The Impact Of Women's Position In The Labour Market On Current UK Productivity And Implications For Future Productivity Growth

THE IMPACT OF WOMEN???S POSITION IN THE LABOUR MARKET ON PAY AND IMPLICATIONS FOR UK PRODUCTIVITY SUMMARYIntroductionThis report investigates the impact of women???s position in the labour market on women???s pay and considers the implications for UK productivity and productivity growth. Gender relations in employment have often been addressed in terms of equity, justice and discrimination. The focus here is rather on whether and if so the extent to which women???s position in employment has implications not only fortheir pay, but also the UK???s productivity and economic performance. The government has identified problems of skills deficits and market failures as important barriers to raising productivity to the level of competitor countries. These problems have a gender dimension. The skills deficits are gendered in that women have lower levels of educational qualifications than men do. Failures in the market for labour, stemming from out-moded rigidities due to occupational sex segregation and discrimination against women, limiting the flexibility to enable women to combine caring and employment so as to achieve work/life balance, prevent the most effective deployment of labour. Well-functioning labour markets reward workers according to their performance and skill. When markets for labour fail, this interferes with the best allocation of resources and lowers the productivity of the British economy. The report discusses some of the gender implications of the different ways of measuring productivity. It reviews the literature relevant to understanding the causes of the gender pay gap and tries to draw some tentative conclusions about how analysis of the gender pay gap can inform our understanding of the UK???s economic performance, in particular our levels of productivity. Original statistical analysis of the British Household Panel Survey is conducted in order to identify the relative size of the components of the gender productivity gap. Data collected in a new national survey reports on women???s occupational mobility over childbirth and childcare and women???s own perceptions of the barriers to their more productive employment. Why productivity mattersProductivity is the largest single component of economic growth. So raising the productivity performance of the British economy and making progress towards closing the productivity gap with our international partners is vital to the aim of increasing the country???s growth potential. (HM Treasury, 1999c, 1.12).Productivity is one of the key components of the level of economic output and of the rate of economic growth. Productivity is a measure of the extent to which economic resources are used effectively in an economy. The UK has lower rates of productivity than comparable countries including the US, France and Germany. Raising the level of productivity in order to raise the rate of economic growth is a priority in government economic policy. Policies that raise productivity are actively pursued.Measuring the gender dimension of productivityThe measurement of productivity per gendered worker is a challenge since it is not possible to measure directly the value of the different contribution of men and women workers to any given output . The procedure adopted here is the current Treasury method of measuring the productivity of government services. This is to assume that wages are the best available proxy for productivity. This method has the disadvantage that any reduction in wages as a result of discrimination artificially affects the size of the measure of output. Nevertheless, wages are the best available proxy for measuring gendered productivity. Whilst this approach has been taken in this report to enable the authors to draw some tentative conclusions relating to women???s position in the labour market and UK productivity, the problems of using pay as a proxy for aggregate productivity (outlined in detail in the Report) mean that it is not appropriate simply to use pay as a basis for estimating aggregate potential gains to the economy asas the position of women in the labour market changes. Rather, the link between pay and productivity has been used in order to illuminate particular aspects of women???s labour market experience which are likely to have a bearing on the UK???s productivity levels.Whether the unit of input used in measuring productivity is that of ???worker??? or ???hour worked??? makes a difference to the relative position of the UK in international comparisons of productivity. The key difference is in the treatment of part-time workers. While part-time workers may have the same productivity per hour as a full-time worker, it is unlikely that part-time workers can be as productive per week as a full-time worker, since they work fewer hours. In league tables based on productivity per worker the UK has a lower relative position than in those based on productivity per hour worked. A key reason for this difference is that of the comparatively large part-time sector in the UK, which is disproportionately female.Components of gendered pay and productivity differences: skills deficits and labour market failuresThere are two main causes of gendered pay and productivity differences: skills deficits and labour market failures. Skills deficits have been identified by the government as a specific part of the problem of low productivity among British workers. Market failures occur when the labour market does not allocate the most appropriate worker to any given job slot as a result of labour market rigidities.Skills DeficitWomen on average have fewer educational qualifications than men. Although young women have recently managed to close this gap, the average woman is less qualified than the average man. The analysis of the BHPS data showed that in order to raise the average employed woman to the educational level of the average man, she would need the equivalent of 0.3 years of education. However, the gender gap in educational qualifications is concentrated among those women who are over 40, and those who are employed part-time or not at all. This gendered qualifications gap among this specific group of women is a significant part of the skills deficit. Our survey found that two-thirds of the women who were employed part-time (66%) or not at all (63%) were willing to undergo additional training or education. However, many of them (63% not working, 53% part-time) would find it difficult to pay for themselves. Among those prepared to undergo training or education, 79% said that the greatest help would be if it were free.Segregation There is a pronounced concentration of women and men in different occupations, with women over-represented in lower paid occupations. Gender segregation involves a form of labour market rigidity that prevents the allocation of the most appropriate worker to any given job slot. It is a failure of the market to allocate people to their most productive location. Discrimination Discrimination can be a labour market failure in that it prevents the best allocation of workers to jobs. It is a form of rigidity that may depress women???s potential productivity levels, if it means that, for example, there are mis-matches between women???s skills and experience and the jobs they are doing.Interruptions in employment to care for family members because of lack of flexibility and insufficient childcare All interruptions to employment, whether for unemployment or to care for family members, have a depressing effect on productivity. While men experience more unemployment, women take much more time out of the labour market than men do in order to care. A new national survey shows that significant numbers of women suffer downward mobility between their best job before having children and their current job. However, not all mothers relinquish their employment as a result of having children. Those who are better educated, better paid and who have the most flexible employers are more likely to retain their labour market attachment. Lack of flexibility at work is one of the major reasons that women find it hard to combine caring and employment. Our survey found that increased flexibility and better wages were the circumstances under which women were more likely to enter employment or increase their employment.Part-time employment Part-time employment is the location where many of the factors that depress women???s productivity are clustered. Women who work part-time are the least educated, work in the most segregated occupations, and have the shortest employment histories. While extra years of experience of full-time work increase pay and productivity, our statistical analysis of BHPS data showed that extra years of part-time work experience are associated with lower pay. Many women enter part-time work when they have young children, but considerable numbers do not return to full-time work when their children grow up. Of women employed part-time, 44% do not have dependent children, while 32% of women with no dependent children work part-time, according to calculations from the Labour Force Survey. The part-time sector, at 23% of the workforce, is larger in the UK than in many other countries. It is a large site of low paid and low productivity work.Components of the pay and productivity gapOur statistical analysis of BHPS data found that the following issues were associated with the gendered pay and productivity gap per hour. The gap between women???s and men???s education is associated with a 6% of the gap. Occupational segregation is associated with a pay 13% of the gap. Just being female is associated with a pay 29% of the gap. The difference in the length of women???s full-time work experience, 10.9 years, and that of men, 18.2 years, is associated with 26% of the gap. The greater interruptions to employment due to family care by women as compared with men were associated with 15% of the gap. The extent to which women are more likely than men to work part-time, 4.4 years, rather than 0.3 years, is associated with 12% of the gap. See Table S.1 below.Table S.1: Components of the pay and productivity gap per hour workedComponent Change needed to bring women to male level % of gap Education Up 0.30 years 6Segregation No segregation 13Discrimination and other factors associated with being female To zero 29Full-time employment experience Up 7.7 years 26Interruptions due to family care Down 3.2 years 15Part-time employment experience Down from 4.4 years to 0.3 years 12Total 100