1

The Minimum Wage and Gender Equality

ESRC GeNet Conference on

The Credit Crunch: Gender Equality in Hard Times6th March 2009

William Brownwith warm thanks to Low Pay Commission staff

2

Women in the labour market

• Rising proportion in employment: - women in workplaces of 25 or more rose 38% to 48% between 1980 and 2004

• 40% of women work part-time• Three-quarters of part-time workers are female• Women’s membership of trade unions is now same as for men• Activity rates (16-59/64, 2008iv): women men

– Employment rate 70% 78%– Unemployment rate 5.7% 6.9%– Economic inactivity rate 26% 16%

• 29% of women compared to 13% of men are employed in the public sector (2006)

• Two-thirds of employees in low-paying occupations are women

3

Source: LPC estimates of LFS Microdata, data not seasonally adjusted, calendar quarter, Q2 2008

Gender segregation tends to be higher in low-paying occupations

0

10

20

30

40

50

60

70

80

90

100

Se

curit

y

Ag

ricu

lture

Fo

od

pro

cess

ing

Le

isu

re

Ho

spita

lity

Cle

ani

ng

Re

tail

Te

xtile

s

So

cia

l Ca

re

Off

ice

wor

k

Ha

irdre

ssin

g

Ch

ildca

re

Lo

w-p

ayin

go

ccu

pat

ion

s

Oth

erO

ccu

patio

ns

All

occ

up

atio

ns

Low-paying occupations

Pro

po

rtio

n o

f m

ale

an

d f

em

ale

em

plo

ye

es

(p

er

ce

nt)

Men Women

4

What has happened to the gender pay gap?

• Gender pay ratio = women’s earnings as a percentage of men’s (e.g. 85%)

• Gender pay gap = percentage difference between women’s and men’s earnings i.e. 100% minus gender pay ratio (e.g. 15%)

• Annual gender pay gap > weekly > hourly– Difference in working hours and additional payments

• Mean pay gap– Used for international comparisons– But includes extreme earnings– Less stable

Used here: median gross hourly pay excluding overtime for full-timers, aged 18 and above

5

The gender pay gap 1997-2008lowest decile and median declining; upper static

Source: LPC estimates based on ASHE without supplementary information, 1997-2004, ASHE with supplementary information, 2004-2006 and ASHE with supplementary information new methodology, 2006–2008, normal weights, UK.Note: Care should be taken when comparing ASHE series. 18+, full time workers.

Year

Lowest decile

MedianUpper decile

Lowest decile

MedianUpper decile

Lowest decile

MedianUpper decile

1997 4.44 8.19 17.24 3.87 6.87 13.83 12.9 16.1 19.71998 4.62 8.54 18.10 4.08 7.14 14.44 11.6 16.4 20.21999 4.85 8.85 18.89 4.29 7.46 15.22 11.5 15.7 19.42000 4.94 8.87 19.45 4.41 7.65 15.67 10.8 13.8 19.42001 5.15 9.32 20.84 4.65 8.02 16.54 9.7 14.0 20.62002 5.40 9.72 21.94 4.88 8.41 17.43 9.6 13.5 20.62003 5.63 10.03 22.53 5.11 8.75 18.00 9.1 12.7 20.12004 5.81 10.48 23.44 5.36 9.21 18.94 7.6 12.1 19.22004 5.76 10.36 23.02 5.33 9.10 18.75 7.5 12.2 18.62005 6.00 10.80 24.24 5.60 9.60 19.76 6.7 11.1 18.52006 6.24 11.22 25.38 5.84 10.00 20.28 6.4 10.9 20.12006 6.20 11.14 25.25 5.75 9.86 20.12 7.3 11.5 20.32007 6.50 11.61 26.25 6.08 10.34 20.87 6.5 11.0 20.52008 6.73 12.16 27.27 6.25 10.74 22.16 7.1 11.6 18.7

MenPer cent£ per hour

Women Pay gap

NB: ONS figures are higher than ASHE figures as they only included workers on adult rates

6

The gender pay gap by percentiles: 1998 - 2008gap increases with the earnings distribution - but has narrowed at lower levels

Source: LPC estimates based on ASHE without supplementary information, 1998, ASHE with supplementary information, 2004 and ASHE with supplementary information new methodology, 2006–2007, low-pay weights, UK.

