Scotland trails rest of UK with 15 per cent pay gap

New research from global accountancy firm PwC has revealed that while opportunities for women in the workplace have rapidly improved in the UK since 2000, Scotland is still lagging behind the rest of the UK.

PwC’s annual Women in Work Index, which measures levels of female economic empowerment across 33 OECD countries based on five key indicators, shows that over the long-term the UK has surpassed the average performance of both the OECD and G7 economies due to increasing female employment rates, a narrowing of the gender pay gap and a reduction of the gap between male and female labour force participation rates.

The UK now ranks 13th out of 33 OECD countries, and second only to Canada in the G7.

Despite the encouraging rate of improvement, the UK still falls behind on the number of women workers in full-time employment and ranks 30th out of 33 countries on this indicator, far below the OECD average.

While the report concentrates on the UK as a whole, the report does break the UK down by region to analyse the potential increases - percentage and financial - to annual female earnings.

In Scotland, the pay gap is 15 per cent between male and female workers. If this gap was to be closed, female earnings would increase by 18 per cent - an extra £5,300 per year. In total, this figure would be £6.5billion for Scotland (total increase across all women based on current employment).

Part of the reason for the large gap is due to female workers clustering in lower-paying sectors such as wholesale and retail trade, health and education services while men tend to work in higher-paying sectors.

Matthew Cooper, reward consultant at PwC in Scotland, said: “While it is encouraging to see that the gender pay gap in Scotland at 15 per cent is lower than the UK average of 17 per cent there remains work to do with specific challenges in some of Scotland’s key industries such as financial services and oil and gas where the gender pay gap remains higher.

“The increased focus on pay gap reporting gives employers the opportunity to set out the actions they are taking to address the pay gap as well as their wider strategy on diversity and inclusion. Taking accountability and delivering changes is what is needed from Scottish employers to continue the process toward removing gender pay inequality.

Gwyneth Scholefield, people and organisation director at PwC in Scotland, said: “While it is positive that the gender pay gap for women in Scotland is lower than the national average, the disparity is still significant. Fully closing the gender pay gap could see £5300 a year in additional earnings per woman. This can only be addressed through a combination of getting more women in high quality jobs that offer progression and flexibility.”

Even though the gender pay gap in the UK is narrowing, PwC’s research shows that based on a continuation of historical trends it will take until around 2040 to close it. Job differences between men and women, both across industries and job roles, is one of the biggest factors contributing to the gap in earnings. PwC’s research shows that women are still more likely to work in sectors and occupations that are relatively lower paid given the skills they require. For example, women make up over 70 per cent of workers in health and social work, and 60 per cent of education roles.

In the highest paying sectors of financial services (average weekly pay £949), mining and quarrying (average weekly pay £889) and electricity and gas (average weekly pay £834), women make up a much smaller proportion of the workplace. Financial services is the sector with the largest gender pay gap at 34 per cent, whereas public administration and support services have the lowest at 15 per cent and 13 per cent, respectively.

Regional differences in female employment across industries also go a large way in explaining the regional variations in the gender pay gap. PwC’s research shows that the West Midlands has the largest gender pay gap at 21 per cent and over half (52 per cent) of women in the region are employed in lower-paying sectors such as wholesale and retail trade, and health services. Whereas, Northern Ireland has the smallest pay gap, falling from 22 per cent in 2000 to 6 per cent now.

This is partly driven by a higher than average share of women working in public administration, which has a smaller pay gap.

Yong Jing Teow, economist at PwC, said: “It’s positive news that women in the UK have benefitted from the improving economy and there are now more women in work than ever before, but we still have a way to go.

By fully closing the gender pay gap we could boost women’s earnings in the UK by £85 billion, which is an average of £6,100 per woman per year. It’s not just about getting more women working, but also about getting more of them into high quality jobs that offer career progression and flexibility.”

Laura Hinton, executive board member and head of people at PwC, said: “While it’s encouraging that the UK is making progress on closing the gender pay gap, it is depressing that it will still take around a generation to close it completely. Pay reporting requirements should help speed up change as businesses will face greater accountability. But merely reporting numbers without any concrete action, won’t change anything.

“We know that women are ambitious - we now need to create workplaces that support their ambition, and enough skilled and senior roles that have the flexibility to accommodate work and caring responsibilities.”

Some countries, such as Poland, Luxembourg and Belgium, could close their gender pay gaps within two decades if historical trends continue.

Much slower progress in Germany and Spain means that their pay gap might not close for over two centuries unless underlying structural factors are addressed, although making this a policy priority could accelerate progress.

Achieving pay parity across the OECD could increase female earnings by $2trn.

Closing the gap in the UK could result in an £85bn boost to female earnings at today’s values - an average of around £6,100 per working woman.