Can Pay Transparency Close the Gender Wage Gap?
Updated: Dec 14, 2020
Welcome to my weekly Q&A roundup. (Scroll down to find the Q&A.)
If this is your first time here, welcome. I spend a fair amount of time speaking at events and conferences. At the end of my presentations, I leave space for audience members to ask questions—tough questions, brave questions, you name it.
The level of candor and curiosity always inspires me, and I want to share that sentiment with you. So each week, I pick one question that I believe others would find most instructive and publish my response to it here.
The purpose of this weekly tradition is transparency and inclusivity.
• Transparency: a behind-the-scenes look at my day-to-day.
• Inclusivity: bringing others along in the journey.
Is Pay Transparency the Great Wage Equalizer?
Which of these statements have you heard before?
1. Women make less money than men because they don’t negotiate as much.
2. Women make less money than men because when they do negotiate, they are less likely to succeed.
3. Women make less money than men because they choose occupations with lower earnings potential.
4. Women make less money than men because they choose to work in lower-paid industries.
5. Women make less money because they prioritize motherhood over their careers.
I’ve heard these statements (and more) by people trying to explain the cause of the stubborn gender pay gap. The truth is, women make less money than men for a variety of complex and vexing reasons. We cannot pinpoint just one.
Let’s peel back the layers of the gender pay gap to uncover what’s really at the root of the problem.
Would greater pay transparency close the gender pay gap?
The short answer is no. The long answer is, it will help. Pay transparency is a step in the right direction toward pay equity, but it will not single-handedly close the gender wage gap. To understand why this is the case, let’s look at a recent Glassdoor study on The Power of Pay Transparency.
The (Limiting) Power of Pay Transparency
Economists at Glassdoor wanted to know the impact of pay transparency on workers’ actual salaries. Based on the data collected from their Know Your Worth salary calculator, they found that people who used the tool earn 2.4% higher salaries than people who do not.
Ok. That 2.4% was the key takeaway of the report. I’m more interested in what happens when we drill down to examine the salary bump by gender.
When we do, we find that men who used the salary calculator benefited from a 3.3% salary boost, while women who used the calculator benefited from a much lower 1.4% boost.
So while both genders stand to gain from greater pay transparency, it’s not the only solution to close the gender pay gap.
According to Daniel Zhao, a senior economist at Glassdoor, “Fixing the gender pay gap will require more holistic action addressing both the lack of salary transparency as well as other barriers preventing women from reaching full pay equality.”
Pay Is the Symptom, Not the Disease
On further analysis, we find that the problem is not that women earn less than men. The problem is rooted deeper in gender inequity, and the pay gap is one way this inequity manifests.
For instance, pattern-matching socializes us with the belief that men make more powerful leaders than women. (Which helps explains why only 7.2%, or 36, of Fortune 500 CEOs are women.) However, women score higher than men in 12 out of 16 competencies for “outstanding leadership.” Are men really better leaders than women, or do we believe they are because that’s what history taught us?
Or, take the case of unpaid labor. Every day, the average US woman spends 4 hours working the “second shift” of cleaning, cooking, and caretaking, whereas the average US man spends less than 2.5 hours per day.
The expectation for women to perform domestic labor compromises their participation in the workplace. Moreover, responsibilities related to the second shift are the most common reasons women cite for not working outside of the home.
So how can we expect to reach gender pay equity if barriers to labor force participation (such as the second shift) exist? And how can we expect women to make it into higher paid positions if we don’t see them as competent leaders?
We must go beyond pay transparency to break down the walls that prevent us from achieving gender equity.
• Pay transparency sheds light on the issue of pay inequity.
• When we stop holding secrets around pay, employees can view and analyze salary information to craft their career paths.
• Pay transparency also provides companies with a competitive advantage in the market for labor.
• But to fully close the gap, we must dig down into the systemic obstacles that hold women in the workplace back.
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