Why Gender Pay Inequality Is Holding Businesses Back

A man gets a head start in a race with a woman.

New gender inequality statistics detail how the business world is skewed toward men.

Right now, virtually every sector of modern society is reexamining its relationship with gender, through both culture and policy — at sports teams, the news media and the world of politics, ensuring fair treatment between men and women is an area of increasing concern. The business world is just starting to realize the great progress it has to make itself, in this area, mostly thanks to a push to produce more accurate and up-to-date gender inequality statistics.

ADP's Workplace Compliance Spotlight Webinar, Identifying Wage Inequality through Data Exploration, discussed updated numbers on gender-based pay inequality, laying out the situation in sometimes excruciating detail. The verdict? Virtually every gender deficiency in business is found at virtually every business in the country. It's not just large organizations or small ones, tech businesses or financial giants. The problem is as wide as business itself — but there are things you can do to distinguish your business within this context.

The Problem Is Still Very Real

In the most broad possible sense, men are doing far better than women, in terms of compensation. Comparing all men in the workforce to all women in the workforce, men make about 28 percent more, on average, according to ADP. However, when broken down, the story gets more interesting. One fascinating trend identified by ADP is in gender and age-based changes in wage over the past seven years. Millennial women have seen their pay stagnate, barely keeping up with inflation, while millennial men have seen their wages increase.

The emphasis in analysis of this problem is shifting from top-level salary to overall rate of pay, including overtime, incentives and other benefits, and looking at it this way has made it far easier to see how an enormous 28 percent pay differential could arise. The problem gets introduced right at the moment of hiring, but it also gets expressed through a slightly lower level of success in things like promotions and performance reviews.

These small causes sum to an enormous difference in compensation overall, and that is largely to do with incentives and other less traditional forms of compensation.

What to Do With Gender Inequality Statistics

Ellen Feeney, Vice President, Counsel at ADP, has some commonsense suggestions about how to deal with this. She suggests removing pay history questions from onboarding interviews — these sorts of questions turn past trends into future ones, whether or not those past trends were equitable in nature. The legality of questions about pay history varies quite a bit from region to region — and in general, it's better to have an onboarding strategy that works in all legal contexts. If you don't steer well clear of the legal line, on the issue of questions or any other, then your organization may end up needing to implement a different ad hoc solution for every state-level jurisdiction.

Another big recommendation is to conduct a pay-equity audit — police yourself, for a whole host of benefits. It's vastly cheaper to conduct these tests than pay hefty fines for violations that went unnoticed, and that's without considering the PR impact of being branded a regressive business. Self-audits also allow a business to know the story of its own pay structure, so any incidental pay differential that does naturally arise can be explained without causing a violation. As Ellen points out, "Saying 'We don't have the data,' is not a great excuse."

Pay Equity Is a Business Issue

Attracting top talent has a lot to do with the impression of a fair workplace, and the impression of a fair workplace has a lot to do with the reality of one, says Chris Ryan, Vice President, Strategic Advisory Services at ADP. "In any group, when there are perceptions of unfairness, this can break down or erode organizations," says Chris. "It's not just a compliance issue ... If there are perceptions of unfairness, teamwork breaks down."

The other issue is that since pay inequality is unintentional, it is by definition unplanned and thus disruptive to a properly functioning business. You can't execute an effective HR strategy if a huge proportion of the workforce isn't actually interacting with the system's various incentives as intended. It might seem like costs are lowered through savings on pay, but these savings can be offset by the negative impact of inequality on a business's overall health, in particular its ability to attract and retain top talent.

No business wants to end up on the wrong side of the current trend toward pay equity, and no business can assume that their own processes will necessarily hold up to scrutiny. Business leaders and HR leaders need to be proactive in looking inward and addressing this issue before it's a matter of enforcement. Those who don't may find that fines, alone, are the least of their problems.

Want to learn more about how data can help your organization combat gender pay inequality? Sign up for ADP's Webinar, Identifying Wage Inequality through Data Exploration.