Why the gender pay gap exists–and what to do about it

Want to help close the gender pay gap? Here’s a data-based action plan.

Maybe you’ve heard the one about the BBC television host who was paid about $565 per episode while a male colleague doing pretty much the same job took in, oh, almost seven times that—about $3,850 an episode. Not bloody fair, is what I say to that. A judge agreed: The case was recently resolved in court in the plaintiff’s favor, and it looks like she’s going to get a whole pile of back pay.

While cases like this—of bald-faced bias on the part of employers—are shocking, everyday systemic inequities are the most significant drivers of the pay gap between women and men. The big number is 82; as in women make 82 cents for every dollar men make, across the board, regardless of occupation. (The numbers are even more grim for women of color, who average about 76 cents.) The median annual salary of all women working full-time and year-round is about $45,000. That’s $10,000 less than men’s median. And that missing money touches off a cascade of financial setbacks: If you make less, you save less; if you save less, you have less during your golden years. (That doesn’t even factor in the many other “Pink Taxes” that make being female more costly, like the common surcharges on women’s hygiene products compared to men’s.)

But focusing only on the 82 cents per dollar can obscure the many variables at play in the seemingly intractable pay gap, making it hard to recognize ways to close it. A brand-new study published in the January 2020 issue of the Journal of Population Economics breaks it down to examine various pay gaps. For example, part-time workers typically earn less per hour than full-time workers in the same jobs. The study noted that this part-time penalty really hurts women because—you guessed it—women are more likely to work part-time than their male counterparts.

The more we understand about the specific causes and circumstances of women’s pay inequity, the closer we get to making a plan of action. So here, based on real data, are four causes for the pay gap and four practical steps you can take to close it, for you and for other women.

1. Salary secrecy

It makes sense: Salary transparency leads to greater salary parity—because how do you know how much you should be getting if you don’t know what your colleagues make? Yet research on how transparency affects the gender pay gap is pretty thin. That might be because, while water-cooler salary talk is perfectly legal, employers have traditionally put the kibosh on it. There is evidence, though, that in professions that are up-front about pay, the gap is much narrower. Take jobs with the federal government—a big employer that makes salaries public knowledge. Uncle Sam’s gender pay gap is about half of that in the private sector. Moreover, a study out of the University of Massachusetts found that women who work in states with laws forbidding companies to prohibit or discourage salary sharing enjoy higher pay and a smaller gap.

Take action: Aside from moving to a job with the federal government, transparency is your most powerful weapon here. As uncomfortable as it can feel, opening up about your pay with coworkers can take a load off everyone. Speak up knowing that the law—federal and possibly state—is on your side, if your employer tries to intimidate you into silence.

Talking about money can leave you tongue-tied. My weekly newsletter is full of financial conversation starters.

2. The cost of caring

They call it the “mommy tax” for a good reason. While becoming a parent actually raises incomes slightly across the board, the pay gap for women with children compared to men overall (those with and without kids) is wider than the overall gender pay gap. Why? In large part because women spend, on average, nine fewer years than men in the workforce, missing out on years of earning—and years of pay raises along the way—because they are far more likely to pause their careers to raise kids (or to care for elderly parents).

Take action: Have a talk with your partner. Sharing the caring will mean that both of you get to keep you career more or less on track while you’re raising a family. And if you want to help other women in this regard, fight for paid family leave laws. If you do have to drop out to care for family, you will have to save more. Plain and simple. Because caring for children falls predominantly on women, data shows that if a woman and a man start identical jobs at the same time—and at identical salaries—the woman will need to save 18% of her salary to retire with the same amount as the man who’d saved just 10% of his salary. If you can manage it, make the maximum contribution to your 401(k) each year (currently $19,500). If you don’t have access to an employer-sponsored retirement plan, saving the $6,000 limit in an IRA will help, but if you want to catch up with men, you’ll need additional savings.

3. Career stereotypes

It’s true that women tend toward lower-paying, so-called “caring” professions. (More than 80% of social workers are women, while more than 75% of engineers are men.) Of course, there is nothing wrong with choosing this type of meaningful work, but women need to know they have options. Not just for them, but for their kids. Research shows that reinforcing gender stereotypes with your choice of careers can make your kids more likely to choose similar paths. In other words, you can pass on biases without meaning to.

Take action: The active step here is to make sure you and your children (if you have them) are exposed to the broadest range of possible careers and college majors. Starting when your kids are in preschool, you can point out the people working various jobs all around you—the veterinarian, the roofer, the teacher. And push for mandatory financial literacy in your schools, to make sure our daughters graduate knowing about all the ways to earn a living—and what to do with their earnings.

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4. Fewer raises

This is a big culprit in gender pay inequity. Listen to this: Even if a woman starts out making the same amount of money as a man, odds are she’ll receive fewer salary increases during her career. (This brings us back to the nine years of career interruptions I mentioned earlier.)

Take action: When you take a job, be assertive about negotiating a salary you deserve, and continue to ask for appropriate raises along the way. Fortunately, the Lilly Ledbetter Fair Pay Act of 2009 outlaws discriminatory pay practices and makes them easier to take on in court, if it comes to that. And while you’re fighting for your own raise, support raises for other women. According to the Bureau of Labor Statistics, almost twice as many women as men are earning the federal minimum wage (that’s $7.25/hour) or less. The good news is that the movement to raise minimum wages is spreading; 21 states started off 2020 with increases. Your action item here is to keep up the momentum: Speak up and fight to bring the minimum up to a living wage, for women (and men) across the country.

caregiving fair pay gender pay gap Lilly Ledbetter Fair Pay Act mommy tax parent penalty pay gap pay raises salary salary negotiation salary transparency women


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