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

Women Earn Less Starting at Age 32, New Visier Study Finds

A new US study,  Visier Insights™: Gender Equity, released this week introduced a new term to the lexicon of gender equity: the Manager Divide.

The study, which is based on an analysis of over 165,000 employee records from over 30 large US enterprises, found that the gender wage gap begins to widen at age 32. Up until this age, female workers earn 90 percent the wages of their male counterparts, but this percentage decreases to just 82 percent by age 40. At the same time, the data shows that women are underrepresented in managerial positions from this age onwards—a finding known as the manager divide.

Why does this disparity occur during this particular time?

Between the critical career advancement ages of 25 to 40 there is a notable and steady decline in the percent of women in the workforce -- meaning women are leaving the workforce at a higher rate than men during these years. This trend correlates to the childcare years: most women in the US who have children give birth to them between the ages of 25 and 34. With most children entering school (and, therefore, requiring less childcare) at age 5, women who have children are most likely to experience increased childcare demands up until the age of 39. These demands impact their careers.

Although significant progress has been made in employers proactively pursuing policies of equal pay for equal positions, this alone will not close the gap: gender equity is a complex and systemic issue that requires action on many fronts.

The study finds that eliminating the manager divide, which coincides with the years in which women typically have children, would cut the gender wage gap by nearly one-third. Furthermore, eliminating the manager divide and ensuring gender pay equity in manager positions would reduce the gender wage gap by almost one-half for workers over age 32.

There are a number of important steps employers can take to promoting the end of the manager divide and accelerate the closing of the gender wage gap:

● Implement the "Rooney Rule": for every manager position you have open to fill, consider “at least one woman and one underrepresented minority” in your slate of candidates.

● Implement blind screening, removing names (or other gender identifiers) from resumes when selecting candidates for interviews.

● Increase measurement and awareness of gender equity in the rollout or implementation of HR policies, including compensation policies.

Additionally, all of us—regardless of our role in our companies or communities—can work to eradicate the gender wage gap by:

● Supporting meaningful, paid parental leave that is equal for both men and women.

● Ensuring that it is socially acceptable for both men and women to take time off to care for their children.

● Supporting programs that increase the availability of quality, affordable childcare for all parents.

● Ensuring it is socially acceptable for both mothers and fathers to make use of flexible working time arrangements to care for children.

● Developing and supporting long-term programs—starting in grade school and continuing throughout high school and college and into the work years—aimed at removing the gender bias and social taboos associated with career choices: while it might take 10 or 20 years for these particular efforts to pay off, they are a key part of the solution for eradicating the gender wage gap.