The gender pay gap is complicated. It’s made up of varying causes, differs across countries and companies, and some people even deny its existence. In short, it’s difficult to discuss, never mind resolve!
But, as explored in this article, the ability to have productive conversations about the pay gap and its impact will benefit us all. So whether you’re rallying the troops to tackle inequity in your organization or talking to people who feel attacked by the topic, here’s what you need to know:
What’s the gender pay gap?
The gender pay gap is often misunderstood as describing unequal pay between men and women performing the exact same work, which is illegal in most countries.
Actually, the gender pay gap refers to the difference in the average total earnings of men and women in the workforce. So while the gap can be caused by illegal pay practices, it’s more commonly caused by a lack of equal opportunities to higher paying roles — and this is often a result of some form of discrimination (intentional or not).
This difference in pay tends to favor men over women, especially when compared to women from marginalized groups. It’s typically calculated as the ratio of women’s average earnings to men’s average earnings, expressed as a percentage.
There isn’t just one way to calculate the gender pay gap. Different methods and calculations can be used to assess and measure the gender pay gap, each with its own strengths and limitations. Here are some of the most common approaches:
- Mean earnings gap: This calculates the difference in average earnings between men and women. It compares the total earnings of all men to all women and provides an overall measure of the gap.
- Median earnings gap: This measures the difference in earnings at the midpoint of the income distribution. It compares the earnings of the middle-earning man to the middle-earning woman and is less influenced by extreme values.
- Adjusted or controlled gap: This analysis controls for various factors that may affect earnings, such as occupation, education, experience, and work hours. It provides an estimate of the pay gap after accounting for these variables.
- Hourly pay gap: This focuses on the difference in hourly wages between men and women and is particularly relevant for assessing pay disparities within specific occupations or sectors.
- Full-time equivalent gap: This examines the gap in earnings between full-time male and female workers, taking into account differences in work hours and part-time employment rates.
Different calculations provide different results, allowing you to explore your pay gap from varying angles. Exploring each one provides companies with the insights they need to truly understand and tackle their pay gap.
For step-by-step guidance on how to conduct such a review, download our free Gender Pay Gap Review Checklist.
Who does the gender pay gap impact?
While the gender pay gap directly impacts women, it has broader societal and economic implications that negatively affect everyone.
How the gender pay gap impacts women
The gender pay gap directly affects women by limiting their earning potential and financial independence. It can lead to economic disadvantages, wealth disparities, and reduced lifetime earnings, which can impact their quality of life, career advancement opportunities, and retirement savings. And this is particularly true for women also facing prejudice against elements of their identity such as their age, race, religion, or sexuality — each of which incur their own pay gap.
Graphic note: The gender wage gap is calculated by finding the ratio of women’s and men’s median earnings for full-time, year-round workers and then taking the difference. People who have identified as Hispanic or Latino may be of any race.
Source: For all groups, authors calculated the gender wage gap using data from U.S Census Bureau, “Current Population Survey: PINC-05.
Work Experience-People 15 Years Old and Over, by Total Money Earnings,
Age, Race, Hispanic, Origin, Sex, and Disability Status: 2020,” available at https://www.census.gov/data/tables/time-series/demo/income-poverty/cps-pinc/pinc-05.html (last accessed September 2021).
Graphic source: The United States Census Bureau
How the gender pay gap impacts families
When women are paid less than men, it can contribute to lower family incomes and financial strain. This can affect their ability to meet household expenses, save for the future, and provide for their children’s well-being.
How the gender pay gap impacts the economy
When a significant portion of the population is underpaid, it hampers overall economic growth and productivity. So what would happen if we were to unleash the full potential of all women who wish to work? According to McKinsey & Co, we could add 11% (USD 12 trillion) to our GDP by 2025.
How the gender pay gap impacts men
While men may win when it comes to their pay, the gender pay gap perpetuates harmful gender norms and expectations that ultimately limit their choices and opportunities as well. It can also contribute to work-life balance challenges, as men may feel pressured to prioritize work over family responsibilities.
Source: www.cipd.org/uk/knowledge/reports/extended-paternity-leave
Plus, pay gap reporting is (or will likely become) a legal requirement
If the social, economic, and moral implications of the gender pay gap aren’t enough to convince a company to care, the law will. Already, companies over a certain size in Australia and the UK are legally obliged to report their gender pay gap. Many leading employers also volunteer to share their pay gap data publicly as a sign of their commitment to progress.
While pay gap reporting is yet to become a federal legal retirement in the US, some local government laws require companies to report their pay with a lens of discrimination. Plus, the progress of Australia, the UK, and other European countries continues to put pressure on the US for such procedures to become mandatory.
Want to know more? Download our free guide: Understanding and Addressing Your Gender Pay Gap.
