Employment and earnings in the finance sector: A gender analysis.

EXECUTIVE SUMMARY

Introduction

This study provides background information on the finance sector to assist the Equality and Human Rights Commission's inquiry into sex discrimination in the industry. The study was based on analysis of representative national datasets, together with a short literature review of the finance industry in the UK.

KEY FINDINGS

The finance sector

The finance sector provides 1.3 million jobs (LFS, 2008: Q3) and employs four per cent of the British workforce. Employment is dominated by banks (43 per cent) and other insurance activities (21 per cent).

Employment patterns by gender

• There has been a slight relative decline in female employment over the last five years, against a backdrop of a slight increase in overall finance sector employment; the reasons for this are unclear.

• A similar number of men and women are employed in finance and across most sub-sectors.

• Finance employs a relatively high percentage of people in the 25 to 39 age range and fewer at older ages.

• Women are substantially under-represented in the finance workforce in central and inner London; this is likely to reflect lower employment in head offices.

• Women are also concentrated in smaller establishments.

• Occupational concentration by gender is greater in finance than in the economy as a whole:

o Women are highly concentrated in administrative and secretarial jobs.

o Women are substantially under-represented in managerial jobs, including at the most senior level.

EMPLOYMENT AND EARNINGS IN THE FINANCE SECTOR: A GENDER ANALYSIS

• Working hours for both women and men are longer in finance than the economyas a whole:

o Standard hours are relatively high.

o Part-time working is less common.

o The incidence of other family-friendly flexible working time practices is similar to that in the economy as a whole.

o Men are more likely to work overtime than women, particularly unpaid overtime.

• Men in finance tend to have higher qualifications than women: almost twice as many have a degree (39 per cent compared with 20 per cent).

• Overtime, particularly unpaid, may contribute towards career and pay progression (whether through additional development or through presenteeism signalling commitment), and its concentration on men may be a cause for concern.

Earnings and gender

Average annual gross earnings in the finance sector are about double the national average.

For full-time employees, gender pay gaps in gross annual, weekly and hourly pay in the finance sector range from 39 per cent to 55 per cent, around double those in the economy as a whole.

The three sub-sectors (see Chapter 2 for more details on these) show substantial differences:

• 67: Auxiliary activities and 65: Financial intermediation – for these sub-sectors, the full-time gender pay gap appears to stem largely from gender pay differentials in basic rates and annual payments (including annual incentive pay).

• 66: Insurance and pensions – for this sub-sector the full-time gender pay gap appears to be mainly connected to basic pay alone. The part-time gender pay gap for annual and weekly pay is similar to that in the economy as a whole (around 80–90 per cent). The hourly part-time gender pay gap is smaller (53 per cent), but this is much higher than the national average. The part-time gender pay gap is somewhat smaller in 66: Insurance and pensions. Both full-time and part-time gender pay gaps tend to rise across the pay distribution.

Recruitment

Annual recruitment rates in finance, at 14 per cent, are similar to those in the economy as a whole. Approximately half of recruits are female. Recruitment in finance is disproportionately high in lower-skilled jobs, suggesting that, without other changes, relying on gender changes in recruitment would be particularly slow at improving female representation in higher-level occupations.

Progression

We were unable to measure progression adequately within the scope of this study. However, analysis of supervisory and management roles showed that women with supervisory responsibilities are more likely to be promoted to supervisory posts, whereas men with supervisory responsibilities are more likely to be promoted to managerial posts.

Initiatives to promote gender equality

The finance sector was relatively early in introducing policies and practices to address gender equality and there are many good gender equality initiatives in the sector. However, it is not known how comprehensive or effective these initiatives are. Trade unions have run a number of campaigns on gender equality issues since the 1980s.

Gaps in evidence

A number of major gaps in evidence were identified on:

• causes of the greater gender pay gap in finance and its increase across the pay distribution

• causes of the higher degree of occupational concentration in finance and, particularly, the lack of women in managerial employment

• the roles of recruitment, retention and progression on affecting gender differences in occupational levels and pay

• the role of individual attitudes and employer treatment on affecting recruitment, retention and progression

• the role of the longer hours culture on gender differences

• the processes by which pay systems may affect the gender pay gap in finance, for example, the role of performance pay, bonuses and incentive schemes

Multivariate analysis of pay and occupation in the finance sector would be very useful. Multivariate analysis should be able to identify relative roles of gender and other factors (for example, qualifications) more robustly.

Further research

There were a number of factors which pointed to possible gender equality problems in the finance sector, which deserve further investigation.

Occupational concentration

The high concentration of women in administrative and secretarial roles, and low representation in management, including senior management, stood out. There was also, albeit limited, evidence that men may be more likely to progress than women (the younger age of men than women in administrative and secretarial and in sales and customer service occupations and that women are more likely to be promoted to supervisory posts and men to managerial posts). These patterns might be explained by the gender roles followed in society generally, with men not entering administrative and secretarial jobs, rather than women not entering managerial and other jobs. Moreover, women were less qualified than men. Therefore the lack of women in management (and the lower qualifications of women in finance) may not indicate inequality in the finance sector, but be an inevitable consequence of the high proportion of administrative jobs in the sector. Nevertheless, both recruitment and promotion needs investigation.

Working hours

Working hours in the sector may contribute to concentration in lower-level jobs and mitigate against promotion. Standard hours are relatively long and part-time working less common, whilst the incidence of other family-friendly flexible working time practices is similar to that in the economy as a whole. Men tend to work longer hours than women and are more likely to work overtime than women, particularly unpaid overtime. Overtime, particularly unpaid, may contribute towards career and pay progression (whether through additional development or through presenteeism signalling commitment). These factors are likely to result in greater barriers to employment and advancement for women with caring responsibilities. The extent to which working hours affects concentration, progression and earnings might usefully be further investigated.

Pay

Gender pay gaps are much higher in finance than in the economy as a whole, particularly, but not solely, for full-timers. Both basic pay and additional annual elements contribute to this. Moreover, gender pay gaps rise across the pay distribution. Undoubtedly, occupational concentration and men’s higher qualifications will contribute to the gender pay gap. However, it is not clear whether this is the only cause and the increase in the gender pay gap across the pay distribution relative to the economy as a whole suggests that there may be other causes, perhaps related to the payment system, including differential bonus and incentive structures. It is important to examine the causes of the gender pay gap across the distribution, particularly at the higher end. For the part-time gender pay gap there may be issues about lesser access for part-timers to better-paid occupations in finance (and particularly in 65: Financial intermediation).

Location

Women are substantially under-represented in the finance workforce in central and inner London. They are also concentrated in smaller establishments. This is likely to reflect lower employment in head offices and single-site organisations based in the City. It would be useful to know whether this contributed to women’s lower occupational achievement or was caused by their lower occupational achievement.

Sub-sectoral differences

On a number of factors gender disparities appeared to be smaller in 66.0: Insurance and pensions and 67.2: Auxiliary activities (insurance and pensions).