Note: Care should be taken when comparing ASHE series.

0

5

10

15

20

25

30

35

40

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Percentile point of hourly earnings distribution

Ge

nd

er p

ay g

ap

(pe

r ce

nt)

for

full-

time

em

plo

yee

s a

ged

18

an

d o

ver

(pe

r ce

nt)

0

5

10

15

20

25

30

35

40

1998 2006 2007 2008

7

The gender pay gap varies by age…

Source: LPC estimates based on ASHE without supplementary information, 1998-2002 and ASHE with supplementary information new methodology, 2006–2007, low-pay weights, UK.Note: Care should be taken when comparing ASHE series.

-15

-10

-5

0

5

10

15

20

25

16-17 18-21 22-29 30-39 40-49 50-59 60+

Age

Me

dia

n g

en

de

r p

ay

ga

p b

y a

ge

gro

up

, fu

ll-tim

e e

mp

loye

es

(pe

r ce

nt)

1998 (*) 2002 (*) 2006(new) 2007 2008

8

…and by UK country

Source: ASHE with supplementary information, 2004-2005 and ASHE with supplementary information new methodology, 2006–2007, low-pay weights, UK.Note: Care should be taken when comparing ASHE series.

-2

0

2

4

6

8

10

12

14

England Wales Scotland Northern Ireland UK

Gen

der

pay

gap

of m

edia

n gr

oss

hour

ly e

arni

ngs

excl

. ove

rtim

e fo

r fu

ll-tim

e em

ploy

ees

aged

18+

(pe

r ce

nt)

2004 2005 2006 2007 2008

9

Source: LPC estimates, ASHE new methodology, normal weights, UK, April 2008.

From the 30th percentile the gap is larger for low-paying sectors…

0

5

10

15

20

25

10 20 30 40 50 60 70 80 90

Percentile point of the hourly earnings distribution

Gen

der

pay

gap

for

full-

time

empl

oyee

s ag

ed 1

8 an

d ov

er

(per

cen

t)

Low-paying sectors Non Low-paying sectors

10

…but is smaller for low-paying occupations.

Source: LPC estimates, ASHE new methodology, low-pay weights, UK, April 2006.

0

2

4

6

8

10

12

14

16

18

20

10 20 30 40 50 60 70 80 90

Percentile point of the hourly earnings distribution

Ge

nd

er

pa

y g

ap

fo

r fu

ll-tim

e e

mp

loye

es

ag

ed

18

+ a

nd

ove

r (p

er

cen

t)

Low-paying occupations Non Low-paying occupations

11

…for part-time work, women earn more than men

Source: LPC estimates based on ASHE without supplementary information, 1997-2004, ASHE with supplementary information, 2004-2006 and ASHE with supplementary information new methodology, 2006–2008, low-pay weights, UK.Note: Care should be taken when comparing ASHE series.

Full-time Part-time Full-time Part-time1997 8.19 4.81 6.87 4.73 57.7 98.3 68.81998 8.54 4.75 7.14 4.87 57.0 102.5 68.21999 8.85 5.00 7.46 5.07 57.2 101.4 67.92000 8.87 5.00 7.65 5.12 57.7 102.4 67.02001 9.32 5.19 8.02 5.36 57.5 103.2 66.82002 9.72 5.50 8.41 5.53 56.9 100.5 65.72003 10.03 5.84 8.75 5.93 59.2 101.6 67.82004 10.48 6.00 9.21 6.18 58.9 103.0 67.02004 10.36 6.00 9.10 6.16 59.4 102.6 67.72005 10.80 6.50 9.60 6.63 61.4 101.9 69.02006 11.22 6.78 10.00 6.90 61.5 101.8 69.02006 11.14 6.84 9.86 6.88 61.7 100.6 69.72007 11.61 7.16 10.34 7.21 62.1 100.7 69.82008 12.16 7.30 10.74 7.48 61.5 102.5 69.6

Pay ratio female

part-time to male

part-time

Pay ratio female

part-time to female full-time

Per cent£ per hour

Men Women

Pay ratio female

part-time to male full-time

12

What has been the impact of the minimum wage?

