What is the gender pay gap and 9 ways to fix it

Why does the gender pay gap exist? Is it getting smaller? And how can organizations help narrow it?

EMPLOYEE ENGAGEMENT | 8 MINUTE READ
Defining the gender pay gap

Defining the gender pay gap

The gender pay gap is the difference between the average hourly earnings of men and women, based on salaries before taxes. It’s usually shown as a percentage.

The ‘adjusted gender pay gap’ is what the difference looks like after taking away structural reasons for the disparity, like levels of education and work experience.

So how big is the gap? A worldwide look at the figures for 2022 by Forbes found that globally, women earned 17% less than men on average. But the gap varied widely by industry, ethnicity and even by geography. Even when the figure was adjusted for job title, level of seniority, and hours worked, women were still taking home 11% less than their male colleagues.

The gap affects not just women’s take-home pay, but their overall earning potential and long-term financial stability, as well as their retirement benefits. The Forbes study shows that women contribute 30% less than men to their retirement funds, and receive 20% less in social security benefits.

Untangle work with Workplace

From informing everyone about the return to the office to adopting a hybrid way of working, Workplace makes work more simple.

Why is there a gender pay gap?

Why is there a gender pay gap?

Several factors are known to contribute to the gender pay gap:

Job roles

While the number of people employed globally declined during the pandemic, the drop was steeper for women than for men. In the US, for example, women lost 11.9 million jobs compared to 10.1 million jobs lost by men. And more women work in sectors, like hospitality, retail and tourism, which have been worst affected.

Women are also less likely to choose to work overtime and extra shifts. And they’re more likely to opt for part-time jobs because of domestic and childcare responsibilities. This may also make it difficult to take on senior roles. But while this contributes to the gender pay gap, it doesn’t explain why there are disparities in almost every sector.

According to Forbes, the gender pay gap at entry level to the job market is higher than 18% across all sectors. It’s more pronounced in high-paying industries like engineering and technology, and smaller in physical and social science jobs (9%). The biggest gaps are in law (59%), construction and maintenance (40%) and management and professional occupations (34%).

The ‘motherhood penalty’

The gap in pay between men and women increases with the number of children a woman has. This might be because of women having to cut their working hours, or it may be because of mothers seeking family friendly jobs – which tend to be lower paid.

According to a UK government report, women are much less likely to be offered a promotion after having a child than their male colleagues. It also suggests that just 44% of women surveyed were in full-time work three years after having children, while 90% of new dads were still at their desks.

A mix of lack of understanding and return-to-work programs, lack of affordable childcare and plain bias against employing women – mothers in particular – all feed into this. The result is that many women experience a ‘career ceiling’ which has a knock-on effect on their career progression, and further fuels the gender pay gap at mid and senior levels.

Part-time and informal work

Because of their social responsibilities, disproportionate numbers of women move into part-time working at some point in their careers, including after having children. This difference in men’s and women’s career experience could explain up to two thirds of the gender pay gap of college graduates according to the UK’s Institute for Fiscal Studies.

Globally, women are still over-represented in informal and insecure jobs, including cleaning, textiles, and caring. Many of these jobs have poor working conditions and lack access to benefits like healthcare, paid leave or maternity cover. This traps women into earning less and limits any career progression.

Geography

Geography plays a role in the gender pay gap. Some of the disparity is explained by differences in the economies and labor markets in different countries and regions. The concentration of women in certain industries and the availability of part-time, casual and seasonal work – for instance in tourism and agriculture – can also affect the statistics. But the fact remains that the gender pay gap, whatever its relative size, is universal.

Post-pandemic, in western industrialized societies, commuting distances are continuing to have an effect. A UK government report shows that women are now 30% more likely to leave a job which requires a long commute, opting for lower pay nearer home. Men, on the other hand, are more motivated to travel for higher salaries.

Ethnicity

Research shows that the gender pay gap affects women of different ethnicities differently. Latinas, Black women and Native American women all experience wider pay gaps than the average for all women. In 2021, the gender pay gap for Latinas was 54%, black women were paid 58% of the salaries of the male counterparts, and Native American women received just 60% of the pay awarded to their male colleagues.

Discrimination

The world of work is still rife with gender stereotypes and social norms.

Women are perceived as being more suited to certain roles and jobs, which in turn tend to be lower paid.

