International Equal Pay Day is on 18 September and represents the longstanding efforts towards the achievement of equal pay and builds on the United Nations commitment to human rights.
It is 2020 and we are still talking about the gender pay gap! Progress towards closing the gap has been painfully slow inching up at 1.5% a year since 2015! And the fear is that with women disproportionately impacted by COVID-19 the gap could get wider! Women are over-represented in front line roles impacted by job losses.
McKinsey data suggests that women are 1.8 times more vulnerable to downsizing than men. And some women are opting out of the workforce, unable to manage the excessive demands of home and family that fall on women without access to caregivers and schools. The Boston Consulting Group estimates that women spend 15 hours more than men on housework in the US.
We must end the gender pay gap! Women represent an under-utilized workforce that can assist with bridging the skills gap. There is ample research by Catalyst, McKinsey, Mercer and others to suggest that including women in senior leadership boosts financial performance and provides for more predictable and consistent results. We know that gender balanced teams provide diverse perspectives that foster innovation and better meet consumer expectations.
In order to harness the potential of all employees, organizations must foster inclusive cultures where employees feel a sense of belonging. A premise to this sense of belonging is trust that the organization is fair and equitable and that, regardless of identity, all are being fairly paid.
So, the logic is there. Why are organizations not eliminating the pay gap and what must they do?
I. The Pay Gap in the U.S.
Its 2020 and women still earn $0.81 for every dollar earned by men! According to the Bureau of Labor Statistics, women earn a raw median income of $41,977 annually while men earned $52,146. That’s around a $12,000 difference a year!
The evidence of a gap in the US is more astonishing based on age or race. While women ages 20-24 years old, earned 90.2% of men’s median earnings in 2017, women over 65 years old earned just 77% of men’s median earnings for full time work. This is also compounded with the fact that even though women and men enter the workforce at similar levels, by their mid-career, men are 70% more likely than women to end up in executive roles and by late career, they are more likely to be in C-suite roles and vice presidencies.
Women of color in the US have a higher wage gap than men both in and out of their racial groups. Black female executives earned $0.62 for every dollar a white male executive earns.
Compared to white women, Black women, earn 16% less at entry level, 32% less by mid-career and 39% less later in their career.
II. Global Pay Gap
Globally, women are paid 77 cents for every dollar that men earn, and it will take 202 years to close the gap says the World Economic Forum. Iceland was named the most gender-equal country followed by Norway, Finland and Sweden. Other economies in the top 10 include Nicaragua, New Zealand, Ireland, Spain, Rwanda and Germany. Yemen, Iraq and Pakistan were at the opposite end of the scale. And what’s disappointing is that the United States came in at number 53!
Many European countries have equal pay laws and are required to share their pay data. France, Belgium and Spain all have some form of obligation on employers to produce action plans on equality. Belgium has a low pay gap of 6.1% and requires that certain job classifications are gender neutral. Germany has recently introduced a right for employees in large companies to make an information request to determine their colleagues' average remuneration where there are 6 or more colleagues carrying out comparable roles. A number of countries like Portugal and the Netherlands are currently considering new legislation in this area. The UK has new reporting requirements.
Globally, women are concentrated in lower-paid, lower-skill work with greater job insecurity and under-represented in decision-making roles. They carry out at least two and a half times more unpaid household and care work than men and this has only increased with COVID-19 III. Why the Gap?
One explanation for the pay gap is that to move into executive ranks, corporations require profit and loss (P&L) experience and women are underrepresented in line roles with management and profit and loss responsibilities. In the US, women of color are most likely to be individual contributors without management or profit and loss responsibilities. Asian women are least likely to be in P&L or management roles and only 2% of Asian women make it to the executive level compared to 4% for all women.
A recent study by McKinsey found that only one-fifth of female vice presidents had profit and loss responsibilities, which is typically considered necessary experience for moving higher. [https://womenintheworkplace.com/]
Some have explained away the gap by pointing at women having to take more and frequent breaks from their work time than men. However, research suggests that some women with families get more ambitious in their career instead of less. And this despite incurring a pay penalty when they return to work after an absence, earning 7% less on average for the same position.
Increasing investor and stakeholder pressure are driving companies to conduct their own analysis and put in place remedial actions.
It’s time we stopped talking about “fixing” the women by making them more confident to ask for what they want, take risks and negotiate better! Its time organizations address their systems, processes and culture to examine what prevents women from advancing and take corrective steps now!
IV. What Can Organizations Do?
· Conduct regular pay equity studies and address any adverse impact for women
· Publish pay data with action plans to address the gaps
· Be transparent about pay ranges
· Monitor promotions and annual raises to ensure they are bias free
· Address unconscious bias at each stage of the employee life cycle
· Create career paths for women that encourage them to take P&L roles
· Ensure access for women to critical roles
· Provide high potential women with mentors and sponsors who can guide their career trajectory
· Create flexible work cultures so women do not have to off ramp to manage work and personal life.
· Refrain from requiring prior compensation information when interviewing and hiring candidates as the practice perpetuates the gap
James Bessen, Erich Denk, James Kossuth Stop Asking Candidates for Their Salary History; Harvard Business Review; July 2020
The Real Gap: Fixing the Gender Pay Divide by Korn Ferry Hay Group
Deborah Ashton, What HR Can Do to Fix the Gender Pay Gap; Harvard Business Review 12/2/2014
Global Gender Gap Report 2020; World Economic Forum; 2020
On your radar: Key employment issues across Europe and beyond: gender and pay special issue; July 2018 CMS