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In all modern societies, a gender wage gap exists, meaning that there is a pay disparity between men and women. The gender wage gap is lowest in industries that pay minimum wage, as there doesn’t tend to be much variation in salary with that firm lower boundary. The highest gap is seen in white-collar industries and in roles that require university degrees. In those roles, men and women have close to pay parity at the beginning of their careers. However, the fatherhood premium and the motherhood penalty lead to higher earnings for men and lowered pay, pregnancy discrimination, reduced working hours, and fewer opportunities for promotion for women.
Credit: The Enduring Grip of the Gender Pay Gap, Pew Research Center, Washington, D.C. (March 1, 2023)
Cents on the Dollar
One of the first formal efforts to address this issue in the US was the 1963 Equal Pay Act (EPA). The EPA forbids employers from paying employees doing equivalent work different salaries based on gender. In practice, though, this has not been enough to create true wage parity due to its focus on the unadjusted wage gap. Deloitte defines the unadjusted wage gap as ”average gross hourly earnings, not considering [outside] factors.” In the US, the 2024 unadjusted wage gap is currently that women earn 84 cents for every dollar men make. This interpretation of the wage gap issue assumes that wage discrimination is purely caused by the employer’s bias, so preventing people from acting on that bias would therefore resolve the problem. Unfortunately, this thinking was incorrect, as it has been more than 60 years since the passage of the EPA and a wage gap still exists.
An adjusted wage gap is a regression analysis calculated to determine what factors contribute to setting a particular salary. It looks at individual employees’ positions, tenure, responsibilities, locations, experience, and more, not just their direct compensation amounts. For example, imagine that you have two employees with identical resumes in the same role. If their salaries are the same, then there is no wage gap within the company. However, if one employee’s salary is higher, it suggests there may be some form of bias or discriminatory hiring practices influencing pay.
Fighting the Gap Means Overcoming More Than Bias
Nobel prize-winning economic historian Claudia Goldin asserts in her book “Career & Family1” that the gap stems from the modern structure of work itself. Currently, workers are expected to dedicate themselves and their time fully to their career to show their loyalty and motivation. This inevitably leads to workers being penalized when they have to take time off for personal reasons, such as for health management, caretaking work, or parental leave. As a result, many couples find themselves forced to sacrifice “couple equity” by prioritizing one partner’s income. Since women are most likely to take parental leave, the wage gap is perpetuated.
Credit: The Enduring Grip of the Gender Pay Gap, Pew Research Center, Washington, D.C. (March 1, 2023)
Pay transparency laws are one strategy being attempted to reduce the gap. 55% of OECD countries mandate that companies report their gender pay gap to stakeholders, and Harvard Business Review has found that these actions did contribute to pay gap decreases. Further legislative efforts to reduce the gap have followed suit in recent years, such as the 2023 European Union Pay Transparency Directive mandating that all EU companies must share salary data and mitigate any discovered gender gaps exceeding 5%.
How Can Companies Shrink Their Gap?
Calculating your company’s true adjusted wage data and being transparent about the findings can determine where your organization has the greatest gap and indicate what steps can be taken. Determining a standard salary for each position and ceasing to use salary history in hiring decisions could prevent the company from perpetuating existing wage gaps. Offering childcare, a benefit highly valued by the upcoming Gen Z cohort, would free employees from having to sacrifice their couple equity by allowing parents to continue working. Similarly, developing a method for evaluating and promoting employees that doesn’t penalize them for requiring flexible work hours or taking leave will allow all staff to take care of themselves and their families without impacting their career progression.
At its current rate of progress, it is estimated that gender equality won’t be achieved until at least 2158. The Equal Pay International Coalition finds that unacceptable, working in partnership with governments, the private sector, and worker organizations to achieve equal pay for equal work by 2030. Unfortunately, there isn’t a one-size-fits-all solution, but joining this mission and taking steps to make your workplace and compensation more equitable is a significant step towards uplifting women.
1 Goldin, Claudia, Career & Family. E-book, Princeton University Press, 2021.
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