Luxembourg claims the top spot in the OECD’s rankings for women in the workforce. The US ranks 25th out of 33 countries. Let’s explore why.
Analyzing the racial pay gap
The figures quoted above relate to white women. When we examine the racial pay gap, the picture is bleaker:
Black women earn just 58 cents for every dollar earned by white, non-Hispanic men. What’s more, if a black woman and a white, non-Hispanic male both start working at the age of 20, the black woman would have to work until she is 83 years old to earn the same as a white male by age 60. Black women’s Equal Pay Day took place on July 27 this year, representing some progress, but not enough.
Latina women face similar employer disparities. The National Women’s Law Center (NWLC) found they were paid just 57 cents for every dollar paid to white, non-Hispanic men. In stark financial terms, the pay gap equates to a loss of $2,477 every month, $29,724 every year, and $1,188,960 over a 40-year career.
Women with disabilities fare no better. According to the NWLC, disabled women earn 67 cents an hour in comparison to men without disabilities, and 84 cents compared to their male counterparts with disabilities.
4 causes of employment disparities
The gender pay gap arises from multiple, complex causes, including:
Women are treated differently: Half of American adults believe that “women being treated differently by employers” is a major reason for the gender pay gap, according to Pew Research. PWC says the most significant driver is the “motherhood penalty” – the loss in lifetime earnings experienced by women raising children.
Managerial bias: By the time women reach director level, their level of trust in their employer is 30 percent less than men in equivalent positions. One of the key causes is managerial bias, according to Deloitte research in the Harvard Business Review. Women in the same job, working for the same manager, with the same performance evaluation scores as their male counterparts received lower pay increases.
Lower wage employment: A report from the American Association of University Women (AAUW) found that Latina women comprise almost one-third of the service industry, which is typically dominated by lower paid roles. A NWLC report also provides more context on the barriers that all women face, especially women of color.
LGBTQIA+ workers: LGBTQIA+ employees earn 89 cents for every dollar earned in a week by the typical US worker. For transgender women, this falls to 60 cents for every dollar. Wage disparities for LGBTQIA+ women, transgender men and women, and people of color are greater. Pay data is only available for full-time workers.
We must do better.
Moving towards US pay equity
US states are embracing pay transparency, some more proactively than others. Recent updates to legislation include:
Hawaii is the latest state to require employers to disclose salary information in job listings, and, in a bold move, expanded legislation for protected classes. It also prohibits disparate pay for “substantially similar” rather than “equal work.” The law takes effect January 1, 2024.
Colorado’s amended Equal Pay Act updates pay transparency requirements for job listings while doubling the period for back pay for successful pay discrimination claims. Again, this law comes into force on January 1, 2024.
In a move to promote responsible AI, and eliminate bias, the EEOC updated Title VII guidance in May 2023. Illinois, Maryland, and New York City have also introduced legislation to minimize and eliminate AI bias in automated employment decision tools (AEDTs).
Gender pay gaps vary widely between states. Vermont has the smallest gender pay gap at 7 percent, while Wyoming’s stands at the highest at 31.5 percent.
Closing the gender pay gap: the EU Pay Transparency Directive
Staying a step ahead of the rest of the world is the EU Pay Transparency Directive, which must be transposed into law by 2026. The Directive includes the following legislation:
Employers are required to carry out a Joint Pay Assessment where an unjustified gender pay gap of 5 percent or more exists.
The burden of proof is on employers to prove there is no pay discrimination.
Workers who have suffered gender pay discrimination are entitled to uncapped compensation, including full recovery of back pay and related bonuses or payments in kind.
It is feasible that the Directive could form a blueprint for future US pay equity. Pay transparency legislation in the EU and USshares several similarities.
Eliminating employment disparities
Reducing the 50 year wait to close the gender pay gap needs a universal commitment to pay equity. Here’s how to get started:
Analyze your compensation: Trusaic PayParity conducts a pay equity audit across your workforce at the intersection of gender, race/ethnicity, age, disability, and more in a single statistical regression analysis. The results help you to understand where risks exist and identify areas for remediation. We also identify the root causes of pay disparities, not just the symptoms, including systemic issues such as unconscious bias.
Ensure accurate data: While headline data for Luxembourg is encouraging, the numbers may be misleading. 2021 data shows that women working full-time earned 0.2 percent more per hour on average compared to men. That’s not the whole story. Readjusted figures suggest that women earn 13 percent less than men, as nearly every third woman works part-time. Ensuring accurate data is the only way to gain a true insight into your gender pay gap.
Commit to pay equity: Conducting a pay equity audit is only the beginning. Workplace equality requires consistency and delivers tangible benefits. Pay transparency offers real advantages for employers, from motivating employees to work harder, to boosting retention and attracting more talent to job listings. Pay equity builds trust, empowers women in the workforce and creates a more inclusive culture. 6 in 10 job seekers state that including salary range on a job listing is the #1 criteria in deciding whether to apply.
At Trusaic, we are committed to empowering employers to create inclusive cultures, closing the gender pay gap and achieving true pay equity. Speak to one of our pay equity experts today.
Conducting a pay equity audit is a key component to ensuring equitable compensation within your organization. Just as important as the analysis is how you communicate findings and progress with various stakeholders. Download The Pay Equity Communications Planner to learn best practices for discussing compensation, both internally and externally.