Most employers consider themselves enlightened when it comes to paying men and women fairly for equal work. Nonetheless, the gender pay gap isn't getting any smaller, and it's no secret that women are underrepresented and underpaid in the workforce across a wealth of industries.
So why is it that women collectively earn only 83 percent of what men earn in the United States? Women make up 47 percent of the total U.S. workforce, 50 percent of college graduates and 50 percent of all professional and post-doctoral degrees, according to the 2016 Current Population Survey from Bureau of Labor Statistics. But they're not earning fair wages.
"Contrary to popular belief, pay inequality is not driven by the fact that women leave their jobs more frequently," according to the researchers at the ADP Research Institute (ADP RI) behind a new study. "Across our entire data sample, regardless their age, we saw minimal evidence that women were more likely than men to quit work."
The researchers decided to look at disparities in base and incentive pay between men and women both at the time of hire and after six years of tenure within the same firm. They looked at anonymized aggregated payroll data from the third quarter of 2010, and tracked those newly hired exempt salaried workers (assuming only salaried employees were receiving incentive pay) through December 2016. They viewed base salary as the employee's starting salary in the first year, and the bonus amount was identified after adjusting gross pay for incidentals (reimbursement of expenses, etc.).
And, with that information, the new research suggests that the largest pay discrepancy is actually tied to bonuses.
Here are some of the major takeaways the study found.
A larger proportion of women begin their career at a lower wage compared to men. At hiring, men earn a base pay of $75,162 on average, while women earn just $61,522—that's a difference of $13,640.
"There is a consistent pattern in initial salary distribution for males and females — a disproportionately higher number of women were hired at lower pay," the researchers reported. "For base pay below $40K, the difference in distribution between genders is 20 to 30 percent higher for women; for base pay above $100K it is 50 to 60 percent lower."
According to the researchers, when an employee is hired at a lower salary, catching up seems like an insurmountable obstacle — even over the course of an entire career.
A man's average annual earnings are $98,598 on average, however, a woman's average earnings are $80,085—that's a difference of $18,513. So how does that add up?
"The average bonus amount for women was less than two-thirds of the amount paid to men who had equivalent base pay, age, and tenure," the researchers reported. "This incentive pay disparity was observed across all age, salary, and industry groups from the moment of hire and persisted throughout the six-year study window."
For employees with bonus, females start with base salary gap of 82 percent, which dwindles to 81 percent because of the disparity in incentive pay gap of 69 percent, according to the research. Men earn $11,843 in bonuses on average, while women earn just $8,187 in bonuses on average. The math makes sense—it's right, though it's wrongful.
Many employers tend to focus their internal studies of gender pay equity on base salary alone, largely because base salary information can be easily retrieved from an HR system of record. But they're not taking into account other forms of pay, such as bonuses.
"The causes of fundamental pay disparity between males and females are complex and diverse," the researchers reported. "The value proposition of employment is driven by a variety of tangible and intangible factors. Salary represents only one component. There are many intangible rewards that may make one position or employer preferable to another, including work content, culture, flexibility of hours and commute distance, to name just a few. Male and female employees alike will make employment choices that may seem irrational if viewed from the perspective of salary alone, but are perfectly rational in the broader context of total rewards."
Yes, the gender pay gap is closing, but employers can be doing more too fix it faster. In 2016, American women earned 80 percent as much as men who did the same work — $0.85 for every dollar earned by men. While this was up from 79.6 cents in 2015, the increase marked the first statistically significant annual increase since 2007.
Moreover, other research finds that the wealth gap might be bigger cause for concern than the pay gap. According to the research, which looked at data from almost 180,000 employees at more than 6,000 companies, women hold only 47 cents for every dollar of equity men do. This means that women hold only 20 percent of employee equity, though they make up 35 percent of equity-holding employees. A good equity package can double or even triple one's earnings.
In short: America still has a long way to go when it comes to closing the pay gap. And researchers recommend that employers open their eyes to fair pay beyond base salaries.
AnnaMarie Houlis is a multimedia journalist and an adventure aficionado with a keen cultural curiosity and an affinity for solo travel. She's an editor by day and a travel blogger at HerReport.org by night.
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