In 2017, the U.K. Government Equalities Office announced a regulation that would require companies to report certain gender pay gap metrics on an annual basis. Like the saying “a good lamp is the best policeman,” the hope was that increased transparency would promote accountability and self-correction at companies where the gap was severe.
In reality, of course, it hasn’t been that simple, and industries where the gap is most severe—like law—have struggled to demonstrate improvement year-on-year.
The 2018 numbers reported this spring show that women working at the 10 largest law firms in the U.K. are paid 43% less than their male counterparts on average, which is actually a slight increase in the 42.6% gap reported for 2017, according to The Times. Not only are these figures far higher than the national median average of 9.6%, but they are also much larger than the rest of the private sector in the U.K., where the median difference in pay for 2018 was 17.9%.
Wages are even more inequitable in the U.S., where women earned about 78 cents on the dollar compared to their male counterparts, according to data from the Bureau of Labor Statistics.
Factors Complicated, Varied
The factors contributing to the wage gap in any industry are complicated and varied. This is particularly true in the legal industry, where critics of the U.K. requirements question the methodology prescribed, arguing that law firm compensation is too complex to distill into simple quartiles and medians.
In law, the magnitude of the gender pay gap can be affected by:
- the ratio of lower-earning (mostly female) support staff to fee-generating lawyers;
- whether partner income is counted (the regulations currently do not require partner income to be included because partners are considered owners rather than employees); and
- whether the firm has a lock-step compensation model or some more hours-driven or bespoke compensation matrix.
Even controlling for those variables, law firms’ traditional partner tracks may make closing this gap particularly difficult.
Progress will require firms to focus on the retention of women through the highest pay grades, which in turn may require them to adjust the traditional path to partnership to promote such retention.
Breaking Down the Lack of Progress
While the U.K. reporting requirements do have certain methodological shortcomings, it is undeniable that they have catalyzed more awareness, accountability and conversation since they were first announced.
As each year passes and new numbers become available, trends and key drivers of the gap will become clearer and increasingly supported by data. With the benefit of the first year-on-year comparison, here are some important developments that have been observed in the legal sector:
- More firms are now voluntarily disclosing both partner and employee pay figures, probably in part because of pressure from lawmakers who encouraged firms to follow not only the letter of the requirements but the spirit of them. While today these reports highlight the stark differences between male partners and female partners, this voluntary disclosure underscores firms’ commitment toward addressing the gap from all available angles.
- The lack of progress year-on-year could partially be due to transparency efforts themselves. It is possible that some women may have left their law firms in search of better opportunities upon seeing the severity of the pay gap they were up against.
- The wages’ public nature allows women to examine pay disparities before even applying to a firm. Two-thirds of women report referencing a firm’s pay gap prior to applying for a position. Public data affords women the opportunity to proactively choose firms that are committed to equal pay. As such, firms will simultaneously need to promote recruitment as well as retention if they are committed to narrowing their pay gaps.
Despite the disappointing lack of progress in these first two years of reporting, there are indications that the legal community is taking the issue of diversity much more seriously. In January, more than 170 general counsels signed a letter outlining their disapproval of the data, pledging to use their significant legal spend at firms that demonstrate diversity, including gender pay equality.
If firms haven’t already been spurred to action as a result of pressure from regulators, employees and lawmakers, financial pressure from their clients may be exactly what is needed to motivate them to act rapidly to address the pay gap.
Alternative Legal Career Paths Can Help Bridge Gap, Increase Flexibility
The rigid structure of the partner track at traditional law firms is one factor that makes the gender pay gap difficult to improve. By the time most lawyers are eligible for partnership, many of them have young families or are considering starting a family.
With almost 50% of women (and 20% of men) in exit interviews citing dependent care as a reason for leaving the firm, the confluence of these two major life events—parenthood and partnership—can’t be overlooked as a challenge to retention. Without revisions to this foundational career trajectory, law firms will struggle to improve their pay gap numbers as women disproportionately continue to leave the firm in pursuit of balance.
That being said, the proliferation of legal technology solutions using new and innovative labor models is helping to close the gender pay and opportunity gaps in law. The fixed pay structure used by certain companies in legal tech results in women being paid exactly as much as men for the same work.
Additionally, some of these companies, like InCloudCounsel, utilize cloud-based software platforms that make a flexible work arrangement possible, offering lawyers the freedom to choose where, and in some cases, how much they want to work, and eliminating the need for them to forgo other life passions.
Those lawyers who have taken a more flexible work arrangement as freelancers or by starting a solo practice have typically been challenged by the issue of inconsistent workloads. While work can slow to a trickle one week, the next week may require late nights. However, legal tech platforms are providing lawyers with a far steadier, semi-permanent stream of work with enterprise-level clients, making it easier to build a predictable schedule.
Legal technology companies offering a fixed compensation model are leading the way in creating more gender pay parity in the legal industry, a position that isn’t likely to change unless law firms improve their ability to retain women. And, by offering flexible work arrangements, legal tech is also enabling a growing number of men and women lawyers alike to build the practice that’s right for them.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Bridget Deiters is a London-based managing director at InCloudCounsel, a legal technology company that frees large companies from high-volume legal work. Prior to InCloudCounsel, Deiters practiced corporate and capital markets law at the law firms Kirkland & Ellis in London and Chicago and Cravath, Swaine & Moore in London and New York.