Understanding the Gender Pay Gap

The gender pay gap is a global problem, yet it has local implications. Ethical employers take the time to consider how they can actively dismantle the pay gap and make their workplaces fully equitable between men and women.

If you’re new to considering how you, as an upper-level manager, can improve pay equity in the United States, it can feel like there is a lot to learn. That’s why we’re here to help. Let’s explore the gender pay gap, why it exists, and what you can do to combat it.

What is the gender pay gap?

The gender pay gap is the difference in wages paid to men and women. Women make up nearly half of the American workforce, but even so, they are paid less than men, across the board.

Are we sure? How do we know this isn’t just the result of women choosing careers that pay lower wages? Or how do we know that the pay gap isn’t explained away by experience level or years in the workforce?

There is a lot of research and data that helps to explain the gender pay gap, but at Select One, we like to point our clients to a really great resource: The Institute for Women’s Policy Research.

Some of their key findings include:

• If we corrected the pay gap for all women across the board by paying women the same wages that a man at the same experience and education level receives, then 60% of women would immediately receive a pay raise!

• This same action would reduce the poverty rate of American women by half, from 8% to 3.4%. If you just corrected this amount for working single mothers, the poverty rate would drop from 28.9% to 14.5%.

• The gender pay gap represents an annual $512.6 billion! That’s 2.8 of the 2016 GDP. In other words, if companies paid men and women equally, then there would be $512.6 billion in wages that could be put back into the economy by women’s spending and investing.  

It’s important to remember that the pay gap exists when comparing men and women who have the same level of education and experience. And if you think this can be excused by the fact that women choose lower-income careers, you might ask yourself why fields dominated by women tend to pay less than those dominated by men. Could it be that women’s contributions to our economy are simply valued less than men’s?

As of 2017, the gender pay gap was about 80%. That means that women were paid 80% of the salaries made by their counterparts who are men. This gap is even greater when you look at the divisions by race. African American/Black women earned only 61% of what men made in 2017, and Latin American and Hispanic women were paid at a rate of only 53%. These numbers are similar for Native American women, Pacific Islanders, and other racial demographics. Asian women, who experience the smallest pay gap, still only make 85% of what men make.

Why is it like this?

Some historical context is helpful in understanding the why of the pay gap. After all, it seems unlikely that this is solely the result of sexist managers who look at their job applicants and say, “Yep, this man is going to earn $100k a year, where this woman is going to just earn $80k.” Although implicit bias likely plays a role in the pay gap, history plays a bigger one.

The gender pay gap is a result of a long history of policies that disenfranchised women workers, and a lack of laws that protected them.

For example, the pay gap was exacerbated by things like this:

• Until 1963, when President John F. Kennedy signed the Equal Pay Act, it was legal for men and women to be hired at different rates of pay, even for the exact same work, for no other reason than their gender.

• The 1978 Pregnancy Discrimination Act was the first federal law that protected women from being fired by their employers due to pregnancy. Before that, it wasn’t uncommon for women to be dismissed from their jobs if they became pregnant, which set women up for less pay over time, even if they returned to work shortly after giving birth.

• In 2009, President Barack Obama signed the Lilly Ledbetter Fair Pay Act, because previous to that law, employees only had 180 days to file a complaint about pay discrimination based on sex. Based on the new law, women could file within 180 days of any paycheck, which allowed them more time to discover and respond to pay discrimination in their workplace than before.

New laws and policies that protect women in the workplace are important, but the real opportunity for shrinking the pay gap lies with individual employers.

How can you fix the pay gap in your workplace?

If you are concerned about pay equity in your company, there are a number of things you can do. You can request an internal review, for example, or hire consultants to evaluate your existing policies and pay rates. You can also commit to intentionally considering the pay gap as you make hiring decisions for the company.

We just released an informative free guide to understanding and reducing the pay gap in the American workplace. The Employer's Guide to Pay Gaps and Gender Equity can take you through the important steps of evaluating flaws in your company’s pay structure that could disadvantage your women employees.

Once you’ve taken a look at the free guide, let us know how we can help! We would love to work with you to ensure that your policies create true equity in the workplace, because we believe that pay equity improves performance, job satisfaction, and morale. Don’t wait to find out if you have a pay gap problem because someone documents a complaint, but be proactive and start contributing to solving the global problem of pay inequality!