The wage gap leaves women in part-time ghettos

ECONOMIC VIEW

Women make up nearly half of Britain's total workforce, thanks to a huge rise in our participation in the labour market during the past 20 years. Those years have coincided with the operation of equal pay and sex discrimination legislation introduced by the last Labour government.

The good news is that pay inequalities betwen men and women have shrunk during that time. The bad news is that they have not been eliminated. The lead of men's wages over women's has declined from a whopping 58 per cent in the early 1970s to around a quarter in the 1990s.

On top of that, there is new evidence of a growing polarisation in the jobs market between part-timers - mainly women but more and more men - and full-timers, men and women. In the late 1970s, part-time women's hourly wages were about 80 per cent of full-timers' pay. By the early 1990s they had droped to 72 per cent.

The gender gap has been overtaken by a status gap, and it has worrying implications for the British economy. The jobs market is polarising into a shrinking high-skill, high-pay full-time segment and a rapidly growing low-skill, low-pay part-time segment. This is not a sensible strategy for an economy whose most serious problem has been repeatedly diagnosed as a lack of skills.

A recent Department for Education and Employment working paper* written by two City University researchers analyses the pattern of pay for two groups of people for whom information on education, family circumstances and jobs in a particular year is available. The data gives a detailed snapshot of a large group of 32-year-olds in 1978 and 33-year-olds in 1991. Between those two years women's participation in work, especially part-time, increased dramatically. In 1978 nearly one in five women worked full-time and nearly as many part-time. In 1991, 23 per cent worked full- time and 58 per cent part-time.

Men in the 1978 group had a pay lead of 64 per cent on women, and 36 per cent on full-time women. Full-time women's pay was 40 per cent higher than for part-time women. By 1991 these gaps had changed, to 40 per cent, 20 per cent and 52 per cent respectively. Hourly wages for men were pounds 7.38, for full-time women pounds 6.14 and for part-time women pounds 4.04.

The authors, Pierella Paci and Heather Joshi, look at all the possible explanations for these changes furnished by economic theory and try to measure their separate contributions. Any parts of the wage gaps unexplained by the theories represent raw discrimination.

The central element of an economist's attempt to rationalise unequal pay is the notion of human capital. Workers are rewarded for their productivity, which depends on their educational attainments, other skills and job experience. More training and more experience build human capital, while episodes out of a job diminish it.

There was a marked improvement in these measures of women's human capital between the 1978 and 1991 groups. For example, among the first group - born in 1946 - 8 per cent of full-timers and 2 per cent of part-timers had a university degree, compared with 10 per cent of men. In the later generation - born in 1958 - full-time women were more likely than men to have a degree, at 17 per cent versus 15 per cent. But only 7 per cent of part-time women had qualifications at that level. There were similar increases in women's job experience and tenure between the two groups.

Not surprisingly, improving educational standards turn out to provide part of the explanation for the observed changes in wage gaps. Not very much, though - after all, full-time women are now better qualified on average then full-time men, but still get paid less. As the recent special women's issue of the New Yorker observed, there is no such thing as a glass ceiling - it is a very dense layer of men.

The DFEE paper therefore turns to the next possible theoretical explanation, which is that women and men have different sorts of jobs. Industries can have varying market structures and compensating job characteristics which could explain different wage rates. There are clearly "female ghettos" in the labour market. The highest concentrations of men are in industries such as engineering and transport. Full-time women are concentrated in finance and education. Part-time women are most concentrated in catering. Part-timers are also more likely to work for small firms.

Taken together with the human capital explanation, job characteristics help explain a lot more of the wage gap - especially the difference between full and part-time rates. However, a significant part of the gap between men's and women's pay remains unexplained.

Part of the remainder - a small part - is due to the well-known penalty to motherhood. While bosses often reward male employees for their parenthood with a pay rise, clever things, mothers' pay suffers. The authors note, however, that this decline in earnings power affects only women who quit their job. Those who take maternity leave and return to the same employer are not penalised.

These findings are fascinating in themselves but also lead to some important conclusions. First, even though sex discrimination in pay is not yet a thing of the past, employers have in full-time women a resource which is more skilled and productive than male employees. This ought to make firms keen to conserve their stock of female human capital by introducing family-friendly policies such as flexible hours, maternity leave and child care.

This keeness is, however, noticably absent. In today's tough labour market such measures are seen as unnecessary luxuries.

Heather Joshi observes: ``There is a clear trend towards casualisation and a cheap labour strategy. Government policy has favoured that strategy rather than the alternative of nurturing the quality of labour.''

This effect of labour market deregulation is at odds with the Government's repeated desire to see Britain compete effectively in high-skill, high- value-added industries.

Secondly, this trend means the pattern of employment is polarising between haves and have-nots. Ms Joshi says: ``To compete for secure and well-paying jobs, people on the inside are working themselves like crazy. People on the outside are insecure and badly paid. It reduces the quality of everybody's life and the quality of their work.''

Unfortunately, there is not much evidence that this increasing polarisation is slowing down - if anything, the reverse. There will be no change in the trend without government policies that encourage firms to enhance their man and woman-power rather than exploit it.

* Wage differentials between men and women, Pierella Paci and Heather Joshi, Department for Education and Employment research paper no. 71. Jan 1996.