13

The national income distribution had its lower end sharply compressed between

1997 and 2007Hourly Earnings Distribution, Adults, 1997

0.0

1.0

2.0

3.0

4.0

5.0

6.0

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.0

0

11.0

0

12.0

0

13.0

0

14.0

0

15.0

0

16.0

0

17.0

0

18.0

0

19.0

0

20.0

0

21.0

0

22.0

0

23.0

0

24.0

0

25.0

0

26.0

0

27.0

0

28.0

0

29.0

0

£30

and

over

Gross hourly pay excluding overtime (£)

Per

cen

tag

e o

f em

plo

yee

job

s h

eld

by

tho

se a

ged

22

and

ove

r

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Hourly Earnings Distribution, Adults (22 and over), 2007

0.0

1.0

2.0

3.0

4.0

5.0

6.0

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

10.0

0

11.0

0

12.0

0

13.0

0

14.0

0

15.0

0

16.0

0

17.0

0

18.0

0

19.0

0

20.0

0

21.0

0

22.0

0

23.0

0

24.0

0

25.0

0

26.0

0

27.0

0

28.0

0

29.0

0

£30

and

over

Gross hourly pay excluding overtime - 25 pence pay bands (£)

Per

cen

tag

e o

f em

plo

yee

job

s h

eld

by

tho

se a

ged

22

and

ove

r

0.0

1.0

2.0

3.0

4.0

5.0

6.0

14

The previous collapse of low pay was reversed …. earnings growth by percentile 1992-97 compared to 1998-2007

-20

-10

0

10

20

30

40

50

60

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96

Percentile of the gross hourly earnings excluding overtime distribution (adults aged 22 and over)

Pe

rce

nta

ge

incr

ea

se in

pe

rce

ntil

e e

arn

ing

s m

inu

s p

erc

en

tag

e

incr

ea

se in

me

dia

n e

arn

ing

s

-20

-10

0

10

20

30

40

50

60

1998–2007 1992–1997

15

Of those affected by the NMW in 2008 – two-thirds are women

Source: Annual Survey of Hours and Earnings (ASHE) including supplementary information new methodology, low pay weights, 2008.Note: Low-paid defined as adults (aged 22 and over) earning £5.64 or less, youths (aged 18-21) earning £4.70 or less and 16-17 year olds earning £3.48 or less in April 2008.

Full-time Male21%

Full-time Female20%

Part-time Female45%

Part-time Male14%

16

There has been a substantial impact on women’s earnings…

Source: LPC estimates, ASHE new methodology, low-pay weights, UK, April 2006 and 2008.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Un

der

£4.

50 4

.50

4

.55

4

.60

4

.65

4

.70

4

.75

4

.80

4

.85

4

.90

4

.95

5

.00

5

.05

5

.10

5

.15

5

.20

5

.25

5

.30

5

.35

5

.40

5

.45

5

.50

5

.55

5

.60

5

.65

5

.70

5

.75

5

.80

5

.85

5

.90

5

.95

6

.00

6

.05

6

.10

6

.15

6

.20

6

.25

6

.30

6

.35

6

.40

6

.45

6

.50

6

.55

6

.60

Gross hourly earnings excluding overtime (£)

Pe

rcen

tage

of

fem

ale

em

plo

yee

job

s h

eld

by

tho

se a

ge

d 2

2 y

ea

r o

lds

and

old

er

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2006 2008

Ad

ult

NM

W 2

006

(£5.

05)

Ad

ult

NM

W 2

008

(£5.

