks. What support and advice are they getting at that stage about re-skilling and retraining to ensure that they can play a full and active part until 67 or whatever it will be?
Neil Carberry
There was some good news in the autumn statement in terms of some further investment in adult skills. I think it is important to support smaller businesses in particular withhow they can enable retraining for their workforce, whether people have been in the workforce throughout and need to jump between technology cycles or whether they are coming back. There is also the question of flexibility, because we are moving rapidly towards the four-generation workforce and, coming back to something Monika said earlier, the social expectations on older women are as much about the generation above them as their own children. Addressing that, ensuring that it is more of a shared challenge and that there is a superstructure around things like elder care for male and female workers, are really important challenges for the Government.
Monika Queisser
If you want to address it from a public policy perspective, it is important to separate the different groups that you are trying to target, because we are talking about very different things. When talking about top managers, for example, we often focus on what I call the glam-chicks—people who are on a track and hit the glass ceiling and that is where we know the gender pay gap is the largest. But we are also talking about many other people for whom the gender pay gap is perhaps simpler to address because they are part of trade union negotiations or because the minimum wage plays a big role, as was mentioned by the previous panel, or because other work conditions and childcare and overall elder care arrangements play a role. I think you have to segment it and look at which part of the problem you are trying to solve, because different segments of the problem will require different policy solutions. Lots of women who are coming back now have very high skills. In your target group, women in their 40s, there are many well educated women, so upskilling and obviously re-skilling are part of the issue, but so is building their negotiation power. In some ageing societies, where we already see people starting to get worried about not having enough skilled labour due to an aging population, you can see that women’s negotiation power for more flexibility, for shorter working hours and for the responsibility that comes with higher earnings is already working. Take the chemicals industry in Germany, for example: there are not a lot of women there, but the women who are there are now being pampered by employers. There is much more flexibility, because if women say, “Okay, I will just stop or only work very few hours. If you don’t give me this flexibility and this responsibility, with everything that comes with it, I will leave.” One needs to bolster that and boost that type of confidence in negotiations.
Ann Francke
Building on the policy point, the other thing is that the Government have set an ambitious target for apprenticeships, some of which could helpfully be directed toward this group of older women who want to return into work, as a way of helping them to take that step. Also, somebody told me that to hit the 3 million target every single school leaver has to do an apprenticeship, which is probably, with the best will in the world, a little unrealistic, but it is a great ambition. Include some of this group in that target.
Chair
What is standing in the way of that happening right now? The money is there and the scheme is there, so what is stopping that happening?
Ann Francke
This is the question that Jess asked earlier and it something that probably perplexes all of us—certainly me. Evidence doesn’t always change behaviour: we have compelling evidence, the stuff is there and people could make use of it, but they don’t. It is about being quite relentless and saying, “Actually, there isn’t one thing that we have to do; there are many.” It’s about rewarding people who do change their behaviour and making exemplars of them—giving them knighthoods or whatever it is. The triangular relationship between the Business Secretary, Women on Boards and the employers themselves was very effective; the Davies report was very effective. Initiatives like that that constantly highlight the need to change behaviour—those are all things that can be done. The media has played a big role, and a positive one, because it keeps it in the spotlight. There is no single thing, though.
Neil Carberry
I have a specific answer on the question of apprenticeships. Our concern about where the apprenticeship programme is now is that although 3 million is a valid target if you do 3 million at a quality that really helps people’s career, whether they are early-career, mid-career or late-career, if you look at the 2.4 million starts in the previous Parliament, the vast majority of them were at relatively low skill levels. Now, that was great provision, helping people to integrate into the labour market, but it was not the level 3, 4 or 5, HND or HNC-equivalent provision that is really valuable to our members in addressing skill shortages. That is also the stuff that women over 40, for instance, would need to be able to jump between those technology cycles and build their earnings. One of the roles for the new institute for apprenticeships should be to be really rigorous and independent about making sure that those frameworks are available. Government, business and business representatives should then really start to engage with those programmes, because although, for instance, level 4 apprenticeships went up significantly in percentage terms over the previous Parliament, the numbers are still very, very small compared with lower-skill qualifications.
