Understanding the Gender Pay Gap

Understanding the Gender Pay Gap in America

by Brett Rudy - February 8, 2019

The gender pay gap is the difference between men’s and women’s median annual earnings from full-time, year-round work. Based on data from the U.S. Census Bureau’s 2017 American Community Survey, women in the United States are paid 80 cents for every dollar paid to men, which translates to $10,169 less per year in median earnings. Also known as the group-to-group gap, this unadjusted gender pay gap can stem from pay discrimination, but is also influenced by other factors, including the concentration of women in lower-paying industries and occupations, and the lack of women in high-paying management and executive positions. Because it compares the pay of all women to the pay of all men, calculating your organization’s gender pay gap can be a critical first step towards understanding the state of pay equity in your company. And in countries like the United Kingdom, where organizations are required by law to publish their unadjusted gender pay gaps, these analyses can form a critical part of your compliance process.

The gender pay gap affects women from every background, of all ages, across all levels of educational achievement, in every state in the U.S. – though each demographic is affected differently. Below, we will analyze the wage gap in context of age, education, and location. In addition, we will discuss the competitive advantages your organization can expect to see by emphasizing the importance of gender equality and putting formal processes in place to address pay equity. Like most reporting on the gender pay gap, we will leverage median annual salary information for white men as the standard benchmark in the gender pay gap analyses for these diverse populations that follow.

Earnings Increase with Age, and the Gender Pay Gap Does, Too

From age 15 to 44, both male and female full-time workers observe pay increases, but the gender pay gap follows suit. Between age 45 and 54, while earnings continue to increase for men, women begin to see their wages comparably decrease. Therefore, the largest median gender pay gap – more than $19,000 annually – occurs in this age range, where women can expect to make just 63 cents for each dollar made by their male counterparts.

Source: US Census Bureau, Current Population Survey, 2017. “Historical Income Tables: Table P-8. Age – People by Median Income and Sex.” 

Education Does Not Combat the Gender Pay Gap

Today, women earn more college and postgraduate degrees than men in every demographic. But women with college and advanced degrees actually see a higher median gender pay gap – more than $20,000 annually for women with bachelor’s degrees and more than $34,000 annually for women with doctorates – than women with lower educational achievement.

Source: US Census Bureau, Current Population Survey, 2017. “Historical Income Tables: Table P-20. Educational Attainment – Workers 25 Years Old and Over by Median Earnings and Sex.” 

Location Plays a Huge Role in the Gender Pay Gap

Pay gaps can be calculated for each state using data from the American Community Survey, which is conducted by the U.S. Census Bureau and distributed to approximately 3 million U.S. households annually. In the below graphic, the states shaded in dark blue have a relatively low wage gap (minimum: $0.11 per dollar), and the states shaded in a light blue or white have a relatively high wage gap.

Source: US Census Bureau, American Community Survey, 2016. “State Median Earnings and Earnings Ratio for Full-Time, Year-Round Workers, by State and Gender.”

Working to Close the Gender Pay Gap in the U.S.

If the earnings of full-time workers continue to advance at the same rate as they have between 1959 and 2017, the wage gap between men and women in the United States will not close until 2059. But not every state is closing the wage gap at the same rate.

Here’s a look at the projected year that the wage gap will close in each U.S. state. Those states shaded in dark green are not projected to close the gap until next century, in some places as late as 2153.

Source: Institute for Women’s Policy Research, 2017. “Projected Year the Wage Gap Will Close by State.”

Understanding Adjusted vs. Unadjusted Pay Gaps

While the unadjusted gender pay gap referenced above compares pay levels at a high level, the adjusted gender pay gap accounts for factors such as differences in hours worked, occupations chosen, education and job experience, and geography in an attempt to more directly quantify pay discrimination against women in the workplace. Because this role-to-role gap compares wages for employees who perform similar work, many compensation professionals believe that it more effectively assesses whether or not your organization offers equal pay for women. And after taking the time to adjust for all occupational, organizational, and human capital factors that can cause pay differences, Gartner estimates that the remaining 7.4% adjusted gender pay gap is directly within the Total Rewards function’s control.

The Competitive Advantages of Addressing Pay Equity

Understanding the different types of gender pay gaps, reviewing wage gap statistics, and assessing the existing gender pay gaps in your own organization is only the start of the Total Rewards work towards advancing women’s equality. Closing the gender pay gap requires you to put formal processes in place to address pay equity in your organization. While this can be an immense amount of work, the rewards for your efforts will extend beyond simple gender equality in pay.

According to a report by Aptitude Research Partners, putting formal processes in place to address pay equity can help organizations compete for talent and recruit top talent. In their survey, organizations who had a formal pay equity process were 26% more likely to have improved their quality of hire and 43% more likely to have seen their Glassdoor ratings go up over the last year, demonstrating that mindfulness around ensuring pay equity bleeds into the public perception of the employer’s brand and becomes powerful attracting force for candidates.

This focus on pay equity is also indicative of a culture that embraces diversity of all sorts and values skill, competency, and performance, taking an active role in ensuring multiple perspectives are given equal credence. On the whole, organizations that have put thought into addressing pay equity have also formalized efforts to reach out to candidates that may be more impacted by pay inequities.

The Power of Pay Equity

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