Mind the Gap: The UK’s Gender Earnings Divide

The £250 Billion Question: Why Closing the Gender Earnings Gap is Smart Economics

What would you do with £250 billion? That’s roughly the amount women in the UK did not earn compared to men in 2018. It’s an eye-watering figure—roughly 12% of the UK’s GDP and more than a third of total government spending. In her first Budget last autumn, Rachel Reeves acknowledged her responsibility to pass on a fairer society to the next generation of women and girls ¹ —the challenge ahead remains vast.

The figure comes from a new way of thinking about gender inequality in the economy: the aggregated gender earnings gap ² . Rather than just looking at differences between individuals, it zooms out to capture what these disparities cost the economy as a whole. This approach was conceptualised by Mascha Madörin at Economiefeministe, a feminist economics organisation based in Switzerland, and it helps put a price tag on what inequality really means at scale.

So what’s behind the £250 billion gap? It reflects the combined effect of three key differences between women and men in the labour market: the hourly wage gap, differences in average working hours, and labour force participation. In 2018—the last year the UK was included in Eurostat data on these variables due to Brexit—the UK had a 20% hourly wage gap ³ , a 20% gap in average working hours ⁴ , and a 10% gap in labour force participation. ⁵

While each of these differences contributes to the overall gap, their relative weight varies – in the UK, the largest gains in women’s earnings would come from narrowing the hourly wage gap. The underlying cause of the gaps, meanwhile, can be attributed to the gendered allocation of labour in the economy.

According to the Office for National Statistics, women in the UK do almost 50% more unpaid domestic and care work than men ⁶ . This work is critical for society—but it comes at a cost to women’s own earnings, career progression, and financial independence. As a consequence thereof, an average woman in the UK earned 42% less than the average man in 2018. While the individual-level measure provides insight into what these gaps mean for the average woman, the aggregated gap highlights how these disparities compare to the overall scale of the economy.

Aggregated Gender Earnings Gap, GDP, and State Expenditure (Billions GBP, 2018)

The UK is not alone, but it is doing worse than some of its neighbours. The gender earnings gap in Germany was similarly high in 2018—about 11% of GDP—but in France, it’s closer to 6%. One big reason? Policy. France offers more generous family support, including more affordable childcare ⁷ , high availability of childcare services for children under 2 ⁸ , and tax breaks for in-home care workers ⁹ . These measures ease the care burden on families and help women participate more fully in paid work.

The implication for the UK is clear: investing in care is investing in economic growth. A high-quality, universal childcare system could allow more women to work more hours in paid employment. In 2021, the Women’s Budget Group estimated that such a system would cost £16 billion per year ¹⁰ —less than 1% of GDP, and a small fraction of the current shortfall in women’s earnings.

But it is not just childcare. Recent research by Mathias Jensen (University of Oxford) and Ning Zhang (Chinese University of Hong Kong) shows that eldercare responsibilities also reduce women’s labour market participation ¹¹ . If we’re serious about tackling gender inequality, we need to take a cradle-to-grave approach to care—exactly what William Beveridge envisioned in his post-war blueprint for the welfare state.

Rachel Reeves’s promise to expand access to affordable childcare is a welcome first step ¹² . But if the goal is to create a truly fair and inclusive economy, we need to go further. Closing the gender earnings gap is not just about equality—it is about tapping into a vast reserve of economic potential.

In the end, the £250 billion question is not whether we can afford to invest in care. It is whether we can afford not to.

Louisa Marie Roos is a PhD candidate in Economics at Trinity College Dublin. Her fields of research include Feminist and Labour Economics, with a particular interest in the distribution of work, earnings and wealth by gender and how this is influenced by micro- and macroeconomic determinants. Website.

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The views and opinions expressed in this blogpost are those of the author’s and do not necessarily reflect the official policy position of the Women’s Budget Group.