There is no doubt that the gender pay gap exists around the world. At around 15%, it is perhaps lowest in Nordic countries; in the UK it is 18.4%, while it is 21% and 27% respectively in the US and Japan. The World Economic Forum estimates the global average gap to be around 32%.
The gender pay gap refers to the difference that exists in the average pay of men and women per hour worked, regardless of their level or function. It is thus distinct from the legal requirement for companies to pay their male and female employees the same if they perform the same (or largely similar) roles in the organization. The gender pay gap exists despite legal and other efforts to narrow it. Iceland recently raised the bar by shifting the onus from employees to prove that they have been paid less to employers to prove that they are paying workers the same irrespective of gender. Further, this law makes it a criminal offence if employers do not take action in cases of unequal pay. Given that several factors contribute to creating the gender pay gap, it is perhaps too early to gauge how successful this law will be in further narrowing the gap.
Causes of the gender pay gap
Various research studies have sought to identify factors that cause this gap. Based on data from Denmark (a country that has very strong maternity benefits and other gender disparity laws), Princeton University economist Henrik Kleven concludes that the gender gap is effectively a “penalty for bearing children”. During the 1-2 years of maternity leave, female employees fall behind their male counterparts (what happens if there are no salary raises in those 2 years for the men?). Over the span of a 20-year career, this grows to almost 20%. The same study also noted that there was hardly any gap between men with and without kids. There are of course instances where mothers re-enter the workforce and in a matter of a couple of years, are able to erase the gap. But exceptions do not make the rule.
Harvard University economist Claudia Goldin’s US-based study found that gender pay gap is widest for women in their 30s, which correlates well with their prime childbearing age. Marianne Bertrand from the University of Chicago led a study of Business School graduates and reported that while the average starting salary differential between male and female graduates was about 13% (and attributable to differences in prior experience), the gap grew to 60% nine years into their careers.
The time women take off work to raise kids is clearly an important factor but cannot be the only one that contributes to gender pay gap. There are behavioural differences as well that play a role. For example, the Kleven study also found that in Denmark, although both parents were eligible for childcare leave, almost 90% of the leaves were taken by the mothers. This begs the question whether such behaviours are the result of societal norms and expectations or individual decisions. The answer, as is often the case in such matters, is probably “a bit of both”.
Both in the US and Denmark, public opinion tends to support the view that women with young children should not hold full-time jobs. It is also generally accepted that mothers are more committed to providing care and nurture for their children. As a result of such factors (which are not employer related), many women change jobs after motherhood, choosing roles that involve less travel or more predictable work hours.
Evidence that behaviour is a strong determinant of gender pay gap also comes from a study of Uber drivers in Chicago, 30% of whom were women. Allocation of drivers is based on location of the car and the passenger; considerations such as the driver’s gender are extraneous. Even in such a situation, a 7% pay gap was revealed. Deeper analysis revealed that this may be the result of behavioural factors such as the following:
- Male drivers tend to target the more lucrative routes (e.g. airport trips), while women drivers preferred local drives and Sunday afternoons (relatively quiet periods)
- Women drive slower than males- so over a long period of time, make fewer trips than their male counterparts.
- Males have an average tenure of two years; for women, it is a few months- and Uber’s remuneration is linked with tenure
- The average male driver drove 50% more trips per week than women drivers did
In the UK, companies with more than 250 employees have till April 6, 2018, to disclose gender pay data. As of mid-January, 527 companies had reported their data- and there was a 10.7% gap favouring men. The difference in mean hourly wages of men and women ranged from 0% (The British Museum) to 64.8% (women’s fashion chain Phase Eight). It was also interesting to note that organizations such as mattress retailer Sweet Dreams, the average hourly wage for women was 46.4% higher than the figure for men. Another such example was Yellow Dot, which runs 12 nurseries in Hampshire. Its team was “predominantly female”, with males mainly employed in “the lower skill areas of childcare”. This indicates that skill-based pay differences too exist, with women being preferred for certain roles.
What can companies and individual executives do to reduce the gap?
Ms. Helena Peerheentupa, Mattel’s Head of Licensing for Germany, Austria, Switzerland, Benelux and Nordics, offers some sage advice, when she says “… look for people that love to meet expectations you set for yourself rather than people (who set expectations) of you. By default, if you look at something that you really enjoy, you will be better at it and you will be better equipped” (for senior positions in the company where wage levels are higher).
In a talent-starved world, it is criminal to lose women employees with relevant skills. In today’s technology-driven world, both companies and individuals can take steps to reduce the gender gap. Here are some ideas for your consideration:
- Sensitize school children about the role of men in raising children so that over a decade or so, mindsets about the role of men in raising children will change.
- Encourage moms-to-be to get exposure and training for new roles six months before they go on maternity leave and allow them greater flex-working opportunities when they return. These could include roles as Mentors/Coaches (subject to experience/competence levels)
- Do not consider previous compensation levels during the hiring/selection process for women looking to re-enter the workforce.
- To keep themselves “in touch” with their professional fields when they are on maternity leave, women executives can explore freelancing opportunities.
- Explore the possibility of doing projects that use their expertise but can be done from home or with minimal travel (e.g. how to incorporate Design Thinking into business processes) that are important to the organization.
When asked about time away from work (during maternity leave), Helena says, “During the time that you’re out, you develop many other things… you develop perseverance and nurturing, stress management for sure and multi-tasking and a lot of patience… all of which are traits you take back with you to your work environment and just come out stronger”.
I’d love to hear from you about what else organizations and individuals can do to address the issue of gender pay gaps around the world.