Women in Leadership: Closing the Gender Pay Gap

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Editor's note: This is the second article in a series about women in leadership. The first article was published May 4, 2022.

Women, on average, are paid only 82 cents for every dollar a man earns. They tend to have fewer promotional opportunities and are critically underrepresented at the board and executive leadership levels. They leave the workplace in larger numbers, a trend which has been exacerbated by the challenges of the COVID-19 pandemic and family caregiving demands. 

Acknowledging the seriousness of the pay-disparity challenge is the first step in addressing it.

The Hard Facts

According to data from the Bureau of Labor Statistics, women's annual earnings in 2020 were 82.3 percent of men's, and the gap was even wider for many women of color.

According to a U.S. Department of Labor blog post, to earn what white, non-Hispanic men earned in 2020, Asian-American and Pacific Islander women had to work until March 9 of the following year. For Black women, it was Aug. 3. For Native American women, it was Sept. 8. And for Latinas, it was more than nine months into the year—Oct. 21. 

Some pay disparities between men and women are justifiable. Education levels, licenses, prior employment history and much more can account for differences in pay.

"But sometimes, gaps exist for which there is no reasonable explanation," said Barbara Zung, senior vice president and chief human resources officer of the American Management Association in New York City. "That's when you have to ask yourself if something else may be at hand.  

Salary Bans Are a Step in the Right Direction 

Laws that ban employers from asking job candidates about their salary histories will likely go a long way toward reducing gender pay differences between men and women. While there are no federal laws that specifically prohibit employers from asking job applicants about their current or previous salaries, employers are prohibited from asking about salary history in a number of states, including California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Nevada, New Jersey, New York, Oregon, Vermont and Washington. 

"Relying on a candidate's prior salary in determining the individual's new salary may perpetuate the systemic undervaluing of work for women and women of color and, in turn, lead to more wage disparities," said Jacqueline Cookerly Aguilera, a labor and employment partner with Morgan, Lewis & Bockius LLP in Los Angeles. 

Many recruiters go into salary negotiations understanding that candidates typically expect a 10 percent to 20 percent increase to justify changing jobs. If a recruiter knows that Candidate A, a woman, makes $20 an hour and Candidate B, a man, makes $28 an hour, then that 10 percent to 20 percent increase will prolong the disparity in their pay. If you take pay history off the table, however, a recruiter may be more inclined to pay both candidates consistently, based on their years of experience, level of technical expertise, education and the like.

True, employers may ask what a candidate's ideal salary might look like, but lacking knowledge of prior salary history could address some of the traditional differences in pay between men and women.

A New Way Forward: Gender Pay Audits

It's reasonable in today's environment to recommend that your organization conduct a gender pay audit, and it can be done fairly simply, even for smaller organizations.

Gender pay equity audits are intended to answer questions such as:

*How do you balance pay equity with performance?

*How do you actually measure compensation differences to see if there is a bias?

*How should pay equity processes be communicated internally?

*How much should you budget and what timeframe makes most sense for pay adjustments due *to pay disparities? Should executive pay disparities be treated differently?

"Employers need not attempt to fix everything at once," Zung counsels. "Salary plans permit you to schedule compensation changes over the next few quarters or next few years, starting immediately with where the disparities are most transparent."

Female underrepresentation across the board—from the hourly level to the C-suite—holds U.S. companies back from reaching their greatest potential. In the end, investing in gender pay parity may provide the greatest return-on-investment of all, because talent is—and will always be—the primary reason for your company's success.

Paul Falcone (www.PaulFalconeHR.com) is a frequent contributor to SHRM Online. He is a member of the SHRM Speakers Bureau, a corporate leadership trainer, certified executive coach and author of The Paul Falcone Workplace Leadership Series (March 2022). The first book in the five-book series is titled Workplace Ethics: Mastering Ethical Leadership and Sustaining a Moral Workplace. Other books in the series focus on the talent management life cycle, including Effective Hiring; Leadership Offense; Leadership Defense; and The New Managers (HarperCollins Leadership and Amacom).