Women’s pension savings and incomes are significantly lower than men’s. Earning less, doing less paid work, saving less, investing too cautiously, and lacking interest could all be to blame. Prioritising your pensions and other savings could help you build a brighter future.
According to the Office for National Statistics, for every £1 earned by a man in the UK last year, a woman earned 83p. This is what’s known as the ‘gender pay gap’ and at the end of October 2019 in Great Britain it stood at 17.3%.
When we looked at the underlying data, we found the pay gap is at it’s widest in the South East (20.5%) and the East of England (19.1%). The ‘best-paid’ jobs ¬– such as finance, medicine and engineering – have the largest pay gaps.
It’s larger for women in their fifties (25.3%) and for those with part-time jobs in the public sector (26%). And in 2017, research by the Fawcett Society and the University of Manchester found that women of colour suffer the most significant pay gap differences.
One piece of positive news reported by the Commons Library: the pay gap for all UK women has reduced slightly from 17.8% in 2018. And for women under 40, Office for National Statistics data suggest the pay gap has almost been eradicated. A move in the right direction but still a long way to go.
Just what is causing such a difference in male and female earnings 50 years since the Equal Pay Act was passed in 1970? According to the British Library in March 2013, back in 1970 women earned about half the salaries of men in manufacturing and the professions. Yet in almost every career, we’ve seen headlines that demonstrate working woman from doctors (Feb 2018) , to BBC TV presenters (June 2018) to female council workers (June 2020) are still being paid less than their male colleagues for doing work considered to be the same or at least equivalent.
One argument made is that women don’t ask for pay rises as often as men do. But research by Marketplace and Edison, a US non-profit news organisation, in June 2019 showed women do ask. They’re just more likely to be refused.
The Institute of Fiscal Studies has suggested in Feb 2018 that because more women than men take time out of work to care for their families (both children and older relatives) this affects their earnings when they return to the workplace. There’s certainly growing evidence to show just how badly taking time out affects a woman’s career prospects and pay, as the Institute for Women’s Policy Research reported in November 2018.
But the pay gap is not just about being penalised for taking time away from work. In April of last year, the Sunday Times reported that women earn less from their very first job. Female graduates earn an average £3,500 per year less than their male equivalents: £24,500 and £28,000 respectively.
We have said that the highest paying industries are finance, medicine and engineering. And one reason for the pay gap could be the relatively lower participation of women in these industries.
It is widely acknowledged that fewer women than men study Science, Technology, Engineering and Maths (STEM) degrees, and analysis by the recruitment agency STEM Graduates certainly backs this up. Only 15% of engineering grads, 19% of computer studies grads, and 38% of maths grads are female, preventing more women from entering the STEM-based careers. Only 13% of the UK’s total STEM workforce is female.
So, directing our daughters towards these subjects could boost their future earnings. But there is depressing evidence that even in these fields, women earn less than men. Academic research by Harvard Business Review in 2017 showed the average male maths major earns $60,000 a year in his first five years out of school, while the average female maths major earns only $49,182.” That’s an $11,000 gap at the start of a career.
It also appears that once women move into a field, the roles there become less well paid. The same Harvard Business Review from April 2019 argues that wages for biology and design careers used to be higher when more men than women chose them. As these areas have become more female-dominated, wages have fallen. And for computer programming – initially a female field that has become more male – the reverse is true. It’s now a very well-paid sector.
As this report from The Institute of Fiscal Studies in May 2020 reminds us, the burden of childcare, housework, cooking and other family commitments continues to fall on women rather than men. Even during the pandemic. As a result, women tend not to work such long hours. Related to this, a House of Commons Library report from March 2020 found that 40% of the female workforce works part-time and this is seen as an obstacle to promotion and better pay.
But as Personnel Today reminded us in April 2019, spending longer hours at work does not necessarily make you a more productive member of staff.
Maybe a gap of 17p per hour doesn’t seem too big a difference. But over a lifetime of working it can be very telling. If you are paid less than your male equivalent, then whenever pay rises go up by a fixed percentage, your pay will go up by less and the gap expands. Every month, less money is paid by your employer into your pension fund. Year by year you will start to fall behind your male equivalent, not just in your earnings, but in your total personal wealth.
It means you could struggle to save as much as your male colleagues which has two consequences. Not only will you have less to live on in retirement, but you will have to make it last longer as ONS data from 2016 to 2018 shows that women live longer than men. And, of course, it means you could have less to hand down to your children or grandchildren.
It’s no wonder that even in 2019, Fidelity International found that nearly a quarter of women face their retirement planning with anxiety.
Women owe it to themselves, to their daughters and to all the other women in the workplace, to tackle this gap. The question is: how best to do that?
Back in March 2005, the Harvard Business Review looked at the topic of why so many women struggle in their careers and found that while there are many “off-ramps” for women to halt or even drop out of their careers, there are very few “on-ramps” to support them back into the workplace. Very little seems to have changed in the intervening 15 years.
The UK’s biggest companies now have to publish their gender pay gaps every year. It’s very important that we all talk about the ongoing gap. The more awareness there is around it, the more we can call it out and begin to put it right.
Are you sure you are being paid fairly? You might want to talk to your colleagues about pay rates, to your company, or HR department, or your line manager. You can do your research by contacting local employment agencies to find out what they consider to be a fair rate for your work or look up industry and national surveys.
If you’re daunted about discussing this with your employer – perhaps you’ve never asked for a raise before, you’re uncomfortable talking about money, or you’re worried your employer will react badly – then you could take a colleague with you into the meeting. Or bring in some outside help, maybe someone more senior from a similar profession. Be well prepared for your interview and ask to be paid fairly.
Ultimately, if your employer won’t meet your needs, it may be time to find one who will.
Both women and men need to speak up about this issue at work. Compare the sections where more women are employed, are they being paid fairly? Personnel Today reported in March how Asda has had to explain to the courts why the predominantly male distribution centre staff were paid more than the mainly female shop floor staff. Don’t be afraid to speak up on behalf of younger female colleagues, who may need your help to redress balances.
Set your own sights high at work and actively seek promotion and the better-paid positions. What training could you do to prepare yourself? What responsibilities could you take on? And, very importantly, what responsibilities at home or away from work could you pass on to a partner or others?
Don’t count yourself out because you work fewer hours. Be inspired by the companies and senior executives who manage their workload extremely well on a shorter or flexible week as reported on by the Edinburgh Evening News in May.
Many companies are now focused on closing their gaps by encouraging women into more senior roles. They appreciate that more diverse leadership teams lead to better business outcomes. Flexible working, home working and on-site nurseries are gradually becoming more regular features of company life.
There are only benefits to making sure you, and your female colleagues, are paid on a par with your male colleagues.
Your personal income and personal wealth will increase. Your pride in your work will benefit, along with your feelings of self worth.
By fixing your financial wellbeing, your overall wellbeing will be improved. Having a more secure present could relieve immediate financial pressures. A better role with better pay could allow you to save for a better future.
Having more control and confidence in your financial future can in turn provide you with better peace of mind.
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