Are employers finally waking up to the absurdities of British equality laws? A recent tribunal ruled that Next, the high street retailer, had underpaid its predominantly female retail staff compared with its mostly male warehouse workers.
The ruling encapsulated the insanity of expansive “equal pay for equal work” laws, punishing Next for setting different pay for completely different roles despite no evidence of direct gender discrimination in doing so.
The employment tribunal acknowledged clear economic reasons why Next’s female retail staff (77.5 per cent of retail consultants) earned less than their male-dominated warehouse counterparts (52.8 per cent).
• Next store workers win equal pay case
Warehouse roles are more physically demanding, with unsociable hours and fewer perks, meaning that companies often must offer higher wages to attract staff. The tribunal confirmed that Next’s pay levels were not influenced by gender considerations but reflected the cost realities of two distinct labour markets shaped by recruitment challenges and growing online sales.
Yet since the European Union’s equal pay directive, employers must pay workers equally for jobs deemed to be of “equal value” or justify why they can’t. Tribunal experts concluded that factors such as job complexity, responsibilities and required qualifications were similar enough for the two roles to be of equal value, market wage signals be damned.
In short, Next was told that it should have accepted lower profits and paid retail consultants more to avoid this pay differential exacerbating sex pay inequality. The company now faces a potential £30 million-plus back-pay bill.
Applying the concept of “equal value” to different work defies the logic of a market economy. Yet this monstrous legislation is causing chaos for employers, forcing costly bureaucratic job evaluations and creating chilling uncertainty over retrospective claims.
Birmingham city council was financially wrecked when women in cleaning and care roles won claims arguing that their jobs were of equal value to men in refuse collection and street cleaning, entitling them to equivalent bonuses. Asda faces a £1.2 billion back-pay claim similar to Next’s, with other big retailers braced for copycat disputes.
What underpins this law’s application is the neo-Marxist belief that expert bureaucrats and judges can determine jobs’ relative value, second-guessing market pay determined by supply and demand. It’s predicated on the belief that jobs requiring similar qualifications and responsibilities should be paid the same, with experts judging whether other job requirements, such as soft social skills in retail or more physicality in warehouses, can justify any differentials.
But what good is an “equal value” determination when warehouse jobs face higher vacancy rates, rely more on agency work and require different incentives to attract staff? In the real world, pay is affected by the subjective preferences and availability of workers, not simply by objective job characteristics.
Next offered its retail staff the chance to transfer to warehouse roles in 2021, but few took it up. One claimant admitted that warehouse work didn’t appeal to her unless the pay was considerably higher.
QED, insisting on equal pay for unequal work inevitably will deliver distortive wage compression, warehouse shortages and/or discriminatory hiring to avoid big gender splits across job types.
Lawyers and consultants profit handsomely from these disputes, of course, but forcing companies to justify pay in the face of crank sociology and kooky economics is a drain on time and resources. While many lament the “culture wars,” the judgment shows that identity politics is already firmly embedded in British law, albeit masquerading as a noble fight against discrimination.
And it’s set only to get worse. Labour wants similar equal pay protections for ethnic minorities and disabled workers. Businesses and public sector employers would have to constantly second-guess how pay differentials affect many groups, dreading the day that a judge might declare that two roles with different demographic representation are of “equal value”, despite different market wages.
That ultimately means businesses spending less time creating value and more time navigating a minefield of social policy. So much for a “pro-business” government.
Ryan Bourne is an economist at the Cato Institute and editor of the new book The War On Prices