Millennials Closing Pay Gap, But Not Cutting Apron Strings

Gap widens at executive levels; cultural bias and ‘mixed messages’ to blame

By Dana Wilkie Dec 4, 2014
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The good news is that U.S. Millennials appear to be closing what has been a frustratingly persistent gender pay gap.

The not-so-good news is that the higher the corporate ladder Millennial women climb, the more that pay gap widens.

And the sobering news is that Millennials are having a much harder time achieving financial independence than previous generations.

Those are among the findings in a November 2014 surveyby PayScale and Millennial Branding, which canvassed 1.2 million working Millennials, Generation Xers and Baby Boomers from October 2012 to October 2014. The survey is the third that the two companies have conducted on career trends among various age groups.

PayScale Inc. provides market salaries to employees and employers through online tools and software. Millennial Branding is a Generation Y research and management consulting firm based in Boston.

“In an economy that is still struggling to recover from financial crisis, Millennials are slower to achieve financial independence, even those that have high-level degrees,” said Dan Schawbel, founder of Millennial Branding. The study “also shows that it’s going to take even longer for Millennials to bounce back.”

Shrinking Gap

The difference in overall median pay between male and female Millennial workers—defined as those born between 1982 and 2002—is 2.2 percent, the study found. This age group is more likely to hold entry-level positions, where the pay gap is smaller.

When corrected for job choice, experience and hours worked, the gender wage gap is smaller for members of Generation Y at all job levels than for Baby Boomer or Generation X employees. Among Baby Boomer workers, the overall gap is 2.7 percent, and it's the widest among Generation X employees at 3.6 percent.

Part of this may be because employers are increasingly tuned into the gender pay gap and are working to narrow it, the report authors wrote.

Another reason may be that younger women have been better trained at negotiating their starting salaries, said Millennial workplace expert Lindsey Pollak, a spokeswoman for The Hartford’s “My Tomorrow” campaign.

“I have definitely seen an increase in confidence level among 20-somethings, which could partially account for the decreasing pay gap,” Pollak said. “Women are more educated than ever before, which could also be contributing. Finally, thanks to the Internet, Millennial women have access to more salary information than ever before … to arm themselves with information about what salaries and benefits are possible.”

Millennial women may also be better negotiators than their older counterparts because more of them have spouses and children relying on their paychecks than older working women.

But even if Millennial women are more adept at negotiating pay and benefits, that doesn’t explain why the PayScale/Millennial Branding study found that the gender pay gap widens as Millennials take on increasingly responsible jobs.

The gender pay gap widens for Millennials, as it does for all other generations, as responsibility levels increase. The gap among Millennials increases from 2.2 percent at entry-level positions to 4.9 percent at executive positions. For Boomers, the gap grows from 2.7 percent to 6.2 percent. Among Generation X employees, it goes from 3.6 percent to 7.4 percent.

“Unfortunately, I think this is an indication that bias still exists,” Pollak said. “Even with increased attention to gender wage parity, we still see discrepancies.”

That’s in large part because women continue to get mixed messages about how to approach salary and raise negotiations, said Lydia Frank, PayScale’s editorial director.

For instance, Harvard University researchers reported in a 2007 paperthat when women and men with nearly identical skills and years of experience asked for a raise using precisely the same language, men more often won the pay increase. Moreover, supervisors who gave a woman a pay increase tended to describe the woman as “aggressive.”

And it wasn’t long ago, in October 2014, when Microsoft CEO Satya Nadella told those attending a tech conference that women who don't ask for raises will receive “good karma.” Nadella implied that instead of asking for a raise, women should have faith that they will be rewarded over the long arc of a career.

“You would think that we’ve come a long way … but you still have leaders in industries giving that type of advice, so women get mixed messages,” Frank said. “That’s discouraging. I think the message here is to be aware that [inherent bias] exists. Employers must try to acknowledge that these biases exist within themselves and ensure they’re making decisions based on compensation data, not on likeability.”

Financially Dependent and Underemployed

Millennials are having a much harder time achieving financial independence than previous generations. Nearly 1 in 4 Millennials who took the PayScale survey said they had to move back home at some point after entering the workforce because of financial hardship. That’s compared to only 10 percent of Generation X and 5 percent of Boomers.

While that percentage tends to decrease as education increases, highly educated Millennials are still facing high rates of underemployment. Millennials with a Ph.D. reported being underemployed at a rate of 34 percent, compared to 27 percent for Generation Xers and 25 percent for Boomers. Millennial medical doctors are underemployed at a rate of 30 percent, compared to 22 percent of Generation Xers and 21 percent of Boomers.

The survey defined “underemployment” as being underpaid for one’s level of education or training, not using one’s education or training in a current job, or working part-time while seeking full-time work.

A lot of Millennials also stayed in school longer than their older colleagues—earning graduate degrees, for instance, before entering the workforce. Today, “they’re not necessarily finding jobs that match that level of education because there aren’t necessarily more jobs that require that level of education,” Frank said.

Moreover, until 2009, young adults with student loan debt were more likely to have good credit scores, to own homes and to have outstanding car loans than people of the same age without student loans, according to a February 2014 New York Times article. The loans had allowed them to earn college degrees that led to salaries that qualified them for mortgages. But today, the opposite is true. Young people with student loans are less likely than those without loans to buy a house or to have taken out car loans, the article asserted. They also have worse credit scores and appear more likely to be living with their parents.

Dana Wilkie is an online editor/manager for SHRM.

Related Resources

Millennials’ Under-Saving Nixes Match (November 2014)

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