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13.11.2017

Debt and the Gender Pay Gap

Friday the 10th of November marked this year’s Equal Pay Day. Because of the continuing discrepancy between men’s and women’s average wages in the UK, this marks the day from which women effectively work ‘for free’ compared to men for the rest of the year. According to the Office for National Statistics (ONS), men in the UK earn, on average, 14% more than women. According to gender equality group, the Fawcett Society, at the current rate of change this gap will not close for 100 years.

Who does the Pay Gap affect?

The gender pay gap affects women throughout the UK, and at every age. The Chief Executive of the Fawcett Society, Sam Smethers, has warned that although the gap is widest for older women, “we are now seeing a widening gap for younger women too, which suggests we are going backwards”. Smethers has called this trend “extremely worrying”. The pay gap seems to kick in the moment women begin to work – the Young Women’s Trust recently found that women working as apprentices are paid 8% less than their male counterparts. Women in their twenties are, generally, the least affected by inequalities in pay, earning 5.5% less than men of the same age. Although this is well below the national average at large, it has crept up from only 1.1% in 2011, leading to concerns that we are heading backwards in the journey towards gender equality.

The ONS has published two different measures of the pay gap – average and median. The median gender pay gap stands at 9%, and is calculated by comparing men and women workers in the middle of the UK’s overall pay-scale. The fact that the average pay gap is higher (14%), demonstrates that more men than women in the UK continue to occupy the highest paying jobs, and are more likely to be employed full-time. 74% of director-level roles are held by men

What Causes the Pay Gap?

The gap between men’s and women’s pay is the result of a number of factors. On the most basic level, despite the Equal Pat Act of 1970, in certain roles women are paid less than men for doing exactly the same job. This is especially true of the highest-paying roles. Women who act as CEOs are paid, on average, £23,960 less per year than men occupying the same role. Women working as marketing and financial directors face a similar gulf in their pay.

Child care

The wider cause of women’s continued inequality when it comes to pay, though, is the fact that women still provide the bulk of care for children and family. In 2016, the Fatherhood Institute carried out a study which found that for every hour mothers spend caring for children in the UK, fathers only spend 24 minutes. With the cost of childcare soaring in recent years, it is unsurprising that some women choose to look after their children themselves – many are even financially better off doing so. On top of this, working men are only entitled to up to two weeks of leave when they have a child compared to the whole year to which women are entitles. Other countries, such as Iceland, found that introducing shared parental leave decreased inequality in pay, as well as fighting the assumption that mothers rather than fathers should be responsible for the bulk of childcare. In the UK, on the other hand, mothers can expect to see their wages fall by 4% for every year they are absent from the workforce. Because women generally have more care commitments than men, they are also more likely to find themselves in part-time work, which tends to be lower-paid.

Another problem is that sectors which employ more women than men are generally undervalued. For example, 80% of workers in two of the UK’s lowest-paid sectors, care and leisure, are women. Women are also more likely than men to work in the public sector, meaning they have been disproportionately affected by the austerity measures of recent years.

Women’s lower Pay and Debt

Unsurprisingly, being paid less on average across the board makes working women in the UK more likely to experience debt problems than their male counterparts. Last year, the Money Advice Service found that 64% of people in the UK struggling with debt were women. Debt management company PayPlan, also reported that two thirds of declared insolvencies in 2011 were women. Obtaining a university degree also causes women more debt worries than men. A survey by the British Household Panel revealed that female graduates in the UK take, on average, 16 years to pay off their student debt verses the 11 years that it takes their male peers. The bright side is that women are more likely than men to seek debt help– 63% of callers to Christians against Poverty were women in 2016, according to the charity.

What can be done?

Combatting the gender pay gap will require rethinking the way that working life is structured in the UK. Until men and women are equally responsible for caring, and equally able to access the highest-paying roles and positions, parity will remain a distant prospect.

Encouraging companies to be more transparent about their pay practices will, the government believes, encourage equality, and help to identify issues when they do arise. Large companies will have to reveal how they pay by gender, and declare bonuses, by April 2018. This is a small step, but one in the right direction, which might encourage smaller organisations to follow suit.

Research by Pricewaterhouse Coopers, an accountancy firm, found that closing the gender pay gap could add £188 billion to the UK’s GDP – hopefully we won’t have to wait for a century to see it.

If you need more information about the options available to you in dealing with your debt, you can always speak confidentially with one of our friendly advisors on 0808 2085 198.