Last year, the United Kingdom enacted a new regulation requiring companies to report information about their gender pay gap—a measure of the difference in average pay between men and women. The new rules are a good example of how open data can drive social change. However, the regulations have produced some misleading statistics, highlighting the importance of carefully crafting reporting requirements to ensure that they produce useful data.
In the UK, nearly 11,000 companies have filed gender pay gap reports, which include both the difference between the mean and median hourly pay rates for men and women as well the difference in bonuses. And the initial data reveals several interesting findings. Median pay for men is 11.8 percent higher than for women, on average, and nearly 87 percent of companies pay men more than women on average. In addition, over 1,000 firms had a median pay gap greater than 30 percent. The sectors with the highest pay gaps—construction, finance, and insurance—each pay men at least 20 percent more than women. A major reason for the gap is a lack of women in senior positions—UK women actually make more than men between the ages of 22-29. The total pay gap is also a result of more women holding part-time jobs.
However, as detractors note, the UK’s data can be misleading. For example, the data overstates the pay gap on bonuses because it does not adjust these figures for hours worked. More women work part-time than men, so it makes sense that women would receive less in bonus pay when they work less. The data also understates the pay gap because it excludes the high compensation of partners in organizations such as law firms, a group that includes few women. And it is important to note that—by definition—the pay gap data does not compare the wages of men and women working the same jobs, so the data says nothing about whether women receive equal pay for equal work.
Still, publication of the data has sparked an important national conversation. Google searches in the UK for the phrase “gender pay gap” experienced a 12-month high the week the regulations began enforcement, and major news sites like Financial Times have provided significant coverage of the issue by analyzing the reported data. While it is too soon to tell if the law will change employer behavior, such as businesses hiring more female executives, or employee behavior, such as women leaving companies or fields that pay less, countries with similar reporting requirements, such as Belgium, have seen the pay gap narrow following implementation of their rules.
Requiring companies to report this data to the government may be the only way to obtain gender pay gap data, because evidence suggests that the private sector will not produce this data on its own. Only 300 UK organizations joined a voluntary government program to report their gender pay gap in 2011, and as few as 11 actually published the data. Crowdsourced efforts, where women voluntary report their pay, have also suffered from incomplete data. And even complete data does not illuminate variables such as why women may work in a field that pays less.
The Obama administration attempted an initiative similar to the UK’s that would have required companies with more than 100 employees to report gender and race pay gap data. However, the Trump administration blocked implementation of the rules because it deemed the policy too burdensome to employers. Unfortunately, it has not yet offered an alternative to collect this data.
It is possible to minimize the reporting burden on companies while still producing useful data. One option is to allow companies to report the base pay of employees, rather than their total wages. Some firms have said that reporting this information is easier for them because these figures are already stored in the human resource systems they use to track employee demographic data. And to improve data quality, firms could report the pay gap for employees with the same job title, which companies such as Microsoft, Amazon, and Expedia already do
Moreover, wage data is already being collected by several agencies. For example, states provide quarterly wage data, which they collect from most employers in their state for unemployment insurance purposes, to the Bureau of Labor Statistics (BLS). The federal government could get pay gap data by company if states required employers to submit their wage data by gender. Another option is to change federal laws that prohibit sharing certain federal information across agencies. For example, the Social Security Administration (SSA), which already receives data about employees’ annual wages from employers and knows their gender, could share this data with the Equal Employment Opportunity Commission (EEOC), if Congress allowed it. While making this data available to the BLS or EEOC may not satisfy calls to publicly release company-level wage data by gender, federal agencies could analyze this information, or make it available to qualified researchers who abide by confidentiality agreements, to assess the pay gap.
Many policymakers do not know what to do about the pay gap because competing theories explain it: Some research suggests that the pay gap is a result of individual choices made by workers, other studies indicate that the gender pay gap is most tied to women having children, and a third research stream suggests that some sectors start paying employees less money as more women enter the field. Researchers need more data to test these claims—even if the data does not fully explain why the gap exists—to evaluate proposed interventions. While the UK’s law is not perfect, the data it has produced has sparked an important conversation and should inspire other countries to pursue similar legislation.
Image: David Hunt