Common arguments against the existence of the gender pay gap
Like any productive conversation, it’s important that we don’t simply dismiss arguments against the existence of a gender pay gap.
Firstly, we must acknowledge that many of the reasons given are rooted in some form of truth. However, these are surface level facts that — without context — often support the theory that workplace inequity is a result of women’s own choices. They fail to ask why such “choices” are being made or explore the benefits of changing the status quo.
Here are a few common examples:
Popular argument against the gender pay gap #1
“Women earn less because of occupational and career choices.”
Critics argue that the pay gap is primarily due to women choosing lower-paying professions or working in part-time positions, rather than inherent gender discrimination.
✅ This belief exists because…
Yes, women do over-index in lower paying roles, industries, and part-time positions.
❌ It’s flawed because…
Women’s career choices are heavily influenced by societal norms, stereotypes, and expectations. For example, the belief that women are natural caregivers has seen women over-index in lower paying industries such as education, nursing, and administration.
The good news is, there are plenty of ways companies can actively change perceptions and promote alternative (and higher paying) roles to women. And, the even better news is that many of them are detailed in our free guide: Hiring Tactics That Trump The Pipeline Problem.
Popular argument against the gender pay gap #2
“Women earn less because they don’t study or gain experience in higher paying fields.”
It’s often claimed that differences in educational attainment and work experience between men and women explain the pay gap.
✅This belief exists because…
Historically, legal, societal and economic barriers have prevented women from fully participating in education.
❌It’s flawed because…
Today, research from educational bodies around the world reveals that women and marginalized groups are gaining relevant qualifications at record rates — and even out-graduating men. But while numbers are going up, workplaces are failing to translate these levels of representation into the workforce.
In fact, the recent U.S. Census Bureau shows that the pay gap between men and women only widens with more education.
Popular argument against the gender pay gap #3
“Women earn less because they have lower levels of negotiation skills and assertiveness.”
Some argue that women are less assertive in negotiating salaries and promotions, leading to lower earnings. In other words, they’re not getting paid enough, because they’re simply not asking.
✅This belief exists because…
In a workplace where women are the minority, raising their voice to ask for a promotion is understandably off-putting. And yet, studies show that women are actually asking for promotions at a higher rate…
❌It’s flawed because…
Women are asking for promotions. In a recent study by McKinsey & Company and LeanIn.org, it was proven that women were slightly more likely to report asking for a promotion (39% of women versus 36%of men) or a raise (29% to 27%).
This begs the question: What’s stopping such women from getting the roles they’re asking for? And that’s a big question, which we explore and answer in our actionable report: Five Ways to Develop Diversity (Without Relying on Recruitment).
Popular argument against the gender pay gap #4
“Women earn less because they prioritize parenting.”
Critics also contend that the pay gap is partially influenced by women’s choices to take time off work for maternity leave and child-rearing. This results in interrupted career progression and reduced earnings.
✅This belief exists because…
Whether due to personal wants or societal expectations, the majority of unpaid-caring responsibilities continue to fall to women. However, this should not and does not need to impact the gender pay gap…
❌ It’s flawed because…
As explored in the actionable report Six Pressing Reasons to Improve Your Parental Leave Policy, organizations have the power to help mothers stay and thrive in the workforce. For example, a strong parental leave policy helps companies retain and nurture valuable employees of all genders.
- A study by the Center for Women and Work found that women who take paid leave are 93% more likely to be in the workforce nine to 12 months after a child’s birth than those who take no leave
- Google reported a 50% increase in retention rate of women post-maternity after increasing its paid parental leave policy from 12 to 18 weeks in 2007.
- Endorsed Employer Accenture reported a 40% decrease in attrition among mothers after extending its paid maternity leave from eight to 16 weeks.
Popular argument against the gender pay gap #5
“Women earn less because they work fewer hours.”
Similar to point four, the argument is often made that women work fewer hours or take breaks from the workforce to prioritize family responsibilities.
✅This belief exists because…
Yes, on average, women perform fewer hours of paid work and over-index in part-time positions. But, again, the question is why many are making this “choice”.
❌It’s flawed because…
The facts show that women don’t work fewer hours than their male counterparts. They actually work more hours, but fewer of them are paid.
Despite progress in women’s participation in the workforce, unpaid care and domestic duties continue to be widely considered “women’s work”. As such, working women around the world are undertaking significantly more hours of unpaid care than men.
To understand how this unequal distribution of unpaid care impacts employees and employers alike, download our free report: The Hidden Cost of “Women’s Work”.
More resources to read, listen to and watch
Looking for more resources to aid your understanding or conversations around the gender pay gap? Here are three easy-to-consume yet informative resources.
- Read the Forbes article Gender Pay Gap Statistics in 2023
- Listen to the ‘Stuff You Should Know’ podcast explaining how the gender pay gap works:
- Watch The Female Lead’s ‘Entitlement Gap’ research.
