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Government failing to reduce gender pay gap

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The Government is complicit in a system that is undermining productivity and perpetuating the gender pay gap, finds a new report by the Women and Equalities Select Committee. Furthermore evidence shows the gender pay gap will persist unless Government policy changes.

Today’s report, by a cross-party Committee of MPs, highlights the lack of effective policy in many of the areas that contribute to the gender pay gap. It finds that the key causes of pay differentials are: the part-time pay penalty; women’s disproportionate responsibility for childcare and other forms of unpaid caring; and the concentration of women in highly feminised, low paid sectors like care, retail and cleaning. Although the Government has committed to eliminating the 19.2 percent pay gap within a generation, it has remained at around the same level for the past four years. Women aged over 40 are most affected by the gender pay gap, with women aged 50-59 facing a 27 percent differential. Evidence suggests that the barriers to well-paid work currently experienced by women over 40 will continue unless action is taken to address the root causes of the gender pay gap. 

Chair of the Committee, Maria Miller, MP said: “The gender pay gap is holding back women and that isn’t going to change unless the Government changes its policies now. The pay gap represents a massive loss to the UK’s economy and we must address it in the face of an ageing workforce, a skills crisis and the need for a more competitive economy.

“If the Government is serious about long-term, sustainable growth it must invest in tackling the root causes of the gender pay gap. Adopting our recommendations would be a significant step towards achieving the goal of eliminating the gender pay gap within a generation.” 

The report concludes that: Supporting men and women to share childcare and other forms of unpaid caring more equally is one of the most effective policy levers in reducing the gender pay gap. Many women are trapped in low paid, part-time work below their skill level. This contributes to pay disparities and the under-utilisation of women’s skills costs the UK economy up to 2 percent GDP, around £36 billion. Not enough is being done to support women returning to work if they have had time out of the labour market. Too little attention has been focused on the situation of women working in low-paid, highly feminised sectors like care, retail and cleaning. Until their rates of pay and progression improve, the gender pay gap will not be eliminated. 

There is scope for optimism though. The report finds that attitudes to work and caring are changing. Employers are increasingly recognising that workplaces need to change and that flexible working benefits men, women and the bottom line. This does not mean part-time work, which is underpaid and limits career progression. Flexible working is much broader and includes jobs shares, late starts, early finishes, term time working and working from home. Although the Government recognises the value of modernising the workplace, it is still not taking action to ensure flexible working is offered to all employees, particularly those in lower paid sectors. 

The Committee recommends that: All jobs are flexible by default from the outset unless there is a strong and continuing business case for them not to be. Three months non-transferrable, well-paid leave for fathers and second parents is introduced to support men and women to share care more equally. The Government create a National Pathways to Work scheme that will allow women to return to employment after time out of the labour market. The barriers faced by women in low paid, highly feminised occupations are addressed by industrial strategies. These would focus on improving productivity and pay levels in these industries, starting with the care sector where nearly 80 percent of employees are women.

On Friday afternoon the DWP Select Committee announced an enquiry into the economic effects of allowing certain women to draw their state pension early. 

http://www.parliament.uk/business/committees/committees-a-z/commons-select/work-and-pensions-committee/news-parliament-2015/early-drawing-state-pension-launch-15-16/

Hargreaves Lansdown‘s Tom McPhail, Head of Retirement Policy: “This is a forthright move by the Select Committee, which seems determined not to let the Government off the hook on this contentious issue. After several parliamentary debates and repeated refusals by the DWP to countenance any changes to policy, the Select Committee is now set to explore in more detail a measure which could ameliorate the situation of the affected women, without costing the government any money.

Working through the detailed implementation of this idea will be complex, in particular the interaction with any means-tested welfare entitlement. It also needs to be done quickly as the clock is ticking. Perhaps the recent change in personnel at the DWP will open up the possibility of a more accommodating response from the government. This enquiry and the evidence presented to it may also prove relevant to the recently announced DWP review of state pension ages, to be conducted by John Cridland.” Around 300,000 women are affected by the accelerated increase in the state pension age to 66 introduced in the 2011 pensions act. Many more are affected by the changes originally introduced in 1995 which set in motion the increase in state pension age from 60 to 65 by 2020.

Inquiry background

In its report on ‘Communicating state pension age changes’ published on 15 March 2016, the Committee called on the Government to explore the option of permitting a defined group of women who have been affected by state pension age changes to take early retirement, from a specified age, on an “actuarially neutral basis”. This would mean some women could choose to take a state pension sooner than scheduled in return for lower weekly payments for the duration of their retirements. The “reduction factor” used should ensure that, on average, over the lifetimes of the pensioners concerned, there would be no additional pension costs to the exchequer.

Call for written submissions

Following the publication of the report, the Committee invites written submissions addressing the following points: What would be the short-term and long term fiscal impact? What would be the other costs of the scheme? Could additional costs be incorporated in the reduction factors used to achieve long-term fiscal neutrality? How should the scheme interact with pension credit and other benefits? How could uncertainty within the system be budgeted for and managed? How are similar schemes managed in occupational pensions? Who should be eligible and why? How popular would the scheme be among the people eligible? What impact would it have on the lives of the people eligible?

The deadline for written submissions is Sunday 10 April 2016.

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