What Are the Drivers of Wealth Inequality in the UK and How Can They Be Addressed?
- Maja
- 3 days ago
- 4 min read
This blog was written by Maja, a Year 12 student from Kent, following a Discover Economics session exploring wealth inequality in the UK and the factors that contribute to differences in earnings and wealth over time.
Today I attended a Discover Economics session about wealth inequality in the UK, which focused on one of the factors that can contribute to differences in wealth over time: the gender pay gap.
Before the session, I knew that women often earn less on average than men, but I did not fully understand why this happens or how it can affect wealth throughout someone's life. The session explained that the gender pay gap is not just about earnings. It can also affect savings, pensions and long-term financial security.
What is the Gender Pay Gap?
The gender pay gap is the difference between the average hourly earnings of men and women.
Importantly, the gender pay gap is not the same as unequal pay for doing the same job. Equal pay legislation requires men and women to receive equal pay for equal work. The gender pay gap instead compares the average earnings of all men and all women across different jobs, sectors and levels of seniority.
According to the Office for National Statistics (ONS), the gender pay gap for full-time employees in the UK was 7.0% in 2024, down from 7.5% in 2023. This suggests that progress is being made, but that differences in average earnings still remain. The ONS also found that the pay gap is generally larger among older age groups, indicating that differences can build up over the course of a career.
What Causes the Gender Pay Gap?
The session explored several factors that contribute to the gender pay gap.
One important factor is caring responsibilities. Women are still more likely than men to take time away from work to care for children or other family members. This can affect career progression, reduce opportunities for promotion and lead to periods of part-time work.
Occupational differences also play a role. Women are more likely to work in sectors such as education, healthcare and social care, while men are more highly represented in some higher-paying sectors such as finance, engineering and technology. These patterns help explain some of the differences in average earnings across the workforce.
The session also highlighted the fact that women remain underrepresented in many senior leadership positions. Since senior roles often come with higher salaries and bonuses, this can contribute to differences in average earnings between men and women.
Claudia Goldin's Research
One economist whose work was discussed during the session was Claudia Goldin, who received the 2023 Nobel Prize in Economic Sciences for her research into women's experiences in the labour market.
Goldin studied how women's earnings and employment patterns have changed over more than 200 years. Her research found that although women's and men's earnings are often similar at the start of their careers, differences frequently emerge after the arrival of children.
She described this as the "parenthood effect", where women's earnings growth often slows following the birth of a child. Her work has helped policymakers and employers better understand that improving economic equality involves not only equal pay legislation, but also workplace flexibility, parental support and opportunities for career progression.
How Does This Link to Wealth Inequality?
The gender pay gap matters because earnings affect the ability to build wealth over time.
If someone earns less throughout their career, they may have less money available to save, invest or contribute to a pension. Even relatively small differences in annual earnings can accumulate over several decades.
As a result, differences in income can contribute to differences in wealth later in life, particularly during retirement. This is why many economists view the gender pay gap as an important factor when understanding wider patterns of wealth inequality.
What Can Be Done?
The session explored a number of ways that governments, employers and individuals can help reduce the gender pay gap.
Businesses can review promotion and recruitment processes to help ensure opportunities are available to all employees. They can also support flexible working arrangements and encourage greater representation of women in sectors and roles where they have historically been underrepresented.
Since 2017, larger UK employers have been required to publish information about their gender pay gaps. This transparency helps organisations understand where gaps exist and can encourage action to address them.
My Reflections
I found this session particularly interesting because it showed that the gender pay gap is influenced by a range of factors rather than a single cause.
What stood out most to me was how differences in earnings can affect people's financial circumstances over many years. Before the session, I had not considered how the gender pay gap could influence savings, pensions and wealth later in life.
The session also highlighted the importance of research in helping us understand economic challenges and identify potential solutions. Economists such as Claudia Goldin have helped bring greater attention to these issues and improved our understanding of how careers, family life and workplace structures can influence economic outcomes.
Conclusion
The gender pay gap in the UK has narrowed over time, but differences in average earnings between men and women remain.
Understanding the factors that contribute to the gender pay gap is important because earnings differences can affect financial security, wealth accumulation and opportunities throughout people's lives.
The Discover Economics session showed that there is no single explanation for the gender pay gap, but that continued research, greater awareness and positive changes in workplace practices can all play a role in reducing inequalities. By understanding these issues, young people can become better informed about the economic challenges facing society and the potential solutions available to address them.
References
Office for National Statistics (2024). Gender pay gap in the UK: 2024.
UK Government Gender Pay Gap Reporting Service. Gender Pay Gap Reporting.
The Nobel Prize Claudia Goldin, 2023 Economic Sciences Prize Nature Why women earn less than men: Nobel for economic historian who probed pay gap Claudia Goldin, Marianne Bertrand, and Lawrence Katz. The Dynamics of the Gender Gap for Young Professionals in the Financial and Corporate Sectors (2010), American Economic Journal: Applied Economics.
