1 The Minimum Wage and Gender Equality ESRC GeNet Conference on The Credit Crunch: Gender Equality in Hard Times 6 th March 2009 William Brown with warm thanks to Low Pay Commission staff

2 Women in the labour market Rising proportion in employment: - women in workplaces of 25 or more rose 38% to 48% between 1980 and % of women work part-time Three-quarters of part-time workers are female Womens membership of trade unions is now same as for men Activity rates (16-59/64, 2008iv): womenmen –Employment rate70%78% –Unemployment rate5.7%6.9% –Economic inactivity rate26%16% 29% of women compared to 13% of men are employed in the public sector (2006) Two-thirds of employees in low-paying occupations are women

3 Source: LPC estimates of LFS Microdata, data not seasonally adjusted, calendar quarter, Q Gender segregation tends to be higher in low- paying occupations

4 What has happened to the gender pay gap? Gender pay ratio = womens earnings as a percentage of mens (e.g. 85%) Gender pay gap = percentage difference between womens and mens earnings i.e. 100% minus gender pay ratio (e.g. 15%) Annual gender pay gap > weekly > hourly –Difference in working hours and additional payments Mean pay gap –Used for international comparisons –But includes extreme earnings –Less stable Used here: median gross hourly pay excluding overtime for full-timers, aged 18 and above

5 The gender pay gap lowest decile and median declining; upper static Source: LPC estimates based on ASHE without supplementary information, , ASHE with supplementary information, and ASHE with supplementary information new methodology, 2006–2008, normal weights, UK. Note: Care should be taken when comparing ASHE series. 18+, full time workers. NB: ONS figures are higher than ASHE figures as they only included workers on adult rates

6 The gender pay gap by percentiles: gap increases with the earnings distribution - but has narrowed at lower levels Source: LPC estimates based on ASHE without supplementary information, 1998, ASHE with supplementary information, 2004 and ASHE with supplementary information new methodology, 2006–2007, low-pay weights, UK. Note: Care should be taken when comparing ASHE series.

7 The gender pay gap varies by age… Source: LPC estimates based on ASHE without supplementary information, and ASHE with supplementary information new methodology, 2006–2007, low-pay weights, UK. Note: Care should be taken when comparing ASHE series.

8 …and by UK country Source: ASHE with supplementary information, and ASHE with supplementary information new methodology, 2006–2007, low- pay weights, UK. Note: Care should be taken when comparing ASHE series.

9 Source: LPC estimates, ASHE new methodology, normal weights, UK, April From the 30 th percentile the gap is larger for low-paying sectors…

10 …but is smaller for low-paying occupations. Source: LPC estimates, ASHE new methodology, low-pay weights, UK, April 2006.

11 …for part-time work, women earn more than men Source: LPC estimates based on ASHE without supplementary information, , ASHE with supplementary information, and ASHE with supplementary information new methodology, 2006–2008, low-pay weights, UK. Note: Care should be taken when comparing ASHE series.

12 What has been the impact of the minimum wage?

13 The national income distribution had its lower end sharply compressed between 1997 and 2007

14 The previous collapse of low pay was reversed …. earnings growth by percentile compared to

15 Of those affected by the NMW in 2008 – two- thirds are women Source: Annual Survey of Hours and Earnings (ASHE) including supplementary information new methodology, low pay weights, Note: Low-paid defined as adults (aged 22 and over) earning £5.64 or less, youths (aged 18-21) earning £4.70 or less and year olds earning £3.48 or less in April Full-time Male 21% Full-time Female 20% Part-time Female 45% Part-time Male 14%

16 There has been a substantial impact on womens earnings… Source: LPC estimates, ASHE new methodology, low-pay weights, UK, April 2006 and 2008.

17 Source: ONS Working age employment rate (MGSV, MGSW) and Working age unemployment rate (YBTJ, YBTK), seasonally adjusted, UK, 1971–1997 and 1998Q1–2008Q3. …but no evidence of an impact on employment or unemployment.

