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Closing the Gender Pay Gap

The gender pay gap has been stubbornly hard to close, but the tide may be turning.

​For Zoe Spencer and Molly Payne, gender pay gaps aren’t some abstract societal problem.

Spencer, a professor in Virginia, and Payne, an Iowa-based network security analyst, both noticed they were getting paid less or had lesser titles than men they worked with. Both spoke out. And both ended up in court.

Payne worked for security company Unisys with two male colleagues who shared the same responsibilities, she says. But her title included the word “support” while the men’s didn’t, even though she had more training than one of her colleagues. She says when she came across information showing a broader gender disparity in titles for information technology jobs, she pointed it out.

“I did what you were supposed to: I talked to my manager. I talked to HR,” she says.

Payne was suspended for using the information, she says, even though she had shared it only with HR. Within days, she was fired. She’s now charging Unisys with discrimination in a complaint with the Equal Employment Opportunity Commission.

dollar for web.jpg
​Women earn 82 CENTS for every dollar men make.

Source: U.S. Bureau of Labor Statistics.

Spencer is a professor of sociology at Virginia State University, where she once headed a task force on gender equity. She says she was trying to point out a larger problem when she objected that two male employees were moved from jobs as administrators to positions as associate professors. At the time, she says, she was juggling many more students than the men and had to complete a tenure process showcasing her research and contributions to teaching and service. The two men skipped the full tenure process and had fewer credentials, Spencer says. Yet one was paid $119,000 and the other received $105,000, compared with her salary of $74,500.

Spencer sued under the Equal Pay Act of 1963, a federal law that calls for equal pay for equal work. The college argued that she worked in a different department from the two men, so the jobs weren’t comparable, and that males in her department were paid similarly to her. She lost in the lower courts but wants to continue her appeals.

Spencer says it’s the principle, not just the money, that keeps her fighting.

“At some point, the nation and its institutions have to value the work and worth of women,” she says. “We need to move away from assumptions that men’s labor is always going to be worth more than the labor of women.”

Women earn 82 cents for every dollar men make, according to the U.S. Bureau of Labor Statistics (BLS), which calculates that figure using the full-time median income of all women compared with that of all men. While the gap has narrowed—in 1979, women earned around 62 cents for every dollar earned by men—it has proved stubbornly hard to close.

That makes it critical for company leaders to continue the push toward paying employees equally for similar work, says Jessica Stender, senior counsel for workplace justice and public policy at Equal Rights Advocates, a nonprofit civil rights group.

The benefits for businesses are numerous, according to Julie Ann Overcash, vice president of human resources and global director of compensation and benefits at technology company Intel. “Pay equity is a critical part of being a truly inclusive workplace,” she says, and it “creates more-productive, high-performing organizations.”

Behind the Numbers

Although critics say the BLS wage-gap figure doesn’t compare apples to apples―since it doesn’t distinguish among people in different jobs and with varying levels of experience―advocates for pay equity say it’s an important measure of how women are faring in the workplace.

And statistics that compare women to men in similar circumstances also show a gender pay gap, albeit not always as large. A 2019 study by Glassdoor found roughly a 5 percent difference (95.1 cents per dollar), for instance. The American Association of University Women (AAUW) concluded in another study that for full-time workers with college degrees, women are paid 76 cents for every dollar men are paid.

These pay gaps are due to many factors, including women’s stepping out of the workforce for family obligations, the concentration of women in certain relatively low-paying “pink collar” occupations (such as teaching and hospitality), stereotypes that women aren’t tough negotiators on pay and plain old bias, whether conscious or not.

Not all of the gender pay gap can be explained away by such factors, says Kimberly Churches, president of the AAUW, which promotes pay equity in higher education. Within the largely female field of nursing, there’s a 9 percent gender pay gap, she notes. And women in fields requiring higher levels of education, such as medicine and investment banking, experience larger pay gaps than in other industries. Even women just launching their careers start out behind―female workers ages 20-24 earn, on average, 90 percent of what men the same age are paid.

Big-Picture Questions on Pay Disparities
  • Do women generally wait longer than men for promotions?
  • Are female workers shunted into lower-paying jobs?
  • Are performance reviews based on subjective factors that can be clouded by unconscious bias?
  • Is the company culture welcoming to women?
  • Are there gender differences in nonsalary compensation such as bonuses, overtime opportunities and stock options?

Why It Matters

Closing the gap is good for the bottom line. When women feel they’re being treated unfairly or don’t see an opportunity for advancement, “companies will lose out on great talent,” says Maya Raghu, senior counsel and director of workplace equality at the National Women’s Law Center, which advocates for women and girls.