52)

17Source: ONS Working age employment rate (MGSV, MGSW) and Working age unemployment rate (YBTJ, YBTK), seasonally

adjusted, UK, 1971–1997 and 1998Q1–2008Q3.

…but no evidence of an impact on employment or unemployment.

0

10

20

30

40

50

60

70

80

90

100

197

1

197

3

197

5

197

7

197

9

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

8 Q

1

199

8 Q

3

199

9 Q

1

199

9 Q

3

200

0 Q

1

200

0 Q

3

200

1 Q

1

200

1 Q

3

200

2 Q

1

200

2 Q

3

200

3 Q

1

200

3 Q

3

200

4 Q

1

200

4 Q

3

200

5 Q

1

200

5 Q

3

200

6 Q

1

200

6 Q

3

200

7 Q

1

200

7 Q

3

200

8 Q

1

200

8 Q

3

Year/Quarter

Wo

rkin

g a

ge e

mp

loym

ent

ra

te

0

2

4

6

8

10

12

14

16

18

20

Wo

rkin

g a

ge u

nem

plo

yme

nt

rate

Employment Men (LHS) Employment Women (LHS)

Unemployment Men (RHS) Unemployment Women (RHS)

18

Why have there been no apparent adverse employment effects of the NMW?

• 90% of NMW jobs are in service sectors: few face international competition; many with low price elasticity

• Prices in some of these sectors rose as a result of NMW• Major low paying service sectors (retail, hospitality,

cleaning, care etc) saw growing demand• Evidence of improved productivity arising from improved

management in response to more expensive labour• …and of shift of employment to better managed firms• …and increased concentration of ownership• The NMW has been raised very gradually relative to

average earnings

19

Three phases of NMW growth: very cautious to 2001, faster than average earnings to 2007, cautious subsequently

Source: LPC estimates based on ONS data, AEI including bonuses (ONS code LNMQ), RPIX (ONS code CHMK), RPI (ONS code CHAW) and CPI (ONS code D7BT), monthly, seasonally adjusted (not seasonally adjusted for RPIX, RPI and CPI), GB (UK for RPIX, RPI AND CPI), 1999-2008

0

10

20

30

40

50

60

70

1999

Apr

il

1999

Aug

ust

1999

Dec

embe

r

2000

Apr

il

2000

Aug

ust

2000

Dec

embe

r

2001

Apr

il

2001

Aug

ust

2001

Dec

embe

r

2002

Apr

il

2002

Aug

ust

2002

Dec

embe

r

2003

Apr

il

2003

Aug

ust

2003

Dec

embe

r

2004

Apr

il

2004

Aug

ust

2004

Dec

embe

r

2005

Apr

il

2005

Aug

ust

2005

Dec

embe

r

2006

Apr

il

2006

Aug

ust

2006

Dec

embe

r

2007

Apr

il

2007

Aug

ust

2007

Dec

embe

r

2008

Apr

il

2008

Aug

ust

Month

Cum

ulat

ive

perc

enta

ge in

crea

se s

ince

Apr

il 19

99

0

10

20

30

40

50

60

Adult NMW AEI including bonuses CPI RPI RPIX

20

The NMW has had a substantial effect on the gender pay gap, without evident adverse effects

What might be the consequences of a major recession?

21

Employment growth has slowed since 2008, while

unemployment increased sharply

Source: LPC estimates based on LFS working age employment levels (ONS code YBSE) and total claimant count (ONS code BCJD) monthly, seasonally adjusted, UK, 1998–2008