What’s more, employers tend to focus on career history when making hiring and promotion decisions. This perpetuates the gap between men and women where women have taken career breaks to have children, or to focus on work with a better work-life balance.

Women are also less likely to be given access to training. Investment in their careers is affected by perceptions that they’ll take time out, or fail to progress beyond a certain level after having children. This is compounded by lack of provision for women returners.

Gender discrimination in the workplace has been a focus of employment law in many countries for some time. As of April 2023, The European Council of the European Council has adopted new rules to combat pay discrimination and help close the gender pay gap. Under these rules, EU countries must share information about how much they pay men and women in the same role, and must act if the pay gap is greater than 5%. In the US The Equal Pay Act of 1963, protects against wage discrimination based on sex.

Effort and awareness around gender discrimination and the pay gap is increasing. But there’s a long way to go: according to the World Economic Forum, at the current rate of progress it will take 132 years to reach full parity globally.

How does pay inequality in the workplace affect different countries?

How does pay inequality in the workplace affect different countries?

Europe

The European Parliament says the average gender pay gap across the EU in 2021 was 12.7%, but the figure varies widely from country to country.

It’s greatest in Estonia (20.5%) Austria (18.8%) and Germany (17.6%) and smallest in Romania (3.6%), Slovenia (3.8%) and Italy and Belgium both at 5%. Luxembourg is reported to have closed the gender pay gap completely.

The US

The Pew Research Centre says gender pay disparity hasn’t changed much in two decades. However, there are signs the gap is narrowing, with the current estimated 18-cent gap for workers of all ages down from 35 cents in 1982.

The UK

In the UK, analysis by The Guardian newspaper showed that the gender pay gap is still very much in evidence. It found that four out of five companies in Britain still pay their male employees more than females, leaving the gap at 9.4% - the same level as in 2017-18.

How to fix the gender pay gap

How to fix the gender pay gap

The reasons for the pay gap are complex and there’s no instant fix. But there are many things businesses can do to help close it.

1. Be transparent

In many countries the law makes disclosure of pay across the genders compulsory. But even if that’s not the case, it’s key to have a policy of being open about the way your business determines pay and benefits. This should include raises and promotions.

2. Support promotion for women

Make sure all your employees are aware of the routes to promotion. And make sure all opportunities are equitable, as well as equal. Offer opportunities which support individual circumstances, particularly those of female employees, as well as job titles and skills.

3. Encourage negotiation

Be open to negotiation by all employees, especially women, and be ready to accept change and increase salaries where needed to achieve parity.

4. Look at recruitment and remuneration packages

Adapt recruitment policy to provide equal access to women returners, or those with social and domestic responsibilities.

5. Offer help with caring responsibilities

Creches, after-school clubs, childcare benefits and a flexible approach to time off can benefit female employees. And employers can retain the best people for the job.

6. Encourage men to take on more responsibility

Having policies on paternity leave and parental leave shows that the workplace is open equally to men and women. Encouraging men to share childcare enables women to progress alongside their male colleagues.

7. Look at your paths to leadership

Make sure all opportunities are equally accessible to women, and be ready to make changes to job or task specifications to do so. Create effective women-returner schemes and fast-track opportunities where women have been out of the workplace.

8. Promote remote and hybrid working

Flexible working can help level the playing field between men and women, giving all employees equal space to balance the responsibilities of work and home.

9. Build in training

Diversity and inclusion training, and programs to address unconscious bias will help eliminate the discrimination which contributes to lack of promotion, lack of training and gaps in pay.

Keep reading:
Was this article helpful?
Thanks for your feedback

Recent posts

Business Communication | 7 minute read

Business communication strategies and why organizations need them

Organizations had to rethink their communication strategies when people started working remotely during lockdown. Now, as some people begin returning to the workplace, businesses need to think again. Learn how to get started.

Employee engagement | 8 minute read

How to really measure employee engagement

Measuring employee engagement is hard. How do you know if people are really engaged at work? From pulse surveys to productivity metrics, discover how to measure your employee engagement levels.

Employee Engagement | 9 minute read

Work Motivation: 7 ways to motivate employees

What motivates employees to do their best work? Is it money? Recognition? Or is meaningful work more important? We explore what drives people and look at ways to motivate employees.