Regulations

The Gender Pay Gap – Just How Bad Is It?

The Gender Pay Gap - Just How Bad Is It?

How bad is the gender pay gap in America? The answer is bad, with how bad depending on which report you agree with most.

The Census Bureau and its annual report on income and poverty is the most often referenced to quantify the gender wage gap. Each year, as part of this report, the Census Bureau provides a ratio of women’s to men’s median earnings for full-time, year-round work based data from the Current Population Survey. The most recent report shows that a woman working full-time earned 80 cents to every dollar her full-time male counterpart earned in 2017, similar to findings in 2016.

However, a recent report by the Institute for Women’s Policy Research (IWPR) says that taking a multi-year view of wage growth finds that a woman actually earn 49 cents for every dollar her male counterpart earns.

“The commonly used figure to describe the gender wage ratio—that a woman earns 80 cents for every dollar earned by a man—understates the pay inequality problem by leaving many women workers out of the picture,” states the report, authored by Stephen J. Rose, Ph.D. and Heidi I. Hartmann, PhD. “This report argues that a multi-year analysis provides a more comprehensive picture of the gender wage gap and presents a more accurate measure of the income women actually bring home to support themselves and their families.”

Rather than an annual analysis, the IWPR report measures the wage gap of select individuals over a 15-year time frame (2001-2015) which it says will identify a more accurate and wholistic wage gap.

The IWPR report has four key findings which are excerpted here:

Women today earn just 49 cents to the typical men’s dollar, much less than the 80 cents usually reported.

When measured by total earnings across the most recent 15 years for all workers who worked in at least one year, women workers’ earnings were 49 percent—less than half—of men’s earnings, a wage gap of 51 percent in 2015. Progress has slowed in the last 15 years relative to the preceding 30 years in the study.

The penalties of taking time out of the labor force are high—and increasing.

For those who took just one year off from work, women’s annual earnings were 39 percent lower than women who worked all 15 years between 2001 and 2015, a much higher cost than women faced in the time period beginning in 1968, when one year out of work resulted in a 12 percent cut in earnings. While men are also penalized for time out of the workforce, women’s earnings losses for time out are almost always greater than men’s.

Strengthening women’s labor force attachment is critical to narrowing the gender wage gap.

Despite considerable progress over the last 50 years, 43 percent of today’s women workers had at least one year with no earnings, nearly twice the rate of men. With high penalties for weak labor force attachment, achieving higher lifetime earnings for women will require strengthening women’s attachment to the labor force. Research has shown that such policies as paid family and medical leave and affordable child care, can increase women’s labor force participation and encourage men to share more of the unpaid time spent on family care.

Strengthening enforcement of equal employment opportunity policies and Title IX in education is also crucial to narrowing the gender wage gap further.

Improved enforcement will help women enter higher paying fields that are now, despite decades of progress, still too often off-limits to women.

Cultural norms are one of the factors in furthering the wage gap. For instance, the report finds that women are more likely to drop out of the workplace to care for family and related needs than men. This occurrence is referred to as the “care chasm.” According to the report, women that took four or more years off from work made 65% less than the women who stayed in the workforce. Men that took four or more years off from work were less impacted, making 57% less than men who remained in the workforce.

However you may view the reports from the Census Bureau and IPWR, it’s clear that a gender pay gap exists in America. And both federal agencies and state governments are starting to take more assertive action to address conditions that are reinforcing the existence of a gender wage gap.

It can be argued that the U.S. is well behind Europe in addressing the gender wage gap, with some European countries having initiated recent government initiatives to address gender pay issues. And to the north, Canada is getting ready to initiate a new Pay Equity Act to close the gender wage gap.

The one thing that seems certain is that the focus on solving the gender wage gap is becoming more intense around the globe. U.S. employers who have yet to evaluate and assess their current pay equity processes should consider reviewing their compensation programs and having a pay equity audit performed.

Of course, that means that organizations that decide to perform an equal pay audit should ensure that they are legally protected. They should consult with in-house general counsel, or outside counsel, and accountants about legally protecting the information obtained in an audit. Organizations that don’t feel they have the in-house capability to conduct an equal pay audit should consider the data quality management expertise of the outside experts retained to help conduct the audit. Working with outside vendors with specific expertise in data cleansing and validation will ensure that the results of your pay audit will be accurate. As the saying goes, garbage in, garbage out (“GIGO”)—a meaningful review of pay practices depends on the integrity of your employment data.

Organizations should make sure they are keeping up with the activities for federal regulators and changes in the law at the state level as more states enact more assertive laws related to pay equity, such as salary history bans, banning consideration of past criminal records and equal pay for comparable work.

They also need to decide if they want to be a leader in the effort to provide equal pay to their workers and reap the rewards of a more enthusiastic workforce, positive PR and avoiding costly regulatory penalties.

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