Paying Attention to the Gender Pay Gap

Headspring is a leading provider of customised executive development programs. The alliance is a member of The Diversity Council and also facilitates and runs the DC leadership programs.

In this column, Headspring will share opinion pieces regarding leadership development and the quest for gender equality.

Paying Attention to the Gender Pay Gap

The gender pay gap is a symptom of deeper corporate failings around careers.

By Paul Lewis

Gender pay disparities in the UK have become a controversial topic, fuelled recently by revelations that the BBC’s female reporters and presenters were being paid significantly less than their male counterparts. The highest paid presenters were all men, despite no measurable superiority in performance, though some accepted a pay cut to help stem the outrage. Large public companies are now required to publish gender pay differentials. In 2018, it reported that more than three-quarters are paying women less than men on average. Many have found convenient explanations for the difference.

Perhaps one way to understand why this should be is to consider a popular mantra of bankers during bonus season: ‘If they don’t pay you what you want, will you leave; and if you leave do they care? Nothing else matters.’ For employers, achieving pay equality is not the central issue. Their main concern is to determine how much the employee is really willing to work for, irrespective of whether it is lower or higher than the norm.

When top salaries are negotiable (as opposed to lower-paid jobs with fixed rates and hours) the insistence on pay equality distorts expectations. Few of us would embrace the principle of equality if that meant taking a pay cut. And we don’t mind varying pay rates to, say, our gardeners, babysitters or even freelance journalists, according to what they will accept.

In permanent jobs too, many factors that are not rooted in corporate bias contribute to pay disparities: from the eager job candidate who suddenly toughens up when salary is broached, to the long-serving staff member who has profited from compounding annual pay rises.

Just walk away

But a more important factor determining pay premiums or discounts is the employee’s ‘walkaway’ price—i.e. the point where a job applicant will genuinely turn down a desirable position over salary. Your current or future employer will probably not try to second guess the many personal reasons why you set the limit where you do; only whether it is genuine or a bluff. For example, the company would never suggest you get less money because you have a well-off spouse, even if this is indeed the reason you end up accepting a less generous deal. It’s for you, not the company, to make that decision.

You may, for example, accept a pay discount in order to work for a prestigious brand. However, its social value is highly subjective—not everyone will value so highly as you. Alternatively, you might place a premium on family time and will only forgo this for much more money. Others want to work with clever or pleasant colleagues. Research suggests that a congenial working environment may be equivalent, in happiness terms, to a 40% pay rise. But some would prefer the extra money to the extra happiness.

‘A large factor determining pay differences is your ‘walkaway’ price—i.e. the point where you genuinely turn down a desirable job offer over salary.’

Another major issue to consider, and which is often used to explain part of the gender pay gap, is the ‘breadwinner’ factor. A journalist friend, who had always disliked public relations, recently asked me to write him a reference for a job in PR. I congratulated him heartily: I deduced, correctly, that his wife must be pregnant. Having calculated that he wouldn’t be able to buy a family home on a journalist salary he had resolved to leave the job for any one that paid more. This was no bluff. Eventually, his employer relented and paid him what he needed to stay. Had he been single or his partner wealthy he admits that he would have accepted the newspaper’s initial low offer.

Nowhere to go

Applying the ‘walkaway’ principle, as opposed to the ‘equality’ principle in your pay negotiations (even at the risk of huge resentment should the truth ever emerge) assumes, however, that you have somewhere to walk away to. For women, not to mention ethnic minorities or those from working class backgrounds, the options at senior levels are limited. The FT reports that average earnings for the five female FTSE 100 chief executives is around half the equivalent for their 95 male counterparts. The tiny number of senior positions held by women will almost certainly have affected their walkaway price. Having overcome substantial bias to land a top job, many women will be less willing to leave over unfair pay. By contrast, and especially in knowledge-economy jobs where performance is hard to measure, pay and promotions appear to favour those who ‘look the part,’ at least according to the white, male, middle-class bosses who typically make the decisions.

The lack of equal access to the top jobs may be the biggest obstacle to equal pay. Some even view the pay disparity as a temporary cost for female executives of smashing the glass ceiling. The sour joke is still potent today: ‘Women. Like men, but cheaper.’

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