What Organizations Can Do to Reduce the Gender Pay Gap
During a recent interview about gender pay equity on Freakonomics with Harvard economics professor Claudia Goldin, she noted that the reasons for the existence of the gender pay gap in the United States are varied and complex. For organizations that are interested in promoting pay equity, it’s important to understand what these varied and complex drivers of pay equity are. My colleague authored a great article that provides additional information about proposed legislation and notes steps organizations can take to create consistent pay practices.
Some of the biggest impacts on the gender pay gap are manifestations of societal norms and pressures that find males and females making different choices as they go through their professional lifecycle. While those societal phenomenon are inextricably linked to the gender wage gap and provide context to the topic, the focus of this article is on what organizations can do to reduce the gap.
When I work with clients who have identified an initiative that they would like to pursue (such as promoting gender pay equity), I recommend following a simple process:
- Begin by defining what the intent of our efforts is:
- If the overall intent is to ensure gender pay equity for equal levels of work at the organization, the first step is to begin by conducting an audit. To effectively conduct an audit, certain information should be available (such as job descriptions) so that roles can be accurately compared to each other.
- Identify what is happening:
- Just because the United States has a net gender pay equity gap, it doesn’t mean that there’s a gap at your organization. Knowing whether a gap exists before you take steps to reduce the size of the gap is both intuitive and important.
- Analyze the drivers behind what is happening:
- Separate the causes of a particular phenomenon from things that only have a correlative but not causal relationship.
- Enact change by addressing the root cause(s) of the issue:
- Effectively addressing the causes behind an issue, as opposed to constantly dealing with the symptoms of the issue, is almost always the most scalable and straightforward way to enact lasting change.
Pay Equity Review: The 4 Primary Drivers
Following that same four-step approach, we can use the underlying reasons for the existence of the gender pay gap that professor Goldin identified to address ways in which organizations can mitigate these causes. Some of the larger contributors to the gap that she identified include:
- Job Selection: Job selection’s impact on the gender pay gap is a large one because since females are more likely to take on caregiving roles that may need additional flexibility, they are therefore more likely to select jobs that have greater flexibility. These jobs with greater flexibility often pay less than similar jobs that have less flexibility. This can manifest itself in a lot of different ways, but a simple example would be someone turning down a role with a high amount of required travel and variable hours for a role that has more flexible or predictable hours but less pay.
- Taking Time off for Caregiving Purposes: The data shows that taking time off has a large impact on gender pay equity. This is due to the fact that women are more likely than men to take time off for caregiving responsibilities.
- Employees not Having Good Substitutes for Themselves: When a job can be performed by multiple employees at an organization, there is much less of an impact when one of those employees takes some time away from work. Conversely, there are some jobs in which it is very difficult to have any sort of flexibility or quality work life balance.
- Discrimination: Based on the academic findings regarding the gender wage gap, discrimination was found to be a likely contributor to the gap, but not as big of a driver as some of the other concepts noted in the bullets listed above.
We know some of the main drivers of the gender pay equity gap, now what?
Since we know some of the main culprits of the gender pay gap, it’ll be easy to just wipe out the disparity in pay between genders, right? Well, not exactly. While the size of the gender pay gap has closed in the most recent decades, economists who have recently worked to compare workers with the same education, labor force participation rates, and other relevant characteristics found that the gap still exists. The four items that were listed above as some of the main contributors to the gender pay gap can be addressed by organizations to varying degrees.
Of the four drivers of the gender pay gap, Job Selection is likely the one where organizations have the least amount of power to directly influence. This is because there are a lot of causes for why individuals make their specific job selection choices that organizations are powerless to control. A prime example of one of the most impactful reasons why Job Selection drives the gender pay gap is based on the decisions that individuals make about taking on caregiving responsibilities (as described above).
