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What Drives the Gender Pay Gap?  - Lessons from the Uber Study

AUTHOR(S): Bryan Dunne
PRACTICE AREA GROUP: Employment, Pensions and Benefits, Gender Pay Gap Reporting in Ireland
DATE: 28.09.2018

The Gender Pay Gap Information Bill has been placed on the priority list in the Government’s autumn legislative programme, which was published last week. An understanding of the structural and inherent causes of a gender pay gap within an organisation is essential in order for it to be able to take steps to remedy that gap. This will also help identify those elements that are simply beyond the employers control, even if actively seeking to address the gap.  It is also very important from a PR perspective as it will help the organisation to explain its position when the time comes to reporting. However, the true reasons for a gender pay gap may not be particularly obvious from the outset.

The Uber Study

A recent study[1] led by economists into the gender pay gap in the gig economy revealed some surprising results. The study analysed data from more than 1.8 million drivers and 740 million Uber trips in the USA. It found that female Uber drivers make 7% less per hour than their male counterparts. This was even though the algorithms that determine pay for the service are gender neutral.

Due to its flexible nature, the gig economy is generally considered as an opportunity for equal pay between women and men. One of the economists who authored the study, John List, noted in a recent Freakonomics podcast[2] that the assumption at the outset of the study was that the findings would show equal, or close to equal pay, for two reasons. Firstly, the female drivers on average worked fewer hours per week so they had a chance to cherry-pick the better hours. Secondly, if there was discrimination on the platform, it was thought that the customers would actually prefer female drivers to male drivers.

The results were not so simple. The economists found three explanations for the Uber gender pay gap:

  • Driving locations: On average, men choose to drive in locations with a higher surge and lower wait times, and would drive more frequently than women in areas with higher crime rates.  In short, they proactively seek out the locations where they can earn more per hour.
  • Experience: Men generally accumulate more experience by working more hours each week and they are less likely to stop driving with Uber after a period of 6 months.  As a consequence, it takes them less time to work out where and at what time the more lucrative calls are received, so in turn how to earn more per hour.  The interesting counter-point to this is female drivers are not as free to adapt to these patterns as they are disproportionately more likely to be limited by childcare commitments than male drivers.
  • Men drive faster: Male drivers generally drive faster than female drivers and could therefore complete more trips in less time.

What can we learn from this?

A key learning point from the study is that the fact and causes of a gender pay gap in an organisation may not be particularly apparent. This study found that a gender pay gap existed in connection with work where pay is not based on factors which have traditionally explained the gap (eg preferences for specific hours and discrimination). The male and female drivers performed the same work, through the same platform and under non-negotiable rates, but still displayed a significant gender pay gap.

The researchers concluded that on–the-job learning may contribute to the gender pay gap more broadly in the economy than previously thought. They also determined that policies that could target changes in the time-use choices of men and women could narrow the gap by helping women to accumulate experience at the same pace as men.

What can employers do?

Under the proposed Irish legislation, employers will be required to publish the average differences in hourly pay and bonus pay between male and female employees. The rules will apply to all employers with more than 250 employees, and this threshold will gradually reduce to employers with 50 or more employees.

Whilst the precise detail of the obligations and calculation methods are unclear, and this legislation is only one part of the solution, it is clear that the legislation is coming shortly. Now is the perfect window for employers to get ahead of the curve.

Employers should start thinking about gathering gender pay data and getting the relevant systems and software in place so that they are ready to conduct a worthwhile gender pay audit.

A practice audit can help to identify any areas of vulnerability early. An analysis of the results can help to establish the drivers for any gap within the business, as well as the steps that can be taken to redress the gap. Early preparation will also enable an employer to show that it has been proactive in taking steps to address the issue.

Please see our last article in this series for an overview of the proposed legislation, available online. If you would like any advice or assistance in relation to the proposed legislation and / or in preparing for gender pay gap reporting, including the conduct of a gender pay gap audit, please contact a member of the Matheson Employment, Pensions and Benefits team.

Authored by Alice Duffy, Senior Associate in the Employment Law Practice.
 

[1]. “Gender Earnings Gap in the Gig Economy: Evidence From Over a Million Rideshare Drivers,” Cody Cook,  Rebecca Diamond,  Jonathan Hall,  John A. List,  Paul Oyer, January 2018, Working Paper No. 3637. Available online.

[2]. Available online.

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