Monika Queisser
I also think that you have to work a little bit more on the demand side, by which I mean with women themselves, because it is not clear to many of them how much they will have to do from their side. Entering into a new apprenticeship is a lot of work, particularly if you have stopped working and still have children at home. One thing that I find is not mentioned enough in the public discourse is that divorce has become one of the biggest social risks. It is not only about pensions that are out there somewhere later; divorce is a real risk that can put people into poverty overnight. Many countries have been tightening child support legislation and expect women to go back to work almost full time much sooner than before, but the women don’t have the capacities or the labour market to be able to comply. That needs to be highlighted more.
Chair
And the importance of independence for that.
Monika Queisser
Exactly.
Angela Crawley
Just to come back to the point about modern apprenticeships, perhaps we need to look at how we brand them. I think Ann made the point that we present them as an opportunity for young people; perhaps we should rebrand them and present them in a different way for women who are returning to work. What are your views on that?
Ann Francke
Really, what you are talking about with apprenticeships is upskilling your workers. The UK has a productivity problem, and the OECD has identified management and leadership as one of the biggest creators of that problem. Managers and leaders have been highlighted as a key element of improving the gender pay situation. If, for example, you upskill workers at every level in management and leadership, you are going to have a triple effect: you are going to help the gender pay gap, help older workers to return to work, and improve productivity. That is one of the biggest single things you can do. There will be other skills—engineering and so on—where there are huge skill gaps, where again there can be apprenticeships that are relevant to every age group. So yes, perhaps rebranding them would be a good thing.
Neil Carberry
It is important to say that the challenge is different in different jurisdictions. In England, the challenge is growing those level 3, 4 and 5 apprenticeships. In Scotland, for example, MAs do more at that higher skill level already, but they are probably not as broad in terms of sectoral coverage as they need to be to make the difference. There is a live debate in each of the four jurisdictions about how you evolve the system to make it work effectively for this group and other groups in the labour market.
Ruth Cadbury
I wondered whether we could pick up a couple of things from the earlier panel, given that two of you are engaged in the employer side. The session has focused quite a lot on the top end of the labour market, but we were talking earlier about the lower end of the labour market. Particularly, we have glossed over the progression into supervisory roles, the lack of progression at the bottom end of the market. I wondered whether either of you had any responses on that point.
Neil Carberry
I have probably mentioned the national minimum wage here, so I should declare an interest, which is that I am a member of the Low Pay Commission, but any comments I make about NMW will be with my CBI hat on. A substantive change has clearly been taking place in our labour market over the last 30 or 40 years. It is often called the hourglass effect, but when you look at the data, it is not that the middle of the labour market has disappeared; it is just that it looks different and it is slightly higher skilled. The challenge increasingly is how you help people to enter the labour market on the national minimum wage, and we know that one of the benefits of raising the national minimum wage is always its disproportionate benefit to women. How do you help them progress, either through companies or, and we have to be clear that there are lots of organisations where there is a broad base to the pyramid, between companies? There are two things that we can do. First, as we did at our annual conference in 2014, we can really encourage and shout from the rooftops when companies are doing strong and positive progression work, which we know helps you hold on to people. Again, managers really matter: we did a number of focus groups with people who progressed through organisations in care or in retail—some of these high employment number, high flexibility businesses—and we found that it was always about having the right line manager to encourage and push on. Secondly, what can we do to make sure that the public employment services are genuinely helping people to think about how they develop their career? One of the challenges for Jobcentre Plus, which is more than anything a benefits payment agency, is how it can recover when working in partnership with some of the private sector providers more of a labour exchange role, helping people to think about career development.
Ann Francke
Your question was about encouraging more women to go for managerial, supervisory roles—
Ruth Cadbury
To go from the basic up to the supervisory, but even there, there seem to be barriers.
Ann Francke
Absolutely, there are barriers. We look at managers and leaders at every level and we can see the staff, that 60% of junior managers are female, but 40% of middle managers are female. You can already see that glass pyramid effect. What can be done? Better line management, clearly, because one of the biggest causes of lack of diversity is that line managers are not trained—we call them the accidental manager. Four out of five managers in the UK when promoted get promoted on the basis of functional skills—they are a great salesperson or accountant, so they are told to run the department, but are given no training. Tackling that issue is very important. In terms of supporting the women, on encouraging women to put themselves forward, we know that women are less likely to put themselves forward than men are. If women meet nine out of 10 criteria, they will obsess over the one that they do not meet; men meet six out of 10 and say, “Of course I’m the best person.” Another thing is what Neil said about going back into the schools and providing career services for women—and education in general. We have to tell women, “You have got to work at this, because if you don’t, you will face that pyramid. There are many other suggestions that can help improve things, such as trumpeting role models, because women see an absence of role models in their organisation. Then the last thing is making sure that men see and appreciate this and are agents of change. A lot of the research shows that, again, from managerial populations, women are two, three or four times more likely to say, “This is an issue for me.” Men don’t see gender as an issue.
