The Gender Pay Gap: Where We Are and How to Get Where We Need to Go

A gender pay gap depiction using UK subway safety warning Mind the Gap

Organizations are making progress addressing the gender pay gap, but change is slow. Narrowing the gender gap relies on understanding nuances and committing to strategies that go beyond issues of compensation.

Does March 24, 2021, ring a bell? What about March 31, 2020, or April 12, 2011? These dates represent Equal Pay Day, which highlights the gender pay gap. The dates mark how long U.S. women must work into the new year to earn the same amount that U.S. men earned during the previous calendar year.

For example, because women in the U.S. will earn $0.82 for every dollar made by men in 2021, women will need to work almost three months extra to receive the same pay. While this statistic is daunting, many organizations are making progress in narrowing the gap. Still, much work needs to be done.

Complexities of the gender pay gap

The gender pay gap has many nuances that can make it confusing to understand and even more difficult to address. First, there are two types of calculations for determining how much money women earn versus men, according to Payscale. The uncontrolled gender pay gap figure, which is $0.82 for every dollar, looks at the average pay for men and women regardless of their jobs. The controlled gender pay gap looks more specifically at the pay for men and women performing similar jobs. The difference is narrower with the controlled gender pay gap, which shows $0.98 being earned by women for every dollar made by men. However, even though the controlled gender gap looks smaller, it still results in a lifetime earnings loss of $80,000.

It's crucial to understand that a pay gap is more than a compensation issue; it reflects an imbalance that runs throughout the organization, from the recruiting and hiring process to onboarding to mentoring, project opportunities and promotions. Beyond the hiring or promotional salary, when women don't have the same opportunities to develop and advance as men, it ultimately affects their pay.

Emphasis on narrowing the pay gap

Most organizations recognize that gender pay inequities are costly. Recruiting, retention and brand reputation are affected when an organization doesn't pay fairly, and the business may be subject to legal challenges as well. Additionally, leading organizations appreciate that ensuring diversity and inclusion at all levels improves business performance, while many are working for change simply based on the moral grounds of the issue.

A 2019 SHRM survey found 60% of U.S. organizations are working to resolve pay inequities. Of those, 93% are using pay equity analysis, 77% are adopting remediation strategies and pay equity adjustments, and 72% are working to identify and resolve root causes.

State governments are also involved in the fight to narrow the gender pay gap. According to HR Dive, at least 19 states banned asking about salary history during an interview to end the cycle of pay discrimination during hiring.

The pressure to address the gender pay gap also comes from potential employees who prioritize working at socially responsible businesses. Glassdoor reported that three in five people would not work where they thought a gender pay gap existed.

Taking action, making it effective

Despite the desire and efforts to narrow the pay gap, change is slow. Although many organizations acknowledge the benefits of pay equity, a surprising number of people don't think pay gaps exist. In one study, reports CNBC, 46% of men surveyed said they don't believe the gender pay gap is real. Worldwide, according to Glassdoor, seven in 10 people believe women and men are paid equally.

One tactic that may help with pay gaps is increased transparency. Historically, employees were discouraged from discussing salary with their colleagues, but Payscale research indicates that transparency around salaries, salary ranges and market data helps organizations minimize unconscious bias and make better salary decisions that lessen pay gaps. Data tools that can analyze compensation are essential assets for organizations looking to analyze and compare wages to identify potential gaps.

Businesses addressing gender pay gaps must look for inequities throughout the organization and ask hard questions that look for inequities at all stages of an employee's journey. A recent example of gender inequity at work is illustrated by the fact that many employed women have had to quit their jobs due to the pandemic. Many of these women worked remotely and disproportionately had full-time childcare and homeschooling responsibilities because most schools and daycare centers were closed.

In September 2020, 865,000 women left the workforce, compared to 216,000 men, according to The National Women's Law Center. Businesses need to consider what support and practices they can offer to help employees better manage family responsibilities and remain at work. For example, organizations must help valued employees return after they take time away for family responsibilities and also check that processes are in place to minimize additional pay inequities in these times.

While there has been progress in closing the gender pay gap, much hard work still needs to be done. Organizations must get a clear-eyed view by using data to identify problem areas and digging deeper to understand where inequities may exist within the organization. From there, they must address those issues using pay transparency to decrease unconscious bias.

Through these efforts, organizations can work to ensure that Equal Pay Day occurs before the new year begins every year.

Go deeper into this topic by downloading this report from the ADP Research Institute®: Rethinking Gender Pay Inequity in a More Transparent World

Pay equity and pay transparency are connected. Visit our pay transparency page to learn more.