- What can be done? Since females are more likely to opt-out of positions that don’t have flexibility due to the relatively higher likelihood that they’ll be performing caretaking responsibilities, organizations who are interested in reducing the gender pay gap should attempt to create jobs that reasonably allow for flexibility. This is by no means a silver bullet, and a disproportionately high amount of females will still to opt-out of jobs with higher pay, longer and more variable hours, more travel, and higher levels of accessibility due their desire for a role that has a smaller footprint on their personal life and the responsibilities that they’ve taken on and/or inherited. Some types of roles are more conducive to flexible scheduling and for some roles (or professions) introducing flexibility it can be near impossible.
Taking Time Off for Caregiving
Taking time off for caregiving has a lot of overlap with job selection. Claudia Goldin notes that women who have caregiving responsibilities will often get fewer opportunities, raises, and if they’re working flexible hours their boss can think that they’re not that committed. In addition, she notes that their boss may want to not burden the woman with additional work.
- What can be done? The challenge for organizations is to keep employees engaged who are working longer hours and/or are on a less flexible schedule while at the same time not ignoring those who have to take time off for caregiving responsibilities. The degree and nature in which organizations focus on those caregiving employees impacts the degree to which those organizations’ practices impact gender pay equity.
Employees Not Having Good Substitutes for Themselves
Employees not having good substitutes for themselves also ties in with the previous two drivers of gender wage disparity. This is because having a good ‘substitute’ for yourself at work means that it should have much less of an impact when you take time off. By reducing the impact to the organization when an employee takes time off or has a flexible schedule, the level of the tradeoff between compensation and flexibility should be reduced. Claudia Goldin notes that the cost of flexibility is very high if a client says ‘I want you to be available all of the time’; that’s a big demand, and an individual who values their family time will often say they won’t do it. According to Professor Goldin, the professions and industries in which the cost of flexibility is very high also are the most likely to have the biggest gender wage gaps.
An example of this that almost everyone has experienced while growing up involves substitute teachers. When your normal teacher wasn’t able to make it into work, the school district would send in a substitute teacher to fill in for the regular one. If your experiences were anything like mine, sometimes the substitute teacher had experience with the subject matter and was able to relatively seamlessly take over for the day, and sometimes they appeared woefully unprepared for what they were stepping into. The same concept applies to just about any profession that you can think of. The cost of flexibility in one instance was high, and low in the other instance, even though the general job of being a teacher was the same in both cases.
- What can be done? The most straightforward approach that an organization can take is to cross train employees and have work status and processes well documented. Laying this sort of foundation also provides organizations with a lot of benefits beyond anything related to the gender wage gap. If you have employees at your organization whose work grinds to a halt when they take time off, their flexibility then comes at a high cost to the organization. Ultimately, cross training employees and having good documentation reduces the cost of flexibility and its potential associated impact on pay.
Claudia Goldin discussed discriminations’ impact on the gender wage gap as something that used to have a much larger footprint, although its manifestations are no longer as overt as they used to be and are therefore rather difficult to single out during her analyses. As a result, she notes that the impact of discrimination as a contributor to the gender pay gap is pretty small once you hold a lot of things constant. The last I checked, small does not mean non-existent, and therefore organizations who want to reduce the gender wage gap should take efforts to mitigate any potential conscious or unconscious discrimination at their organization in regards to compensation (or any employment-related area).
- What can be done? As much as it would simplify things to be able to catch gender-based wage discrimination at the exact moment it’s occurring, that just isn’t a realistic and comprehensive solution to the issue. One of the best ways to reduce any sort of illegal employment discrimination is to have consistent policies and practices that are accompanied by training for those who will be making or influencing employment-related decisions. This framework engenders consistency in the application of process and as a result, it reduces the opportunities for individuals to consciously or unconsciously discriminate when making employment-related decisions.
With all of these different drivers and approaches to reducing the size of the gender wage gap, the steps organizations can take goes back to the initial process that we walked through in the beginning of the article. A measured and methodical approach to reducing the gender pay equity gap makes sense given the complex and nuanced nature of the drivers behind the gap. Some organizations are better situated to promote gender pay equity than others, and every organization can do something to contribute to reducing the gap.