Angela Crawley
We have covered part of this in terms of flexibility and reducing the gender pay gap, but what is the evidence that by encouraging flexible working, productivity will increase? What are the barriers to increasing flexibility and can they be overcome?
Monika Queisser
Those are really good, important questions, but we do not have the evidence yet. We were interested in that, and we started to look across the OECD, but there is surprisingly little evidence so far about the details of how people work part time or full time and how that affects productivity, apart from the fact that if people want more flexibility, they will be happier workers, and we know that happier workers will be more productive. Unfortunately, we have yet to measure this on an overall macro basis, so I have to say bear with us—we are working hard on this and hope to have a little more evidence. Overall, the flexibility-job satisfaction link is an obvious one.
Ann Francke
Yes.
Chair
May I press you on that? If you have the G20 Brisbane agreement, are there not metrics that you will be measuring if you are proposing to close the gender pay gap by 25%?
Monika Queisser
The G20 target is primarily about the labour force participation of women and how many hours they are working. That feeds into an overall macro-growth model that does not single out productivity; it is a fairly basic input-output model.
Chair
Could it do that?
Monika Queisser
You could probably arrive at a more sophisticated model for the G7 countries, but the G20 countries include China, India and South Africa, so that would be much harder to do, due to data. Again, you would still be far away from considering the gender pay gap because we are driving down to gender specifics, such as who makes how much money, because you have the overall wage sum in that model.
Ann Francke
I think the book I have with me is great and I will give it to you if you are interested in flexible working, because it talks about the barriers and the stupid stigma that if you work flexibly, you are not as valuable—it is presenteeism. It recommends that you don’t make flexibility an iron-clad policy, because flexible working means different things to different individuals, so don’t make it “flexible working looks like this, and only this.” It is about a conversation with your employee about what works best for them. This book is claiming that flexible firms do get boosts in profits. The EY study I mentioned also shows that flexible firms get boosts in productivity and that the flexibility benefits men as well as women. I think that there is evidence of its benefits, and the biggest barrier is that those flexible workers are stigmatised because of this notion of presenteeism.
Neil Carberry
We know that employee health matters and that it has an impact on productivity. People get stressed when there are clashes between different areas of their work life so, by definition, it is logical step that flexibility reduces stressors in employee health, and makes workplaces more productive. There is work to do to draw those lines, but we have members who have done work that shows that that is the case. One member, for instance, has found that investment in employee health, de-stressing and flexibility leads to lower physical accident rates in the workplace. If you have a physical accident, that shuts the whole place down for at least a couple of hours. There is plenty of anecdotal evidence that employee health matters.
Ann Francke
We will soon release a study on the quality of working life. The last study showed absolutely that there is a clear correlation between stress in the workplace and whether the company is declining or growing. The bottom line is that if people are stressed, the firm is much more likely to be declining than growing. We will update that study shortly, and make sure that the Committee receives it. It will probably show a similar relationship.
Monika Queisser
And for your subject, looking at women over 40, there has also been a lot of work done on the situation of older workers and how productive they are. There is a myth about people being less productive, but excellent studies have been done that show how much experience on the job compensates for less reactivity in age, so that, with very simple workplace adaptations, there is no net loss in productivity whatever.
Mims Davies
We heard a bit from Monika earlier about how other countries are dealing with the gender pay gap. Looking at UK plc as a whole, are there some really great things that other countries are doing that would fit best with us? We hear a lot about Scandinavia, and we are clearly not Scandinavia. What can we bring to make a difference?
