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The real reasons why women get paid less than men

Smart Money: Male and female graduates get roughly the same pay when they enter the workforce, but not for long

As businesses and agencies across the State publish their gender pay gaps, it is clear that on average women still get paid significantly less than men. The gender pay gap had been estimated nationally at just over 11 per cent in 2019, based on official figures. Ictu analysis of the gender pay gap reports published up to the end of December showed a similar picture, with an average (mean) gap of 11 per cent in favour of men. The general explanation given by companies is that men have, on average, more senior roles – it would be illegal to pay men and women different rates for the same job.

But this still leaves a lot of questions unanswered. New research from Maynooth University gives important new insights emerging from 10 years of data on the Irish jobs market, focusing on graduates in a range of disciplines. While the gender pay gap is small – or non-existent in many cases – immediately after graduation, the clear result of the study is that after eight to 10 years, men have pulled ahead. So why does this happen?

1. What does the study show?

The paper – Why do the earnings of male and female graduates diverge? – was written by Maynooth economists Aedin Doris, Donal O’Neill and Olive Sweetman, and focuses in particular on the role of motherhood. It looks at the earnings of men and women in the 10 years after graduation. A key finding is that even though female graduates start off with similar earnings to men, a substantial gap emerges relatively early on in their careers. These gaps are not explained by different fields of study – in other words they are evident in people with the same qualifications and jobs.

While differences emerge between men and women generally, the differences are stark when males are compared to females with children. For business and law graduates, for example, the gender pay gap for women with children is zero on graduation, but grows to over 28 per cent 10 years after graduation following the arrival of a child.

smart money 26/01/23

Delving further into the data, the study finds that weekly earnings for women fall by almost 27 per cent in the years immediately following the birth of their first child and remain low even eight years later. There is no evidence of a similar drop for men who become fathers. So comparing mothers to fathers, the researchers estimate a motherhood pay penalty of 27 per cent overall – with roughly similar results for graduates of the different disciplines studied. (The gap was 25 per cent in business and law, 23.2 per cent in Stem subjects and 28.8 per cent for other graduates.)

2. Why does women’s pay fall off after having a child?

The paper went on to study the reasons why women’s pay falls off after having a child. There are a range of possible explanations, including reduced hours of work, difficulty in moving to a new job or a decision to move to a lower-paying more family-friendly role. The results show that in general around half the fall-off in pay is due to reduced hours worked by mothers in the year after childbirth, with many opting to work part-time. Mothers’ hours of work fall from an average of 37.9 hours before childbirth to 33 hours in the year after childbirth, a 12.7 per cent reduction. More than one third choose to work part-time after childbirth, roughly double the proportion doing so beforehand. Less than 5 per cent of men work part-time in the year after childbirth. Strikingly, these different work patterns tend to persist in later years. This Irish result is similar to previous research in the US and Denmark. While lower working time is a big issue, changes in job mobility are not. While women with children are less likely to change employer after childbirth, this is not found to be important in explaining the diverging earnings trends.

3. What about the rest of the pay gap?

If half of the pay gap after childbirth is explained by lower hours, what about the rest? The research finds that the pay of women falls off over time after graduation and while the drop is much more noticeable for women with children, it is also evident generally, with gaps of 5 to 10 per cent in the fields studied. The declines for women with children are significantly larger, as discussed earlier. Beyond that, the researchers find that pay gaps emerge within companies between “stayers” – in other words men who stay in one company as compared to women who do the same. The researchers say that “further research on personnel practices within firms following childbirth is needed.” This suggests that women pay a permanent price in terms of pay after childbirth. The unanswered question is how much of this is due to choices made by women and how much is to discriminatory personnel and other practices of businesses.

4. The policy issues

Gender pay gap reporting has started to shine a sharper light on the issue. The Maynooth researchers say further detail from companies, including a comparison of the pay between people who have stayed in the organisation for a period, as opposed to just top-line data, would be useful.

The research also points to the role of decisions taken in households on who is responsible for child-minding and the social norms around this playing a role. Parental leave entitlements have improved in recent years, including the recent introduction of new Parent’s Leave of up to seven years in the first two years of the child’s life. Employers are not obliged to pay for this, though parents may qualify for a social welfare payment for the weeks involved. The Maynooth researchers also point to the potential role of working from home, more common now as the pandemic dissipates, as a route to allow women to maintain their hours of work and reduce the earnings decline after childbirth.

But the data also points to deeper underlying problems within companies. The Ictu research of gender pay reporting shows that the gap is bigger in the private than the public sector and particularly in the finance and insurance areas. Ictu has previously highlighted the lower earnings of women after childbirth – and its estimate that this can amount to a gap of up to 30 per cent is supported by the Maynooth research. What of other factors?

“The gender pay gap exists because women experience significant inequalities in the labour market,” says Laura Bambrick, Ictu’s head of social policy and employment affairs. “Compared to men, women are most likely to work in lower-paid jobs, in jobs that undervalue their work and skills, and in jobs do not provide them with the same opportunities at work because of their care responsibilities.” Strategies Ictu supports within companies include gender-neutral evaluation criteria for career progress, measures promoting more pay transparency and targeted higher wage increases for lower-paid jobs within companies.

The Maynooth research – and the gender pay reports – have cast new light on the issue. To what extent this leads to changes which will help close the gap remains to be seen.