What Contributes to the Gender Pay Gap?
"A woman makes 79 cents on the dollar that a man makes."
"When adjusting for the same role and level of seniority, the gender pay gap doesn't exist."
"Women are paid less because they work less and leave the workforce once they have children."
"The gender pay gap is a result of an oppressive patriarchal system that intentionally makes women second class citizen."
The gender pay gap is a complex economic issue that has become an even more complex political issue. Here are five graphs to help you make sense of the mess, following five concrete actions companies could take to reduce it:
1. Women (and especially women of color) still make less than men on average, but when adjusting for specific factors like industry, company size and title, the gap gets significantly reduced.
It's worth noting that for certain job categories such as pilots, chefs and c-suite executives, the gender pay gap remains high at 24% to 26% even when controlled for all of the above factors.
Source: Glassdoor Economic Research report: Progress on the Gender Pay Gap: 2019 based on 426k employees
2. The gender pay gap increases with age, but so does the expectation gap. The more experienced women were, the lower was their salary expectation compared to men, with women with 9 to 10 years of experience having the biggest gap.
Source: Hired.com The State of Wage Inequality in the Workplace 2019 Report
3. Motherhood penalty: women see a significant reduction in earnings after every subsequent child, something that men don't experience. Yet, the magnitude of drop varies greatly from one country to another, ranging from 21% long term penalty in Denmark, 31% in the U.S. and 61% in Germany. Researchers found that there's a high correlation between the intensity of cultural expectations of women to stay home with children and the magnitude of the penalty.
Source: The Economist and the original study by the National Bureau of Economic Research.
4. Gender segregation and pink-collared professions also contribute to the pay gap. The highest paid occupations are in male-dominated industries, which means that women tend to self-segregate to lower paid occupations but also, that certain occupations are valued less because they are (or become) women-dominated. It's also important to note that this segregation is not static: "occupational integration since 1960 was responsible for 60% of real wage growth (after accounting for inflation) for black women, 40% for white women, and 45% for black men."
Source: The Washington Center for Equitable Growth
5. Role segregation also happens inside companies. Transparency measures like the U.K. legislation requiring companies with over 250 employees to report salaries by gender highlight that the gender pay gap is worse in the highest paid industries like banking, especially when adding performance bonus to the equation. Despite banks' claims that women are paid fairly, their reported data shows that women were segregated into the more junior and the less strategic support roles. Goldman Sachs recently announced that it will be increasing its efforts to recruit women into its investment banking division and look at the promotions gap in the company.
Source: Financial Times
[Want to get an even deeper understanding of the gender pay gap? Read our previous article: Gender Pay Gap - Myth or Reality? ]
So, What's Next?
There are several things that companies can do to help close the gender pay gap:
1. Look at your gender (and race) pay gap both vertically (the company as a whole) and horizontally (for specific roles). Salesforce paid over $6 million (only about 0.06% of its annual revenues) in the last few years to correct for roles where women were making less than their male counterparts. Tech startup Buffer did something more interesting in looking at how the company's growth impacted the gender imbalance between the highest and lowest paid roles. Buffer is using the data to change its recruiting strategy (including hiring men into departments that are majority-female) and refocus on developing the careers of their female employees.
2. Support new moms during the difficult transition period post giving birth. Having onsite daycare helped Patagonia reduce turnover by 25% while Google decreased its new mom quitting rate by 50% by extending its maternity leave to six months. Other simple measures like allowing returning mothers to work from home several days a week or at a reduced hourly schedule for the first few months can make a huge difference during those stressful times.
3. Help new moms to get back to speed as fast as possible and don't penalize them for the time away from work. Extended maternity leave was shown to have a direct negative impact on women's careers and wages. To mitigate this impact, keep in touch with employees on maternity leave to make sure they stay in the loop. Furthermore, top performer moms often complain that they were downgraded to an average performer and left out of promotion nominations because of the three to six months they've spent taking care of their newborns. This is especially frustrating when they know that they have had stellar performance prior to giving birth and hit all their targets for the year. Recently, a major audit firm realized that this practice was harmful to women's career progression and motivation. It decided to eliminate this practice and enacted a policy to extend performance review scores from prior periods for women who were away on maternity leave.
4. Implement pay transparency for different salary bands both internally and externally. The thought of this may be scary for some HR leaders but the benefits can outweigh the costs in the long run. You will reduce candidates' anxiety about negotiations and also avoid future lawsuits about unfair pay practices like this lawsuit Oracle is facing for allegedly underpaying over 4,00o female and racial minority employees. Learn more about the benefits and downsides of pay transparency.
5. Remove the question about prior salary in job applications. It penalizes applicants who were previously earning less and perpetuates the salary gap for many women and people of color. Pay people for the work they are hired for instead of perpetuating the unfairness of prior employers. In fact, 13 states and 11 municipalities in the U.S. have made it illegal for companies to ask job candidates about prior salaries.
Sometimes you may not have the power to change your company's policies but you can certainly ensure that the women and men under your responsibility are paid fairly and have equal opportunities for advancement. You can also help women in your network better position themselves for higher paid roles and negotiate their salaries. Sixty-five percent of women who discovered that they were paid less relative to male peers did so through a conversation with a colleague. So if you think that your colleague is being underpaid, help her negotiate a better salary and/or advocate on her behalf.
This article was originally published in my column for Forbes Careers.