Estimation of the gender pay gap in London and the UK - an econometric approach

We estimate the gender pay gap in London and the UK based on Labour Force Survey data 2002/03. Our approach decomposes the mean average wages of men and women into two parts (a) Differences in individual and job characteristics between men and women (such as age, number of children, qualification, ethnicity, region of residence, working in the public or private sector, working part-time or full-time, industry, occupation and size of company) (b) Unequal treatment and/or unexplained factors. Stata enables us to easily implement a cross sectional regression for a large household dataset and derive the distribution of wages for men and women. Results from our work indicate that differences in individual and job characteristics account for most of the gender pay gap. The impact of direct unequal treatment appears to be slightly lower in London than outside, reducing London women's wages by around four per cent compared to six per cent outside London. Our wage distribution analysis indicates that for London part-time workers of both sexes are paid less than full-time workers. Among full-time workers, the lower-paid workers have virtually no difference in pay between men and women however the gender pay gap widens further up the wage distribution to 24 per cent for the top decile.