According to the U.S. Bureau of Labor Statistics, women working full-time earned only 82.3% of what men earned in 2020. Making matters worse, this percentage has remained stagnant for more than 15 years, though economic historian and labor economist Claudia Goldin thinks a convergence of gender roles might take place in the near future.
As a business leader, you can move that percentage in the right direction. Below, we’ll explore why the gender pay gap exists and share best practices you can adopt to make for a fairer, more equal workplace.
What is the gender pay gap?
The gender pay gap refers to the difference in earnings between men and women for the same job roles. While, by definition, the gender pay gap could reflect a disparity in favor of either demographic, it has traditionally always favored men over women and non-binary workers.
What makes the gender pay gap particularly egregious is that it describes women and men who, by and large, do the exact same work. Two co-workers could have the same occupation, education level and job credentials. Yet, if one is a woman and the other a man, it’s not uncommon for there to be a difference in earnings.
Gender pay gap examples range from Fortune 500 companies to major sports leagues. According to the World Economic Forum, due to COVID-19 and other factors, global gender parity is at least 132 years from reality. As staggering gender pay gap statistics like this show, there’s plenty of work ahead before any leader can claim their workplace is genuinely equal.
Why is there a gender pay gap?
The reasons for the gender pay gap in the U.S. stem from America’s long, documented history of gender discrimination and strict social castes.
Women were denied the right to vote for centuries until Congress ratified the 19th amendment in 1920. Post World War II, only a fraction of women held degrees in higher education compared to men — a reflection of traditional “gender roles” as men returned to the workforce and working women became homebound.
In 2022, those gender roles have been all but shattered. Women are outpacing men in college enrollment and graduation rates, meaning the current educational attainment rate favors women — and will likely continue to do so in the future. By all accounts, women should be more qualified for job roles than their male counterparts.
And yet the gender pay gap persists. The reality is that women continue to face tremendous obstacles regarding pay equity. Whether it’s the burden of maternal leave, the exclusionary nature of industries like tech or flat-out sexism, the gender pay gap won’t close until employers give women the same opportunities, benefits and treatment afforded to men.
How to close the gender pay gap in your company
As a business leader, you are the last defense against the gender pay gap. After months of navigating The Great Resignation, you don’t want to give your employees additional reasons for leaving a job.
Curious about how to fix the gender pay gap within your organization? Below, you’ll find nine ways to start moving in the right direction.
1. Conduct a pay audit
At a time when job satisfaction is at an all-time low, having a gender pay gap for the same job will only push female employees closer to the door. To correct a pay imbalance, you must first understand how that imbalance came to be.
Together with your human resources team, conduct a thorough audit of the salaries and wages you pay your employees. For each job title you audit, ensure parity of earnings between employees regardless of gender, race or education. In other words, if two people have the same job title, they should be paid the same salary or wage — period.
2. Don't base salaries on annual earnings from a prior employer
Often, pay disparity occurs when companies hire talent “on the cheap” because their previous employer underpaid them.
Don’t perpetuate the same mistakes. Give your employees the respect they deserve, and ensure they receive a fair salary from day one at your company. Conduct market research to determine median earnings or average wages for a given position, and be transparent about pay ranges in your job description.
Beyond that, never lowball a candidate just because they suggest a figure below what you’re willing to pay. It’ll only exacerbate the pay problem you’re trying to solve.
3. Raise the starting wage of your job positions
If you realize you’re underpaying current employees while conducting your pay audit, be sure to remedy that.
One option is to raise your starting wages. By raising the pay floor for a given role, you’ll be bringing those who are underpaid in line with higher-earning employees.
Pay transparency isn’t relegated to gender. As you make changes, look for other ways to create a more equitable workplace. For example, you could standardize salaried and hourly earnings for your job roles, thus ensuring full-time and part-time workers receive equal compensation for their work.
4. Diversify your recruiters
Together with your human resources department, identify opportunities where new or existing roles could be filled by women, non-binary workers and people of color. Fill those roles either internally or via a traditional hiring method like ZipRecruiter, a popular job search site.
Attracting top talent is difficult, especially if you’re wondering how to find employees who will stay engaged for the long term. By diversifying your hiring team, you’ll be diversifying future cohorts of new hires — and creating a workplace where everyone can thrive.
5. Adopt pay transparency practices
When you aren’t transparent about pay, you’re not just doing your workers a disservice — you’re hurting your business. If someone discovers a peer with the same title makes more than them, it can lead to frustration, “quiet quitting” and ultimately attrition.