In January, Intel announced it had reached pay parity for genders globally, including for wages, bonuses and stock-based compensation. The company’s gender pay gap was 2.6 percent globally and just 0.7 percent in the U.S. (after taking into consideration business factors that account for the differences, such as performance and tenure)―far less than the national average. Turnover at Intel has dropped since that announcement, according to Overcash.

Although closing a pay gap can be expensive, so is retraining staff if women leave, Churches says. “This is really a no-brainer,” she adds. “The math adds up to get the pay gap closed.”

Reducing the pay gap helps in the hiring, promotion and retention of women, and in turn results in more female leaders, according to Churches. And more women in leadership means better decision-making and financial results for companies, according to a 2017 study by McKinsey & Co. It found that businesses in the top quartile of gender diversity within their executive ranks were 21 percent more likely to see above-average profitability.

A Cultural Moment

Pay equity is part of a larger call for fairer treatment of women, along with the #MeToo movement, says Margret Bjarnadottir, assistant professor of management science and statistics at the University of Maryland.

As part of the societal awakening over sexual harassment and discrimination in the workplace, several forces are converging to press for pay equity: public opinion, Millennial workers, shareholders, consumers, and new and strengthened legislation.

“We’re in this cultural moment,” Raghu says. “The trends have moved to put greater pressure on companies to address pay and equity.”

Millennials have helped bring gender fairness to the fore because, as a generation, they’re focused on transparency, equity and diversity, she says.

In addition, more shareholders and consumers are pressuring companies to pay workers fairly. Overcash predicts that this pressure will increase as shareholders gain a better understanding of the impact of equity on productivity.

The fact that companies such as Intel are making public announcements of their efforts on pay equity is a sign that they believe the message is important to their brand image and talent recruitment, Bjarnadottir says.

‘Pay equity is a critical
part of being a truly
inclusive workplace.’ 
Julie Ann Overcash

In the legislative arena, U.S. states and cities, and many other countries, are demanding more transparency from organizations, such as reports on wage gaps. In Iceland, for instance, the government requires companies with 50 or more workers to review salaries and take steps to eliminate differences between genders.

Thirty states have some type of wage-gap bills on the agenda this year, according to Churches. Since 2015, 19 states have strengthened pay laws, such as by barring companies from using previous or current salary information when setting pay levels, Raghu says.

Additionally, Washington, D.C., and 18 states protect workers from retaliation for discussing their compensation. Some states are also considering changing the burden of proof in legal cases so that companies would have to prove they’re paying fairly.

Earlier this year, the House of Representatives passed the Paycheck Fairness Act. The bill would, among other things, prohibit using salary history in setting pay for new hires. Supporters say the federal legislation would be especially helpful to companies operating in numerous states because it would replace the inconsistent patchwork of state laws.

But critics say it goes too far. The U.S. Chamber of Commerce says the proposed legislation would take away the ability of businesses to use legitimate factors such as experience and education to differentiate pay levels.

“It has a very negative impact on employers’ ability to distinguish between employees, and a negative impact on employees’ ability to be compensated for what they bring to the enterprise,” says Marc Freedman, vice president of workplace policy at the chamber. “The whole premise of the bill is that the wage gap is driven by discrimination, which we don’t think is the case. And if there’s a component that is discrimination, it’s a very small component. You already have laws on the books saying that discrimination is illegal.”

Pay-Equity Tips for HR
  • Fixing pay disparities isn’t easy, but the steps HR needs to take are clear.
  • Start with a pay audit. Compare how men and women are paid for doing similar work. An audit can factor in anything important to the company in terms of how it sets pay, such as education, experience, responsibilities and performance.
  • Correct underlying disparities. The annual compensation review is a good time to do this. Consultants and salary surveys can help HR determine the market rate for a position.
  • Do an audit again. Employees come and go, people get promoted and companies fold. So even if you fix the problem, it can crop up again. Conduct an audit every year.
  • Eliminate bias in hiring. Unconscious-bias training helps. Also, analyze job descriptions to eliminate language that’s likely to turn off potential female applicants.
  • Look beyond wages. Examine bonuses, stock awards, promotion rates and concentration levels by gender in certain jobs. 
  • Be an employer of choice. Offering flexible hours and paid leave for all employees encourages both men and women to stick around and potentially move up. So does rewarding output instead of long hours.
  • Be transparent. Don’t bar employees from discussing wages, and be open about salary ranges and how compensation is decided.
  • Don’t rely on salary history in setting pay. That just perpetuates past inequities.

Strategies for Success

Beyond legislation, organizations have several options for making their pay systems fairer. Publicly committing to expanding the recruitment and promotion of women is something companies of all sizes can do, Stender says.

