The gender pay gap: Why it's still a thing, and how to close it

Employers 12.15.2021 4 MIN READ

Summer 2019: The hot topic of the season was the U.S. Women’s National Soccer team, their record-breaking 4th World Cup victory, and the attention they’ve drawn to the gender pay gap. The pay gap isn’t unique to professional sports, it's still a problem in corporate America as well. This topic was a focus at Ayco’s 31st InnerCircle conference and will continue to be a focus as companies and society work to ensure equal pay for equal work.

Watch the gap

The wage gap between men and women in America has been slowly closing, but still currently sits at around 20% in 2019. This means that in the U.S., women need to work four years longer on average than men to make up for the wage gap. In higher paid positions, the gender gap widens significantly. Women make up 40% of the S&P 1500 labor force, but only 6% of CEOs¹.

“Although it’s immeasurable, there may be some bias, whether conscious or unconscious, embedded in that number. When we looked at the data, the primary issue is that women are not in the senior positions that pay the most.”

—Amanda Hindlian, former Managing Director, Goldman Sachs, speaking at Ayco’s InnerCircle conference, June 2019

The gender pay gap has a negative impact on companies as much as it does on employees. The link between diversity and enhanced company performance has been clearly established. Companies will benefit if their practices naturally surface diverse leaders, and allowing their best talent to advance regardless of gender.

So why is there still such inequity, what is the cost to companies, and how can corporations level the playing field?

Why is there still a gap?

Many factors contribute to the wage gap. Three are highlighted below:

State laws have an impact. 32 states still allow employers to ask for pay history. In the 18 states where laws make requesting pay history illegal, there has been a significant narrowing in pay discrepancy.

Blind spots are a contributing factor. At multiple points in the employee life cycle, managers and leaders make decisions that impact employees’ pay and benefits. It’s important for influencers to internally evaluate the factors that drive decision-making.

There’s a cost to flexible schedules. The gender gap is often attributed to a greater number of women following career paths that offer a flexible schedule to help create work/life balance. This can result in reduced compensation potential.

“You have to be really comprehensive across all your systems and say, how is it that I become attractive to women and retain them so that they can develop, advance and progress inside of my organization? Not only the diversity and inclusion office needs to think about this, but also your benefits partners, your compensation partners, and your business unit heads all need to place value on this.”

—Magda Yrizarry, SVP & Chief Talent & Diversity Officer, Verizon, speaking at Ayco’s InnerCircle conference, June 2019

What to do about the gender pay gap

There are many strategies companies can use to level the playing field for women.

Consider the gender gap in succession planning and advancement. Reinforce opportunities for advancement to improve retention of female employees. This should be a coordinated effort across business unit heads and HR benefits and compensation leaders. A variety of opinions and perspectives should be considered when evaluating candidates for promotion, especially at the senior levels.

Shape your company culture for inclusivity. Carefully consider both the benefits offered and the language used to communicate them. For example, encouraging all new parents to take leave when a child is born recognizes that both women and men may share family responsibilities.

Set the tone from the top. Senior leadership should hold other leaders accountable for change, while encouraging employees at all levels to embrace diversity and inclusion in their daily work.

Set policies that move the needle. Even in states without laws aimed at closing the gender pay gap, companies can set their policies to create a more level playing field. Salaries should be based on peer and market data. Companies should continually evaluate an employee’s salary throughout the stages of advancement to ensure that compensation is fair.

A final note

The U.S. Women’s Soccer team has galvanized fans around the world with their commanding performance and their activism against gender inequality. Using their platform, they’ve issued a challenge to employers.

Building a diverse workforce that includes under-represented demographic groups adds strength to company culture and has been shown to boost the bottom line. Closing the gender pay gap is an important step that corporations can take to build a more inclusive culture.

Learn how we can help you create a more productive, financially well and engaged workforce at all levels.

Interested in what a Financial Counseling program can offer? Contact us

Sign up to receive exclusive thought leadership on the latest in benefits, compensation, tax changes and more.

First Name *

Last Name *

Work Email *

Captcha *

¹The source for this post is “Closing the gender gaps: Advancing women in corporate America.” Read the full study, published by Goldman Sachs at https://www.goldmansachs.com/insights/pages/gender-pay-gap-f/gmi-gender-gaps.pdf

For disclosures relating to this article, please click here.