Monika Queisser
Like I said before, there are the two levers that countries have. You don’t have to be Scandinavian for this, because even very conservative countries such as Germany have instituted parental leave for fathers with non-transferrable months. Before the reform, about 3% of fathers took leave days. With that extended leave, now about a third of fathers take leave. That has happened in a very short time. It is a hugely successful way of getting a better balance of paid and unpaid work. The Germans want to go further. It is not legislated yet, but there is a plan. They would like to talk about family working time, which gives the possibility, when you have young children, for women to increase their hours and for men to decrease theirs. You take the family as a unit, rather than the individuals. You look at the partners, and support that with public policy. It is still only at the planning stage, but we are looking into it, together with a country, to see what the possible impact would be. Our preliminary estimates show that you would not lose any working hours, but you would distribute the work differently between the partners. That is very novel. Childcare is hugely important, not only for partnered couples with children, but, in particular, for women who are sole parents, for whom this issue is no longer regarded as a choice. It is no choice; these women have to work when they are single mothers. It is not possible for them to keep their children out of poverty if they are only on benefits. That is in the vast majority of OECD countries. Those are the two levers that every country should be acting on and making better. Earlier the panel mentioned out-of-school hours. It is important to focus not only on small children. Often, the trouble starts, as you pointed out, only when children start going to school, and the hours become unpredictable and vary from day to day. Much more has to be done there, and I think the UK could do much better on that.
Chair
Anything else to add on that?
Neil Carberry
I was going to say two things. First, on the position of other OECD countries, I always look at the labour market participation rate for women and the form of that participation, as well as the gender pay gap, because I think that tells you a lot more about where labour markets are. Italy has one of the lower gender pay gaps, but one reason why is that it has a very traditional labour market model and only about 50% of women work. When you look across the piece, it is pretty clear that finding a way to navigate towards genuine flexibility in the workplace is important. The UK has done some good stuff in comparison with others. It is one of the few areas in which I often represent British employers in the European social dialogue. It is the most comfortable area for us, in comparison with our sister federations across Europe, because we are ahead of the game—whether on shared parental leave or a commitment to flexible working. Yes, absolutely, we haven’t driven that through our organisations in the way we need to, but the business community is very open-minded about having a discussion about what policies will work in the UK. Coming back to the core question, I think the Agile Future Forum’s work on this is really helpful. How do you build a system that works for business and employees? We need to think about employees, because that is how you solve the issues that women over 40, working mums and single mums have in the labour market. One of the issues when you are designing policies for families is that you risk designing policies that work against single mums. If we deal with solving the problems of flexibility of the whole labour market, you will disproportionately benefit some of the groups that the Committee cares most about.
Chair
Could we move on to our last area of questioning? Ruth, I think you are going to lead that.
Ruth Cadbury
Which measures do you think are likely to be successful in getting UK employers to address the gender pay gap? To what extent is it Government’s role in legislation, and to what extent is it changing and improving cultural norms?
Neil Carberry
The first and foremost thing is to get companies into a position where they are owning the problem. If they are in the group of businesses that will be reporting under section 78, they are looking at the numbers, but the numbers are not for comparison with that lot down the road; it is, “These are our numbers; now how are we going to change them?” That is about engagement with management—we have talked a lot about managers in this session—and the offer on flexibility. It is about, for instance, what to do with occupational parental benefits? One issue that a lot of our members are wrestling with in the lee of the introduction of shared parental leave is how to equalise occupational maternity leave so that you are giving more support to fathers who want to choose to take time, which again unlocks some of the benefits that Monika was talking about. Then there is a second string of issues, which is what we can do as businesses collectively and individually with Government to work with FE colleges and providers on retraining for women over 40 and issues like careers. There has been a real sea change in the business community about doing that.
Ann Francke
I think about the biggest drivers. If I look at the US, it is in some respects better than the UK in dealing with these issues. They have not used legislation, but done something that you could use policy to do here. The big drivers of change have been around transparency championed from the top. This is about the CEO saying, “Yes, I am going to close my gender pay gap and, yes, I am going to close my talent pipeline gap. I am going to set an aspirational target and have 40% of women in managerial positions by 2020, and I am going to track and report on that target.” It is that cultural change, led from the top, and the setting of a target and constant reporting on it. And it is the social affirmation, so making a big deal out of that, making that CEO feel proud and reaping the rewards. You do have examples here. Paul Polman has done that at Unilever. Look at Glassdoor and LinkedIn: Unilever now gets the best talent. Everybody wants to work at Unilever instead of the City, even though it is not paying as much. It can work here. What you are doing in terms of requiring transparency is a huge enabler, because you are going to ask companies to report on this. Again, I think you have to do it by band and have a “stick to it” attitude and track it over time. You could publish league tables and make it easy to access and compare. I believe comparability is key, because you do want that as a driver of change. Comparing with peers and sectors is a driver of change. If you really wanted to solve the issue of women in leadership positions, which will drive cultural change—that is why it is also disproportionately important—you could champion or require integrated reporting, where they have to report on things like employee engagement and the gender of their various work populations by level. Those are the things that I think you could do.