However, the drive for reducing a pay gap needs to come from senior leaders, Churches notes, and it needs to include clear goals. “What gets measured gets done,” she says.

Pay-equity advocates also say companies need more transparency throughout the pay system.

“When standards are more objective and measurable, it can help eliminate bias―unconscious or alert,” Raghu says.

That means looking at market rates for pay and using objective measures, instead of past pay and other subjective factors, in setting salaries.

Including salary ranges in job postings, for instance, helps eliminate the need to ask potential hires their current salaries. Inquiring about pay history can perpetuate disparity, Raghu says.

Many employers are skipping negotiations altogether and placing workers into pay levels based on relevant factors such as experience and skills. Whole Foods and make everyone’s salary visible to all employees. Reddit and GoDaddy use standardized pay scales, according to the National Women’s Law Center.

‘I don’t think any company goes from a 7 percent gap to zero in one year. It’s about how are we going to close it in steps.’
Margret Bjarnadottir

Companies can also consider conducting pay audits to determine how employees with similar qualifications and responsibilities stack up by gender. Many companies are interested in pay audits not because of legal requirements, but because they feel it’s the right thing to do, Bjarnadottir says.

“You want to signal to half the workforce it’s a fair and equitable place to work,” she says.

Technology is helping companies figure out where there are pay gaps, using more-sophisticated measurements than just the average pay of men versus the average pay of women.

Bjarnadottir is founder of a company called PayAnalytics in her native Iceland. The business works with company leaders to determine what factors they want considered in setting pay, such as performance, geography, skills, roles and education. PayAnalytics then designs an algorithm specifically for the client company to analyze pay differences by gender. Aside from assisting with periodic pay audits, the analysis can also help determine whether a hiring or promotion decision will exacerbate inequality.

Time and Money

That’s not to say it’s inexpensive to achieve parity.

Salesforce, for instance, has spent $8.7 million to rectify internal pay differences after a series of three pay audits found discrepancies for 30,000 workers globally.

Intel’s costs vary by year, but last year the company’s spending on equal-pay efforts amounted to 6.5 percent of payroll globally. About 5.5 percent of the 107,000 employees received pay adjustments, including men who were found to be paid less than women in similar situations.

“It’s a complicated task, but it’s critical,” Overcash says, adding that it needs to be done at least once a year.

“I don’t think any company goes from a 7 percent gap to zero in one year,” Bjarnadottir says. “It’s about how are we going to close it in steps.”

One of PayAnalytics’ clients, Reykjavik Energy, took three years to close its gap after finding out that women who were high-performers weren’t being compensated at the same level as high-performing men.

Mercer, a global consulting company, has about 100 clients that conduct pay audits, and most of them repeat the process yearly, says Brian Levine, workforce strategy and analytics leader at the company. “A gap can re-emerge,” he notes. “Every year, you hire and make pay decisions, and people are leaving. It’s a moving target, so you have to look at it on a regular basis.”

Bjarnadottir suggests carving out part of the annual pay-raise budget to address gaps. The cost for each company to fix the imbalance depends on many factors, including the scale of the inequity and the percentage of women in the workforce, she says.

Levine says the cost to fix a wage gap generally comes to about 0.4 percent to 0.6 percent of payroll.

“It doesn’t come for free,” Bjarnadottir says.

HR’s Role

HR plays an important part in proactively looking for inequities and pointing them out to company leaders.

“A lot of people in HR don’t feel empowered to tell administrators and management, ‘You have a problem,’ ” Spencer says.

HR needs to tackle patterns uncovered in pay audits, such as women being overrepresented in lower-paid jobs. Understanding the trends can help organizations focus on recruitment, hiring and promotion to build a diverse talent pool, Stender says. Reviewing job titles can also uncover patterns of unfairness, adds Payne, who has found a better-paying position―and now has the same title as her male colleagues―doing the security work she loves.

Initially, HR was left out of the analytics movement that transformed contracts, manufacturing and other parts of businesses, Bjarnadottir says. But algorithms like the ones offered by her company can easily be run by HR managers once they’re designed. “We’re bringing HR to the analytics revolution,” she says.

HR also has an important role in focusing leaders on the issue. “We’re the voice for employees,” Overcash says. “You can be the voice to get leadership rallied around it.”

Raghu stresses that HR shouldn’t take on pay equity alone. “HR can ... raise this, but it’s helpful to work with diversity and inclusion folks, legal counsel, and compliance or compensation committees―coming up with a plan together so efforts across an organization are coordinated.”  

Tamara Lytle is a freelance writer in the Washington, D.C., area.

Photographs by Cassidy Duhon.