Women have been on a long, slow march toward pay equity. More than 40 years ago, U.S. women earned just 65 cents for every dollar men earned. By 2002, that had risen to 80 cents. And in 2022, it hit 84 cents, a historic high. Everything seemed to be heading in the right direction, albeit quite slowly.
That is, until last year when the gender pay gap widened again. Women working full time in the U.S. slipped back to earning 83 cents for each dollar a man earned.
What happened?
Most likely, COVID-19. Women who lost or left their jobs at the height of the pandemic seemed to pay a heavy price for stepping out of the labor market — especially in hard-hit, low-wage industries such as hospitality, social work, and caretaking.
For Black and Latina women, the gap is particularly wide. According to the Economic Policy Institute, Black women are paid 69.8% of white men’s wages, while Latina women only earn 64.6%. Globally, women — all women — make just 77 cents for every dollar men make.
While these numbers are disconcerting, there is some good news. Wages rose for all workers in the U.S. last year, although faster for men. And the gender gap, though widening, has only slipped to 2019 prepandemic levels. But there’s still work to be done toward reaching pay equity — and companies have to play a key role.
Here’s what companies can do to help narrow the gap:
1. Conduct a pay audit
To see if your company is paying its employees equally for equal work, conduct a pay audit. This involves reviewing salaries across departments and looking for disparities among gender, race, and age.
You’ll want to look at the responsibilities for each role and identify employees doing substantially similar work. Then verify the salary structure, pay grades, bonus plans, and other objective criteria you’re using to establish pay. Be sure to keep in mind that there will be variables such as an employee’s experience, education, level of responsibility, and location that may explain some differences in compensation.
By conducting a pay audit, your company can gain a clearer understanding of its pay practices and identify any areas where pay gaps exist. This information can then be used to take corrective action, such as adjusting salaries or bonuses to ensure that employees are being compensated fairly.
2. Promote pay transparency
One of the best ways to assure your employees that you’re paying them fairly is through pay transparency.
Pay transparency is the practice of openly communicating information about compensation with employees and candidates. This will look a little different at each company. While some companies share all salary data publicly, some simply disclose how salaries are determined with each team member. Many employers also share salary ranges so team members understand their earning potential in a given role.
When you openly share pay ranges on job postings — which is required by law in some locales — it allows candidates and employees to see how their offer or compensation stack up to the minimum and maximum salary for a given role. This also helps employers stay accountable for fair pay practices and promotes less secrecy around compensation, both of which contribute to pay equity.
3. Ban questions about salary history
Asking candidates for information about what they’ve been paid in the past can help perpetuate the gender pay gap. That’s why 21 U.S. states have passed legislation that prohibit employers from asking candidates about their pay at previous jobs. Even if you live in a state — or country — where a ban is not in place, it’s still a good idea to stop asking.
A study published in 2020 by the Boston University School of Law found that in states where salary history bans have been enacted, pay for job switchers increased 5% to 6% more than for those in other states. The boost was largest for Black employees, who received increases 13% to 16% higher, and for women, who received bumps ranging from 8% to 9%.
A more recent study, however, found that men are disclosing their previous salaries without being asked, which could benefit those who have historically been well-compensated and perpetuate a lack of pay equity. So, whenever possible, ask candidates to stay silent about their salary history.
4. Offer flexible work opportunities
Globally, women carry out at least 2.5x more unpaid household and care work than men. This can include caring for elderly parents or children who still live at home. The extra responsibilities limit women’s ability to be present at work and take advantage of advancement opportunities. But workplace flexibility can help women balance work and caregiving, giving them a chance to earn more. It can also give men a chance to step in and do more caregiving and more work outside their day job.
Women sometimes have to take part-time and lower-paying jobs so that they can manage all their responsibilities outside of work. One result: The higher up the corporate ladder you go, the fewer women you’ll find.
That was one of the takeaways of a 2020 study that looked at 1,100 organizations worldwide and found that 47% of support staff, 37% of managers, and 23% of executives were women. In other words, it’s a leaky pipeline to the top. What’s even more concerning is that the gender pay gap tends to increase as pay increases. Recent research, for example, has found that male partners at big U.S. law firms earn almost 30% more than their female counterparts.
But when women get the support and flexibility they need at all levels, they have a better chance of succeeding, which helps close the gender gap.
5. Encourage paternity leave
Companies that offer paternity leave — and encourage or even require employees to use it — also go a long way toward achieving equity.
Why? Because when women have children, they pay what’s called the motherhood penalty, in which their wages decrease. Men who become fathers, however, experience a fatherhood premium, with their pay increasing.
But when men are involved in caregiving, women earn more. According to a study by the Swedish Institute for Labour Market Policy Evaluation, women’s long-term income after having a child rose by nearly 7% for each month their male partner spent on paternity leave. The World Bank has also found that the more parity there is between maternity and paternity leave, the more women participate in the workforce.
“Getting to full economic and political equality for women and girls,” writes Gary Barker, president and CEO of Equimundo: Center for Masculinities and Social Justice, “requires men and boys to do their share of the care work and to be advocates for the care economy.”
Final thoughts: Pay equity benefits everyone
While closing the pay gap benefits women, it benefits organizations too. “Companies that demonstrate a commitment to pay equity experience a range of benefits,” Robert Sheen, CEO of Trusaic, writes on LinkedIn, “from increased staff morale and productivity to a competitive advantage when it comes to talent attraction and retention.”
And that’s good news not just for women, but for everyone.
