Why the Gender Pay Gap is Bad Data

08 April 2019

Socially responsible businesses want to provide equal opportunities for all their employees. And even those that don't much care about their social responsibilities have to obey the law, which rightly makes it illegal to pay men and women different rates for completely comparable and equivalent jobs.

But in the last couple of years, the UK government has required companies to report annually their gender pay gap. This is a crudely put together figure that purports to show that in most companies, women are being short-changed. At least, that's what the narrative suggests. The BBC talks about how the problem can be dealt with. Some argue that companies should be punished if they fail to make progress in reducing their gender pay gap.

But is this good data, that we should be building public policy on? Or is it a highly effective device that will create perverse incentives and actually damage the cause of equality for women at work?

Additional Reading

IEA's Briefing Paper on the Gender Pay Gap

BBC reporting