Get ahead of that possibility, and make compensation transparent across all job roles. If someone discovers salary or wage differences within a given role, don’t sweep it under the rug; rectify the mistake.
It shouldn’t be taboo for employees to discuss salary within your organization. If anything, you should welcome those discussions, as they will build trust and signal to your people that you’re invested in their success.
6. Provide sufficient paid family and medical leave
Too often, women are expected to make concessions in their careers for their families. Nowhere is this more evident than in the lack of adequate paid leave policies in the business world.
According to a report from The Century Foundation, companies with less desirable childbirth and childcare benefits also report a wider wage gap between men and women. Conversely, the better those benefits at an organization, the more equitable that organization tends to be.
Make family and medical paid time off a priority in your organization. Give women the flexibility and space to prioritize their physical (and mental) health, and reassure them that taking time away from work won’t jeopardize their career path. In doing so, you’ll make your organization a more equitable, desirable place to work.
7. Make employee work schedules more flexible
In an increasingly remote world, employees are seeking organizations that let them work how they want, when they want.
For women, flexible work options are a valuable way to balance work and home life. Some may wish to work earlier hours, taking the afternoon to spend with a child or pet. Others may want the ability to work from a coffee shop and get crucial heads-down time.
By giving your people the freedom to tackle their work, you foster a culture where people of all backgrounds can succeed. It may seem like a small gesture, but over time it can lead to massive improvements in career equity, wage distribution and salary parity.
8. Implement a childcare employee benefit program
A more direct measure for improving pay equity is to provide better childcare benefits. Many of today’s organizations will cover a portion, if not all, of the costs associated with enrolling a child in childcare.
Giving working parents a reliable means of taking care of their children directly invests in their health, well-being and careers. This is yet another way to level the playing field for women, men and non-binary workers, regardless of their home lives.
9. Ensure female workers have equal career advancement opportunities
Beyond all of the above, it’s critical to ensure you’re providing female employees with the same career opportunities you offer your male employees.
You could have total pay equity and transparency for every role in your organization. However, if you’re not actively promoting women and putting them into senior, higher-paying positions, you may still be contributing to a gender pay gap.
Encourage leaders in your organization to facilitate regular career development meetings with each of their direct reports. Stress how important it is that every person in your company has a clear and motivating career path.
How is the gender pay gap calculated?
The gender pay gap is calculated by taking the median annual salary of women in your organization and dividing it by the median annual salary of men in your organization.
For example, say you run a six-person organization with three women and three men. Their salaries are as follows:
- Woman #1: $10,000
- Woman #2: $30,000
- Woman #3: $50,000
- Man #1: $20,000
- Man #2: $40,000
- Man #3: $60,000
- For women, the median salary (i.e., the exact middle salary in the range) is $30,000.
- For men, the median salary is $40,000.
- Divide $30,000 by $40,000, and you get 0.75.
In dollar terms, the gender pay gap for this example is $0.75. That means that for every dollar men earn in your organization, women earn $0.75.
What consequences for women does the gender pay gap cause?
The gender pay gap has become a national talking point over the past several decades — and with good reason. Not only is the difference in earnings between men and women stark, but it’s causing an array of detrimental effects for women and the U.S. economy at large.
Women who suffer from the pay gap end up with lower levels of disposable income than their male counterparts. Compounded over months and years, this income gap creates a subsequent wealth gap.
It’s easy to imagine the financial impacts of a wealth gap. Not only do women have less equity to invest in big-ticket items like a car or home, but the gender wage gap causes lost retirement savings they will never be able to recuperate. In short, the wage gap leads to a poorer overall quality of life.
You can see the impact of the gender pay gap in sports. Consider the U.S. women's national soccer team, which famously won back-to-back World Cup championships (2015 and 2019). Despite outperforming the U.S. men’s team — which has never won a World Cup — the women’s team stated its members were consistently underpaid compared to their male counterparts.
In 2022, the U.S. women’s team settled with the U.S. Soccer Federation, signaling a significant milestone in the fight for gender pay equity. Still, the hard work remains in many other sports leagues — most notably the WNBA — to receive similar equity.
Take steps to reverse gender wage gap inequality in the U.S.
Is the gender pay gap real? Absolutely — but it doesn’t have to continue to be if business leaders take a stand against the gender pay gap in the U.S.
Incorporate the above best practices within your organization, and give your employees the tools to build a fairer, more equitable workplace. This inequality won’t stop until we all do our part. So, let’s get to work.