The real reasons for the gender pay gap

Equal pay is not enough.
Equal pay is not enough.
Image: Reuters/Shannon Stapleton
We may earn a commission from links on this page.

A US court yesterday (April 9) declared it was illegal for employers to use women’s prior salaries to justify paying women less then men.

The decision may finally eliminate one of the last legal excuses employers have for pay discrimination, and it follows a number of states, cities and even companies that have prohibited hiring managers from asking about prior pay. As welcome as those developments are, and as important as it is for women and men to start at the same salaries, that’s not what’s behind the gender pay gap.

Today is Equal Pay Day, which marks the point in the year where women in the US have have to work to catch up with what men earned last year. The median annual difference is about 20%, according to US Census data.

What’s pernicious about the gender gap is that when you compare men and women in similar roles at similar companies, it virtually disappears. According to a March 29 study of almost 800 US companies by Korn Ferry, the global search firm, when salary data is broken down to individual job functions at the same level at the same company, the pay gap is less than 1%. A similar 2016 study from job site Glassdoor that compares men and women with the same job title, employer, and location puts the gap at 5.4%.

Where the gender gap manifests itself is across the entire economy, when the pay of all women is compared to the pay for all men. That’s because women are far less likely to have careers in the most lucrative professions, and far less likely to advance to senior positions.

For a clear example, consider the gender pay report issued by Goldman Sachs’s London office last month, as part of a new UK reporting requirement. While the firm starts male and female associates at the same pay, men at the firm on average make 56% more than the women. A big reason is that women make up only 15% of Goldman’s 450 partners, the most senior, and mostly highly paid, employees.

In a statement, Goldman admitted as much, saying: “The real issue for our firm and many corporations is the under-representation of women and diverse professionals both in magnitude and levels of seniority.”

Solving the gender gap means addressing the root causes of why women aren’t entering the most highly paid professions, particularly in engineering and computer sciences (women earned only 18% of bachelor’s degrees (pdf) in computing in 2016). It means addressing gender bias in hiring and particularly in promotion, and removing obstacles that keep women from the opportunities to advance.

It means grappling with the penalty women pay for having children, and the persisent crisis of access to affordable child care. It may mean considering radical solutions, such as implementing quotas for women on corporate boards, as exist in many European countries; requiring US companies publish gender pay gap reports, as they do in the UK; or even mandating men take paternity leave, to level the playing field between working men and women.

On Equal Pay Day, it’s worth celebrating the progress that’s been made, but we shouldn’t shrink from the work that lies ahead.

This story is part of How We’ll Win, a project exploring the fight for gender equality at work. Read more stories here.