The gender pay gap (GPG) within the financial sector and particularly in senior leadership roles is extremely significant. We find that the glass ceiling theory exists and contributes to the GPG through a lack of appropriate policies for women, such as good access to affordable childcare facilities which, in turn, contributes to women’s underrepresentation in top management jobs. The GPG is an overlooked phenomenon. Twenty three years ago, London had the smallest GPG in the UK, but in 2017, it had the largest. But why is this the case?
The ONS defines the GPG as the difference between average hourly earnings of men and women as a proportion of average hourly earnings of men’s earnings. This measure excludes overtime as men often work more overtime than women. It also uses hourly earnings which ensures differences in hours don’t affect results (ONS, 2019). There are many different measures of the GPG which may affect the results given. So does this mean the GPG is actually being targeted? These measures do not account for the GPG within the same job (Eurostat, 2018). Although companies do record the median value of the GPG, the median is used as a better measure of pay, otherwise results may be affected by the presence of a small number of people on very high levels of pay.
According to Barr et al (2019), finance is one of the worst sectors for women to work in as for every pound earnt by a man, a woman would earn 77 pence. Statista (2019) shows mean GPG of full-time employees in the financial and insurance sector in the UK was 32.6%. The GPG is extremely large in the financial sector. There is a significant underrepresentation of women in senior leadership roles. Women who work in leadership roles also have a significantly shorter tenure than men (Blau and Kahn, 1999). This is because of the GPG and the Glass Ceiling Theory.
The glass ceiling is the idea that women are prevented from obtaining leadership roles (Ryan and Haslam, 2008). Some women reach top levels of management, however they come to find that the pay gap is even bigger. The GCI measures where women have the greatest chance of equal treatment by ranking countries on 10 indicators of workplace equality. In the UK, it is below the OECD average of 58 where 100 is the best (The Economist, 2020).
Of course, some women break the glass ceiling, but they then may suffer from significant constraints post promotion due to the high-risk leadership position and may lose their job which is less likely to be the case for men. This is because of gendered stereotypes, where women are seen as unable to lead (Broadbent and Kirkham, 2008).
The child penalty refers to having children which then decrease a women’s life time earnings. This takes effect as women reduce the number of hours they work, exit the labour force or switch to more flexible jobs which tend to be lower paid (The Economist, 2018). The GPG narrowed between 1980 to 2013, but the child penalty was approximately 50% of women’s earnings relative to pre-child earnings. After this period in 2013, the child penalty accounted for majority of the remaining GPG (The Economist, 2018). Therefore, their presence is an obstacle in terms of women achieving and maintaining senior management jobs as the finance sector is associated with long working hours (Healy and Ahamed, 2019). Women may also be looked at differently as bosses may assume women will simply leave due to familiy commitments and be relcutant to promote women to senior leadership roles. This is supported by research of Fortune 500 companies. 26% of women left leadership positions compared to only 14% of men due to women becoming disatisified with their working life due to limited career opportunities (Stroh et al).
The progress in GPG in the financial sector has been too slow despite government pressure to close the gap. This suggests a need for urgency in tackling the GPG (QMUL, 2019).
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Eurostat, 2018. A Decomposition Of The Unadjusted Gender Pay Gap Using Structure Of Earnings Survey Data. Statistical working papers. Luxembourg: EC, pp.5-32.
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