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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.
—Amanda Hindlian, 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?
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.
—Magda Yrizarry, SVP & Chief Talent & Diversity Officer, Verizon, speaking at Ayco’s InnerCircle conference, June 2019
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.
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.
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.
Insights from Ayco InnerCircle 2021