How the Gender Pay Gap Impacts Business Performance

By Jade Makana, Director of Content at PayScale

The good news is that PayScale’s most recent gender wage research found that the pay gap between men and women is shrinking. The bad news is these improvements are miniscule.

The Data Doesn't Lie

The uncontrolled pay gap—which looks at the median salary for all men and women, regardless of job type or worker seniority—showed that in 2015, women made 74 cents for every dollar earned by men. This year, women made 76 cents when compared to each dollar a man earned. Additionally, when the data controls for factors like job title, job level, years of experience and other important influencers of wages, women now make 98 cents for every dollar earned by men, as opposed to 97 cents last year.

Although the difference in wages may sound small (i.e. why squabble over a few pennies?), it all adds up. For a man making $50k a year, the gap means a woman will make one $1k less annually for the same job. Or for a man making $100k per year, a woman will earn $2k a year less. And unfortunately, it's not even worth comparing jobs for men and women earning $200k per year because there are so few women in this wage bracket.

The gender data goes on to tell a deeper, more concerning story. Men aren’t just getting more pay—they are also getting more promotions and advanced titles. In fact, men are 85 percent more likely than women to be a vice president or executive by their mid-career and 171 percent more likely than a female to hold such a position late in their career. So, men are not only earning more pay, but also experiencing higher levels of autonomy, power, and decision-making, all of which negatively impact women’s engagement and earning potential in the workplace.

Why It Matters

Why should this matter to business owners? Because we’ve learned that greater gender diversity actually correlates to better business performance. A McKinsey study titled "Women Matter: Gender Diversity, a Corporate Performance Driver," found that companies with a higher proportion of women in leadership positions had stronger financial performances. More specifically, companies with a greater proportion of female leaders saw a 48 percent higher operating profit, a 10 percent higher return on equity (ROE), and a 1.7 percent growth in stock price.

Gender equity also impacts employee engagement and retention for both genders. PayScale research found that when employees believe their employer is taking no action to address gender inequity, 71 percent of women and 74 percent of men said they plan to find a new job within six months. Gender equity is becoming an urgent business matter because employers understand that it impacts retention of top talent, overall business performance, and—ultimately—the bottom line.

Taking Action

While most organizations do not intentionally discriminate against women, gender equity—like most pay inequity—tends to happen when you’re not looking. The good news is the proliferation of salary data available to employers makes it easier to know how gender pay at their company stacks up.

The first step in addressing the issue is to conduct an audit so that managers and HR leaders can understand whether any female employees are taking home a smaller paycheck for the same work. Then pay practices and compensation can be adjusted to achieve equity across the company.
It’s also vital to discuss the steps being taken to address inequity with your employees, as it is almost as important as the process itself. Both men and women want to work for a company that shares their values on fair and equitable pay. But if you don’t let employees know what you’re doing to eliminate the gender gap, it can be as damaging as doing nothing at all.


Jade Makana is Director of Content at PayScale. She provides resources to help organizations understand the value of developing strategic compensation programs to improve their business performance. For more information, visit www.payscale.com