Understanding the Gender Pay Gap in America

by Sarah Reynolds - February 8, 2019
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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 earn 80 cents for every dollar paid to men. This means women earn $10,169 less per year than men in median earnings.

Also known as the group-to-group gap, the 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. Plus, there are also fewer women in many of the highest-paying management and executive positions. As a result, calculating a company’s gender pay gap can be a critical first step towards understanding pay equity because it compares pay of all women to all men.

In countries like the United Kingdom, organizations are required by law to publish their unadjusted gender pay gaps. In the U.K., these analyses can form a critical part of compliance process.

The gender pay gap affects women from every background, of all ages and levels of education, in every U.S. state. Below, we will analyze the wage gap in context of age, education, and location. We will also discuss the competitive advantages your organization can expect to see by emphasizing the importance of gender equality.

Like most reporting on the gender pay gap, median annual salary data for white men is the standard benchmark used in our gender pay gap analyses.


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, and the gender pay gap also increases. Between age 45 and 54, while earnings continue to increase for men, women begin to see their wages decrease. The largest median gender pay gap – more than $19,000 per year – occurs in this age range, where these women can expect to earn just 63 cents for each dollar earned 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. Yet, women with college and advanced degrees see a higher median gender pay gap than women with lesser education. This gap exceeds $20,000 annually for women with bachelor’s degrees, and exceeds $34,000 annually for women with doctorates.

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 graphic below, you can see that states shaded dark-blue have a comparably low wage gap (minimum: $0.11 per dollar). Conversely, states shaded light-blue or white have a comparably 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 earnings of full-time workers continue to advance at the same rate as they did from 1959 to 2017, the wage gap between men and women in will not close until 2059.

Here’s a look at the projected year that the wage gap will close in each U.S. state. States shaded in dark-green are not projected to close the gap until next century, with some states not projected to close the gap until 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 compares pay levels holistically, the adjusted gender pay gap accounts for other factors. These factors include variables such as hours worked, occupations chosen, education, job experience, and geography. Accounting for these variables can more accurately quantify workplace pay discrimination against women.

This role-to-role gap compares wages for employees who perform similar work. Thus, many compensation professionals believe this approach more effectively assesses whether your organization offers equal pay for women. After adjusting for 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 different gender pay gap types, reviewing wage gap statistics, and assessing existing gender pay gaps is crucial toward companies achieving women’s equality. And, closing the gender pay gap typically requires a formal process to address pay equity. While this can be an immense amount of work for HR professionals, the rewards will go beyond gender equality in pay.

According to The Power of Pay Equity, a report by Aptitude Research Partners, having formal processes that address pay equity can help organizations recruit top talent. In their survey, organizations with a formal pay equity process were 26% more likely to improve quality-of-hire, and 43% more likely to see their Glassdoor ratings go up. Together, this demonstrates that mindfulness around ensuring pay equity bleeds into the public perception of the employer’s brand is a powerful attracting force for candidates.

Focusing on pay equity is indicative of a culture that embraces diversity of all sorts and values skill, competency, and performance. Plus, taking an active role helps ensure that varied perspectives receive equal credence. Data shows that organizations with a pay equity strategy are more likely to reach out to candidates affected by pay inequities. It's a win-win.


The Power of Pay Equity

Download this paper to learn why when organizations make pay equity a priority, they enjoy 13% higher employee engagement and are 19% more likely to exceed industry average levels of productivity.

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