Gender pay inequities exist but the gap is narrowing.
By Katie Bardaro
Gender pay inequities persist in 2019, but not necessarily in the way many people think. There is a lot of miscommunication and confusion about the gender pay gap, so let’s set things straight. PayScale leveraged pay data from 1.8 million employees to compare the overall median pay for women to the overall median pay for men and found that women earn 79 cents for every dollar earned by a man. When accounting for the intersectionality of race/ethnicity and gender, this pay gap ranges from 74 cents on the dollar (African American and Hispanic women) to 93 cents on the dollar (Asian women).
However, these values do not truly capture a pay gap, but rather an opportunity gap. What they show is that women are underrepresented in today’s top paying fields. This really breaks down in two ways:
- Women dominate lower paying fields like education, social work, and nursing while men dominate higher paying fields like technology and finance.
- Women don’t rise to higher job levels at the same rate as men.
Given that men and women can be found in different roles, these overall statistics can obfuscate the actual gap in pay. For this reason, PayScale also calculates a “controlled” pay gap figure that accounts for measurable characteristics such as job, level, education, skills, management responsibilities, location, and other compensable factors. When comparing men and women doing the same work, with the same background, at the same type of employer, the national pay gap shrinks to 98 cents on the dollar overall. It ranges from 97 cents on the dollar for African American women to $1.02 for Asian women.
So, the question asked upon seeing this might be: Is the work done? The simple answer is no. While 2 percent may seem small, the impact compounds over the course of a woman’s career, resulting in median lost wages of more than $75,000.
Further, gender still limits the opportunities to advance. PayScale’s research examines men and women’s career progressions in three career stages:
- Early stage: people who are under 30;
- Mid-career: people between 30 and 44; and
- Late career: age 45 and above.
The study found that by mid-career, men are 63 percent more likely to be in vice president or C-level roles than women. And by late career, men are 131 percent more likely than women to be in a vice president or C-level role. On the other hand, women are more likely than men to remain in individual contributor positions over the course of their careers. A sobering statistic from the Glass Ceiling Index finds that there are more Fortune 500 CEOs named James than there are female CEOs.
This divergence in leadership opportunity is even more pronounced when bringing race and ethnicity into the analysis. Only 2 percent of women of color are in executive roles compared to 6 percent of Caucasian men. Overall, 72 percent of Asian women are individual contributors relative to only 56 percent of Caucasian men. It is important to point out that while Asian women may have a positive pay gap when accounting for differences in worker and position characteristics, their opportunities to advance into leadership roles are more suppressed than any other race/ethnicity examined.
But the future may be different. When comparing the overall median pay between women and men over time, there is a shrinking pay gap. PayScale’s first gender pay gap report released in 2015 reported a pay gap figure of 74 cents on the dollar. Today in 2019, that has increased to 79 cents on the dollar, gaining an improvement of roughly 1 cent per year. If this pattern holds, the gender pay gap could close in the year 2040.
What could potentially be causing this change? In looking at the data, there’s an increase in female representation in top paying occupations. For example, when it comes to in-demand positions in technical and mathematical fields, only 19.9 percent were held by women in 2014, compared to 23.2 percent in 2019. Similarly, 43 percent of roles at the director level and above were held by women in 2014, but this number increased to 48.7 percent in 2019.
So, what can organizations do to address the gender pay gap? A good first step is to run a pay equity analysis. These analyses can be completed in four steps:
- Gather any and all data that cover job characteristics (title, level, location, hours worked) and individual characteristics (demographics, pay, tenure).
- Group employees who do substantially similar work in a legally defensible way.
- Leverage the power of statistical modeling to understand the unexplained pay gap and where remediation tactics are needed.
- Determine an optimal communication strategy that aligns with company culture and develop this for both an internal and external audience.
The need for in-depth pay equity analyses will likely grow as a recent federal ruling requires organizations with at least 100 employees to report pay figures broken down by gender and race/ethnicity. Given that this federal reporting will focus on the overall pay gap and not nuanced differences across workforces, rigorous pay equity analyses will be needed to ensure that leadership teams are committed to paying equal rates for equal work.
Pay equity analyses are not for the faint of heart and will often require not only legal counsel throughout the process, but also a third party to help organizations correctly run and interpret the analysis results. Be wary of walkthrough guides online as the data and process needed is frequently unique to each organization. Conducting pay equity analyses ahead of budgeting season helps create an “equity reserve” to make pay equity adjustments. And, remember it isn’t only about pay: organizations need to understand the causes of the inequities and how to put strategic plans in place to avoid future problems.
Katie Bardaro is chief economist for PayScale.