The gender pay gap in the US

The gender pay gap in the US

According to a report from the American Association of University Women, women lose $513 billion a year in wages due to the gender pay gap.

The OECD defines the gender wage gap as “the difference between median earnings of men and women relative to median earnings of men”. As a rule, the gender pay gap is a statistical indicator that allows us to understand the gap between women’s earnings compared with men’s.

Lots of measures have recently been taken, and more and more attention is drawn to this issue but in spite of that in 2018, the gender pay gap still persists. Payscale recently published a report about “The state of the gender pay gap in 2018” and it revealed that for every dollar earned by a men, women only earned 77.9 cents. There was a slight improvement compared with 2016, as women used to earn 76.3 cents for every dollar earned by a man.

This gap tends to widen while women climb the social ladder. Indeed for similar employment characteristics and jobs, women will earn 97.8 cents for every dollar earned by a man. However, if we look at executives, the gap widens to 94.4 cents for every dollar, and this number has been constant since 2016.

This gender pay gap exists in all sectors, although there are sectors that pay more equitably than others. For instance, in the sectors of Transportation & Warehousing and Energy & Utilities women respectively earn 96.0 and 96.2 cents for every dollar earned by a man. In health care, women experience a gap of 98.9 cents on the dollar. In the sectors of Engineering & Science and Tech near-parity for wages is achieved, as women respectively earn 99.2 cents and 99.5 cents for every dollar.

It is interesting to understand the reasons that can be held accountable for this gap. There are many different reasons starting with the fact that men are more represented in senior roles but also, the fact that more women tend to work part-time. However, Payscale’s report shed light on other new kinds of reasons - the use of salary history, career disruption and employee referrals.

Firstly, the use of salary history relates to the new employers that base salary on what the employee used to earn in his past job experience. Since women are in fact less paid than men, this practice inevitably leads to perpetuate unequal wages.

Another reason is career disruption - unemployment can have a significant impact on wage as, on average, unemployed people when they receive a job offer earn 4 percent less than those who haven’t recently been unemployed. And the longer this career disruption, the greater the penalty on wages. This penalty is harder on women because they tend to take more and longer breaks than men. In particular, between the ages of 30 and 44, women are 6 percentage points more likely to be returning after a break in employment, compared with men.

In the end, the study highlights that employee referrals benefit men far more than women. Firstly, because referrals lead to a greater salary increase for a man than for a woman. Indeed, when referred by a contact, the report shows that men can expect to get up to $8,200 of salary increase while women should only expect a $3,700 salary increase, which corresponds to a 55 percent difference.

But also because women are less likely to receive a referral in the first place - white women are 12 percent less likely, and women of color are 35 percent less likely to receive a referral than their male counterparts.

Over the past few years, states and companies all over the world have tried to close that gap by taking steps. For instance, salary history has been banned across the US in order not to perpetuate the gender pay gap. In France, companies with more than 50 employees are now required to justify pay gap by using a software and if a company fails to erase a pay gap detected by the software, they could face a penalty.

Organizations have also taken measures to reduce the gender pay gap. For example, in the last two years, Salesforce has spent millions in order to raise wages to close the gender and racial pay gap among its employees.

Efforts seem to be underway to erase the gender pay gap especially as more and more people become aware of this debate. But will it be enough to effectively close the gap?

Minan M.