-150

-100

-50

0

50

100

150

200

250

300

350

400

1998

Jan

uar

y19

98 A

pril

1998

Jul

y19

98 O

cto

ber

1999

Jan

uar

y19

99 A

pril

1999

Jul

y19

99 O

cto

ber

2000

Jan

uar

y20

00 A

pril

2000

Jul

y20

00 O

cto

ber

2001

Jan

uar

y20

01 A

pril

2001

Jul

y20

01 O

cto

ber

2002

Jan

uar

y20

02 A

pril

2002

Jul

y20

02 O

cto

ber

2003

Jan

uar

y20

03 A

pril

2003

Jul

y20

03 O

cto

ber

2004

Jan

uar

y20

04 A

pril

2004

Jul

y20

04 O

cto

ber

2005

Jan

uar

y20

05 A

pril

2005

Jul

y20

05 O

cto

ber

2006

Jan

uar

y20

06 A

pril

2006

Jul

y20

06 O

cto

ber

2007

Jan

uar

y20

07 A

pril

2007

Jul

y20

07 O

cto

ber

2008

Jan

uar

y20

08 A

pril

2008

Jul

y20

08 O

cto

ber

2009

Jan

uar

y

Ch

ang

e in

em

plo

ymen

t on

a ye

ar e

arli

er

(tho

usa

nds)

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

Cla

iman

t Cou

nt l

evel

(th

ousa

nds)

Change in employment (LHS) Claimant count level (RHS)

22

Vacancies have fallen sharply since April 2008 as redundancies have risen

Source: ONS data (codes BEAO and AP2Y), seasonally adjusted, UK, 2001–2008

100

120

140

160

180

200

220

240

260

280

300

320

340

360

380

400

200

1 J

une

200

1 A

ugu

st2

001

Oct

ob

er

200

1 D

ece

mb

er

200

2 F

ebru

ary

200

2 A

pril

200

2 J

une

200

2 A

ugu

st2

002

Oct

ob

er

200

2 D

ece

mb

er

200

3 F

ebru

ary

200

3 A

pril

200

3 J

une

200

3 A

ugu

st2

003

Oct

ob

er

200

3 D

ece

mb

er

200

4 F

ebru

ary

200

4 A

pril

200

4 J

une

200

4 A

ugu

st2

004

Oct

ob

er

200

4 D

ece

mb

er

200

5 F

ebru

ary

200

5 A

pril

200

5 J

une

200

5 A

ugu

st2

005

Oct

ob

er

200

5 D

ece

mb

er

200

6 F

ebru

ary

200

6 A

pril

200

6 J

une

200

6 A

ugu

st2

006

Oct

ob

er

200

6 D

ece

mb

er

200

7 F

ebru

ary

2

007

Ap

ril2

007

Ju

ne2

007

Au

gust

200

7 O

cto

be

r2

007

De

cem

be

r2

008

Feb

rua

ry

200

8 A

pril

200

8 J

une

200

8 A

ugu

st2

008

Oct

ob

er

200

8 D

ece

mb

er

Re

dun

dan

cie

s (t

ho

usa

nds

)

400

420

440

460

480

500

520

540

560

580

600

620

640

660

680

700

Job

va

canc

ies

(tho

usa

nds)

Redundancies (LHS) Vacancies (RHS)

23

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

1999

Ma

rch

1999

Ju

ne19

99 S

epte

mb

er19

99 D

ece

mb

er20

00 M

arc

h20

00 J

une

2000

Sep

tem

ber

2000

De

cem

ber

2001

Ma

rch

2001

Ju

ne20

01 S

epte

mb

er20

01 D

ece

mb

er20

02 M

arc

h20

02 J

une

2002

Sep

tem

ber

2002

De

cem

ber

2003

Ma

rch

2003

Ju

ne20

03 S

epte

mb

er20

03 D

ece

mb

er20

04 M

arc

h20

04 J

une

2004

Sep

tem

ber

2004

De

cem

ber

2005

Ma

rch

2005

Ju

ne20

05 S

epte

mb

er20

05 D

ece

mb

er20

06 M

arc

h20

06 J

une

2006

Sep

tem

ber

2006

De

cem

ber

2007

Ma

rch

2007

Ju

ne20

07 S

epte

mb

er20

07 D

ece

mb

er20

08 M

arc

h20

08 J

une

Cha

nge

on

a ye

ar

earli

er (

per

cen

t)

All low-paying sectors Whole economy

Number of jobs in low-paying sectors has been increasing faster than whole economy

Source: ONS, Employee Jobs, GB, 1999-2008

Change in Employee Jobs, GB

24

Some low-paying sectors continued to perform well up to September 2008

Source: ONS Employee Jobs, not seasonally adjusted, Great Britain, 1998–2008.Notes: 1) As a result of the break in the employee jobs series between December 2005 and September 2006, changes between periods prior to December 2005 and after September 2006 cannot be estimated.2) The social care and leisure, travel and sport sectors do not align exactly to the LPC's specification of the low-paying sectors due to the breakdowns of employee jobs provided by the ONS.

