Why the Gender Pay Gap is Closing at a Maddeningly Slow Pace

The most often-cited statistic about the gender pay gap is that women earn 82 cents for every dollar a man makes—a figure that has percolated in the public consciousness for a long time, never getting any higher. Once adjusted by race, the numbers get worse: Hispanic and Latino women earn 55 cents on the dollar compared to white men, and Black and African American women earn 63 cents.

Gender Pay Gap Closing at Maddeningly Slow Pace

Prior to the pandemic, the current state of the gender pay gap had economists guessing that it would take an astronomical 100 years to achieve parity. But in light of how hard women were hit by the pandemic—and women of color even more so—that the original 100-year estimate now looks even more distressing: The World Economic Forum says that it’ll take 136 years before men and women are paid the same.

Governments around the world have responded in varying measures to try and tackle the problem:

  • The UK has required companies with more than 250 employees to report on the pay difference between men and women.
  • France has a similar measure requiring employers with 50 or more employees to disclose gender pay gap reports on an annual basis.
  • Late last year, Spain passed one law that lets the government fine companies that fail to disclose gender pay information, and another requiring companies with more than 50 employees to file their four-year plans to balance the gender of their workforces.

The picture in the US looks less rosy. It was just this month that the House narrowly passed the Paycheck Fairness Act, which includes provisions that protect employees discussing salaries with their colleagues, prohibit companies from requiring salary histories during the hiring process, and require employers prove that there are legitimate reasons for pay disparities, among others. And on disclosure overall, the US by far lags behind its European counterparts—like EEO-1 data, companies can disclose whatever data they want in whatever format they want, complaining that federal mandates requiring gender pay information would place undue burden on employers and pose confidentiality risks.

But we know that disclosing this information leads to actual results: 

  • According to a 2018 study, the gender pay gap shrinks when companies are required to disclose disparities in pay. An analysis of wage information from Danish companies found firms that reported that information saw a 7% decrease in the gender pay gap. 
  • In Iceland, where the government requires companies with more than 25 employees to show proof they pay men and women equally for a job of equal value, analysis showed that employees reported an improved work environment.

Right now, the vast majority of S&P 100 companies only disclose adjusted pay information, which controls for factors like education, experience, and type of occupation. But adjusted figures are only a part of the picture—they’re derived from formulas that are shrouded in mystery to the public and those formulas vary from company to company. Nike, for example, said its 2020 pay equity data showed that “for every $1 earned by men, women globally earned $1, and for every $1 earned by white employees in the US, racial and ethnic minority employees earned $1.” They are not alone—Just Capital found that for companies that disclose gender pay ratios, “the vast majority of disclosures indicate that women are paid nearly the same as their male counterparts.” Perhaps Nike is the rare company that has achieved gender and racial pay equity, but without being able to access the company’s raw figures, we just have to take Nike at its word.

Like we said recently about diversity data disclosure, in order to actually move the needle and make progress, companies need to be fully transparent and disclose unadjusted raw pay data by gender, race, ethnicity, and job category. Reporting adjusted figures is not nearly enough—and it might be worse than not disclosing figures at all.

Additional Reading on the Subject

  • Racial and Gender Pay Scorecard 2021: Navigating Corporate Racial and Gender Pay Disclosures (Arjuna Capital)
  • Your Company’s Pay Gap Is About More Than Money (Harvard Business Review)
  • A window on the gender gap at the top of corporate America and the case for better disclosure (Morningstar)
  • The State of the Gender Pay Gap in 2021 (PayScale)
  • Pandemic, Racial Protests Driving New Wave of Pay Equity Bills (Bloomberg Law)
  • This database of salaries helps companies see if their pay is equitable (Fast Company)
  • Pay transparency can address gender wage gap better than alternatives (HR Dive)

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