Equitable pay is at the foundation of any healthy employer-employee relationship.
Some organizations, such as the All England Club, have taken steps over the years to address the gender pay gap. The club, which hosts the Wimbledon Tennis Championships, began offering men and women equal winnings in 2007. Male and female players alike applauded the change."There's probably no other sport, and very few professions in this world, where a woman can earn as much as a man," said John McEnroe, tennis pro and former Wimblemdon champion, per U.K. Reuters.
But more than a decade later after this momentous change in sports, the gender pay gap remains a huge issue. On average, men make 28 percent more than women across all industries, according to data from the ADP Research Institute®. For business leaders who want to ensure fair treatment for all workers, as well as recruit and retain top talent, ensuring equitable pay practices are in place must be a top priority.
The "Why" Behind Pay Gaps
It's difficult to quantify precisely why pay gaps exist. Is it due to gender stereotypes that impact career aspirations from a very early age? Do women suffer because they aren't empowered as negotiators? How often does gender discrimination impact the hiring process?
Data from Pew Research Center indicates that one major contributor to the gender pay gap is that women are more likely to take career breaks to care for family. Of those surveyed, 42 percent of women said that they had reduced their work hours to care for a child or other family member. By comparison, only 24 percent of men said they had done the same. Taking these career breaks impacts long-term pay potential, earning power and career options due to being out of the workforce for an extended duration.
Additionally, while women are increasingly holding higher-paying, manager-level jobs and working in industries previously dominated by men, Pew Research has found that women "continue to be over represented in lower-paying occupations, which also contributes to the gender differences in pay."
Finally, when examining discrepancies in jobs with the same requirements around education, skills and function, it's apparent that pay gaps are also due to perception and gender bias. Research conducted by a sociology professor at New York University indicates that employers place a lower value on work done by women.
"It's not that women are always picking lesser things in terms of skill and importance," the professor told the New York Times. "It's just that the employers are deciding to pay it less.
Pay Gaps Vary by Generation
There are also differences in the pay gap women experience that depend on their generation. According to the Department of Labor, the pay gap is the smallest for millennial workers and most significant for the Baby Boomer generation. Data from the Resolution Foundation in the U.K. quantifies those trends:
- Baby boomers (born 1946-1965): 16 percent gap
- Generation X (born 1966-1980): 9 percent gap
- Millennials (born 1981-2000): 5 percent gap
Again, it's difficult to pinpoint an exact reason why these variances exist between generations of female workers. At a minimum, the variation is likely due to differences in what each generation seeks and values about work. For example, Pew Research found that 61 percent of female millennial workers have a desire to be a boss or top manager, while only 41 percent of Gen X workers and 21 percent of working Baby Boomers share that passion. It's clear that a millennial worker who seeks a top manager position would earn a higher rate of pay, thereby having a smaller pay gap than her counterparts from other generations who don't have an interest in holding the upper-level management role.
A Commitment to Equal Pay Impacts More Than the Bottom Line
While closing the pay gap requires a financial investment, organizations can also experience benefits in improved performance, higher levels of retention and increased employee engagment when equitable pay practices are in place. According to a study mentioned in the New York Times, companies have also experienced increased profits when more women are in top management roles. Additionally, if an organization is known to have closed the pay gap, it's a powerful way to demonstrate company values, which should in turn attract new talent and customers.
Start Addressing Pay Gaps At Every Stage
Although the task of updating an organization's pay practices to make them equitable may feel immense, it doesn't have to be akin to rocket science. One way to start addressing pay gaps is by breaking it down by employee stage.
Candidates: Adopt a policy to not ask about a candidate's previous pay. In some states (Oregon, Delaware, California, Massachusetts), employers are already, or will soon be, restricted in how and when they can ask about or collect a candidate's salary history, according to Bloomberg. Regardless of your location, base your employment offer on a candidate's experience and qualifications, not on their salary history.
Employees: Create a transparent culture around pay. One way to do this is to list salary ranges in your job descriptions. According to the ADP Research Institute®, 90 percent of job seekers say they want to work for an organization that embraces transparency — which includes openness around pay. If you have job levels, publish the pay range for each level on your company intranet. This kind of transparency will increase trust and reduce the potential for pay gap issues to arise.
Managers: If managers are responsible for performance reviews and associated pay increases, make sure they are trained and have all the information they need about equitable pay. If you're worried that there may be a skill gap in this area, assign an HR manager or compensation specialist to assist managers during the evaluation process.
Equitable pay should be at the foundation of any healthy employer-employee relationship. As such, organizations play a vital role in eliminating wage discrimination practices that have been in place for several decades. When employers take actions to narrow the pay gap, they're not only doing the right thing — they can also reap the many return benefits that come from an equally-paid workforce.
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Rethinking Gender Pay Inequity in a More Transparent World
The ADP Research Institute® (ADP RI) examined disparities in base pay and incentive pay between genders both at time of hire and after six years of tenure within the same firm.Get the Report