Levels (thousands)September

2008

Change on September

2007

Annual growth since September

2007

Change on September

2006

All sectors 26,400 -8 -0.0% 216

All low-paying 8,400 38 0.5% 45

Retail 3,298 -2 -0.1% -16

Retail (excluding motor) 2,759 3 0.1% -8

Hospitality 1,775 -9 -0.5% -6

Social care 1,185 23 2.0% 49

Cleaning 495 7 1.4% 1

Agriculture 264 19 7.5% 18

Security 176 5 2.6% 10

Textiles, clothing 90 -3 -3.5% -8

Food processing 350 -6 -1.7% -6

Leisure, Travel and Sport 641 1 0.2% 1

Hairdressing 127 5 4.0% 4

• Recent growth concentrated in social care and agriculture

• Retail was stable but hospitality in decline.

25

-100

-50

0

50

100

150

200

250

300

350

400

450

50020

00 Q

120

00 Q

220

00 Q

320

00 Q

420

01 Q

120

01 Q

220

01 Q

320

01 Q

420

02 Q

120

02 Q

220

02 Q

320

02 Q

420

03 Q

120

03 Q

220

03 Q

320

03 Q

420

04 Q

120

04 Q

220

04 Q

320

04 Q

420

05 Q

120

05 Q

220

05 Q

320

05 Q

420

06 Q

120

06 Q

220

06 Q

320

06 Q

420

07 Q

120

07 Q

220

07 Q

320

07 Q

420

08 Q

120

08 Q

2

Cha

nge

in e

mpl

oym

ent

on a

yea

r ea

rlier

(th

ousa

bds)

Public Sector Private Sector

Public sector employment has been falling – adversely affecting women

Source: ONS, LFS and estimates from public sector organisations, not seasonally adjusted, UK, 2000-2008

26

Bank of England GDP Forecast (February 2009) - probably still highly optimistic

The fan chart depicts the probability of various outcomes for GDP growth. To the left of the first vertical dashed line, the distribution reflects the likelihood of revisions to the data over the past; to the right, it reflects uncertainty over the evolution of GDP growth in the future. If economic circumstances identical to today’s were to prevail on 100 occasions, the MPC’s best collective judgement is that the mature estimate of GDP would lie within the darkest central band on only 10 of those occasions. The fan chart is constructed so that outturns are also expected to lie within each pair of the lighter green areas on 10 occasions. Consequently, GDP growth is expected to lie somewhere within the entire fan on 90 out of 100 occasions. The bands widen as the time horizon is extended, indicating the increasing uncertainty about outcomes. See the box on page 39 of the November 2007 Inflation Report for a fuller description of the fan chart and what it represents. The second dashed line is drawn at the two-year point of the projection.

• This is much more pessimistic than the November Inflation Report.

• The recession is now forecast to be much deeper and longer.

• It is now forecast to last until Q1 2010 with GDP falling by over 3% in the year to Q1 and Q2 2009.

27

What implications of the recession for gender equality?

• Adverse implications for women from:– Recessions hit less skilled more than more skilled in terms of

both employment and wages – Weakening of employment in public sector – High proportion in part-time employment

• But, against this:– Past recessions hit consumer durables more than services– Employment in low-paid sectors has so far been more resilient– High proportion of women in public sector

• National Minimum Wage should provide effective support for low wages and for the gender pay gap– Will the NMW be allowed to keep up with average earnings in

the recession?