18 Why have there been no apparent adverse employment effects of the NMW? 90% of NMW jobs are in service sectors: few face international competition; many with low price elasticity Prices in some of these sectors rose as a result of NMW Major low paying service sectors (retail, hospitality, cleaning, care etc) saw growing demand Evidence of improved productivity arising from improved management in response to more expensive labour …and of shift of employment to better managed firms …and increased concentration of ownership The NMW has been raised very gradually relative to average earnings

19 Three phases of NMW growth: very cautious to 2001, faster than average earnings to 2007, cautious subsequently Source: LPC estimates based on ONS data, AEI including bonuses (ONS code LNMQ), RPIX (ONS code CHMK), RPI (ONS code CHAW) and CPI (ONS code D7BT), monthly, seasonally adjusted (not seasonally adjusted for RPIX, RPI and CPI), GB (UK for RPIX, RPI AND CPI),

20 The NMW has had a substantial effect on the gender pay gap, without evident adverse effects What might be the consequences of a major recession?

21 Employment growth has slowed since 2008, while unemployment increased sharply Source: LPC estimates based on LFS working age employment levels (ONS code YBSE) and total claimant count (ONS code BCJD) monthly, seasonally adjusted, UK, 1998–2008

22 Vacancies have fallen sharply since April 2008 as redundancies have risen Source: ONS data (codes BEAO and AP2Y), seasonally adjusted, UK, 2001–2008

23 Number of jobs in low-paying sectors has been increasing faster than whole economy Source: ONS, Employee Jobs, GB, Change in Employee Jobs, GB

24 Some low-paying sectors continued to perform well up to September 2008 Source: ONS Employee Jobs, not seasonally adjusted, Great Britain, 1998–2008. Notes: 1) As a result of the break in the employee jobs series between December 2005 and September 2006, changes between periods prior to December 2005 and after September 2006 cannot be estimated. 2) The social care and leisure, travel and sport sectors do not align exactly to the LPC's specification of the low-paying sectors due to the breakdowns of employee jobs provided by the ONS. Recent growth concentrated in social care and agriculture Retail was stable but hospitality in decline.

25 Public sector employment has been falling – adversely affecting women Source: ONS, LFS and estimates from public sector organisations, not seasonally adjusted, UK,

26 Bank of England GDP Forecast (February 2009) - probably still highly optimistic The fan chart depicts the probability of various outcomes for GDP growth. To the left of the first vertical dashed line, the distribution reflects the likelihood of revisions to the data over the past; to the right, it reflects uncertainty over the evolution of GDP growth in the future. If economic circumstances identical to todays were to prevail on 100 occasions, the MPCs best collective judgement is that the mature estimate of GDP would lie within the darkest central band on only 10 of those occasions. The fan chart is constructed so that outturns are also expected to lie within each pair of the lighter green areas on 10 occasions. Consequently, GDP growth is expected to lie somewhere within the entire fan on 90 out of 100 occasions. The bands widen as the time horizon is extended, indicating the increasing uncertainty about outcomes. See the box on page 39 of the November 2007 Inflation Report for a fuller description of the fan chart and what it represents. The second dashed line is drawn at the two-year point of the projection. This is much more pessimistic than the November Inflation Report. The recession is now forecast to be much deeper and longer. It is now forecast to last until Q with GDP falling by over 3% in the year to Q1 and Q

27 What implications of the recession for gender equality? Adverse implications for women from: –Recessions hit less skilled more than more skilled in terms of both employment and wages –Weakening of employment in public sector –High proportion in part-time employment But, against this: –Past recessions hit consumer durables more than services –Employment in low-paid sectors has so far been more resilient –High proportion of women in public sector National Minimum Wage should provide effective support for low wages and for the gender pay gap –Will the NMW be allowed to keep up with average earnings in the recession?