Monika Queisser
There is a hot potato that nobody has mentioned: the quota issue. Some of our member countries are going down that route. I am just putting that out there. I know that in some countries that is not acceptable, but you see it at European Commission level. The first attempt was unsuccessful, but they keep pushing for this. Even very conservative countries are going in that direction. Although they are trying to make it softer, it is a kind of quota, but it goes more in the direction that Ann was describing. Two more things can be done. The Netherlands has been mentioned. Part-time workers have the same social benefits and protection coverage as other workers. That is a really important part, because in many countries we still have the exclusion of part-time workers from many of the occupational benefits—most importantly pensions, and also full healthcare plans and any family benefits that companies may offer. Business routinely says to us, when we ask what they want from Government, “Lead by example,” and that is not happening, unfortunately. We are looking at the public sector and it is not all that better than the private sector.
Ruth Cadbury
All the public sector or Government?
Monika Queisser
The public sector in general. If you look at judges and other high-level occupations, you have gender pay gaps and not enough women at the top. There are plenty of lower level women, but they do not make it up in the same way. It is difficult for Governments to ask something of the private sector if they are performing so badly themselves.
Chair
Can I ask one final question to make sure I am clear? We have touched on it a little bit, but I did not get an overwhelming feeling from any of you that you felt the problems affecting women over 40 were simply going to disappear because the next generation will have got it better. Am I interpreting you correctly? Neil Carberry indicated assent. Ann Francke indicated assent.
Monika Queisser
Again, the leadership issue will never disappear. We need to do more in companies—all those things that you said—and we need to hold people accountable for not promoting women. You may need quotas to a certain extent. In some countries, that is a reason. Even the Commissioner, who was really convinced, said, “I do not like quotas, but I like what they do.” Maybe some countries have found there is no way around that. That problem will not go away by itself. Are the qualification issue and the flexible part-time, full-time work problem going to be smaller? I believe they are. Already women in their 40s are so much better educated. With the younger women coming up now and with much more convergence among the millennials, for example, about their aspirations in the combination of personal and work life, we will see some of this gap disappearing. If you look at even those very advanced countries in Scandinavia, there is not a single country—not even Sweden or Iceland—that has no gender wage gap.
Chair
That is important. Ann, I have read your views on this—you have made them quite well known—but do you want to add anything?
Ann Francke
Well, it is in the written submission. In 2005, there was a 16% gap for 45 to 49-year-olds and 26% for 50 to 54-year-olds. If we take the average, what was it? I don’t know; 20%? Today the gap between 46 and 60-year-old women versus men is 35%, so it has gotten bigger. The notion that this will resolve itself over time is flawed.
Neil Carberry
I slightly disagree with Ann, which is always a dangerous thing to do. I think it will get better because there are some big megatrends around technology and flexibility, and the way millennials are, that will help, but it will not happen quickly enough. It is the old Keynes thing: “In the long run we are all dead”. If we close the gender pay gap in 50 years’ time, that is not quickly enough, so we need policies around it. As you might expect, we are deeply resistant to quotas, not least because that is not something that enjoys, in our experience, widespread support among female employees in our member companies. What they are looking for is a fair deal and decent management. We should focus on the outcome of delivering that, rather than the output measure of quotas. You are right, Monika: quotas move the numbers, but I don’t know whether they move the numbers in a sustainable way. The Norwegian example—
Jess Phillips
You need to sustain the quota—arguably.
Chair
And on that note— I am sure that that will be one question that we will debate as a Committee. I am sorry that we have overrun, but it was a very interesting conversation. I cannot thank you enough for the submissions that you have already given us, but also the evidence you have given today. Thank you for your time. I know you are all extremely busy and it has been really interesting to have you here. Oral evidence: Gender Pay Gap, HC 584 23