Understanding the gender pay gap ... and how to close it

Equal Pay Day is a clever concept designed to highlight the gap between how much women earn compared to men. In the US, Equal Pay Day, symbolizes how far into the year women must work to earn what men earned in the previous year. Paying unequal wages to men and women who perform the same work has been illegal for almost 60 years in America, but gender-based pay discrimination persists.

International Equal Pay Day, however, is an international event celebrated on September 18th that aims to highlight the stubborn presence of pay inequalities. A 2021 report by the World Economic Forum found that the wage gap (the ratio of the wage of women to that of men in a similar position) is still approximately 37% globally.

In 2021, median weekly earnings for wage and salary workers who usually worked full-time were $998 but median earnings for women were just $912, or 83.1% of men’s earnings, according to the US Bureau of Labor Statistics. Moreover, women were hit harder by the pandemic: job losses were concentrated in low-wage jobs, which predominantly employ women, and hundreds of thousands of mothers left work to take care of their children. The economic progress that had taken women decades to achieve in the workforce was erased in just months. Here, we explain what the gender pay gap is exactly, its consequences, and why fighting it is crucial for society as a whole.

What is the gender pay gap?

The gender pay gap is defined as the difference between the “median earnings of men and women relative to median earnings of men,” according to the Organization for Economic Co-operation and Development. Every year, the overall gender pay gap is calculated by comparing median earnings among full-time, year-round workers. (The median is the number that is in the middle of a set of numbers when they are arranged in order. It is not the same as the average.)

Since the second half of the 20th century, women’s labor force participation has grown significantly in the US, and women now make up about half of the American workforce. But despite this progress, significant wage gaps between men and women persist, especially for women of color.

In 2021, the gender pay gap meant that on average women earned $10,000 less than men for the same job, or that during a 9 AM to 5 PM working day, females started working for free at 2.40 PM, according to Equal Rights Advocates, a lobby group.

Gender-based pay discrimination has been illegal in the US since 1963, yet it is still common. At the current rate of progress, it will take until about 2111 before women reach parity with men, according to the American Association of University Women (AAUW), a non-profit organization that promotes education and equity for women and girls.

“At the current rate of progress, it will take until about 2111 before women reach parity with men.”

Furthermore, the AAUW warns that “the future is far bleaker” for many women of color. Not only is the gap wider than the overall gender pay gap, but it is also closing more slowly, the organization explains in its latest report.

What causes the gender wage gap?

The gender pay gap originates from a mix of factors such as discrimination, racism, stereotypes, or sexism, resulting in women facing a number of barriers that limit their opportunities. As Marlene Kim, a professor of economics at the University of Massachusetts who has studied the gap for 30 years, noted during a congressional hearing on the pay gap in June 2021, “unconscious biases remain against women. Women with the same qualifications are less likely to be hired, trained, mentored, promoted, and compensated at the same rate as men.”

In its fall 2021 report entitled The Simple Truth about the Gender Pay Gap, the AAUW identified four leading causes that explain this pay discrimination. First, the organization acknowledges that “work done by women is undervalued.” This means that “workers in women-dominated fields are paid lower salaries than workers in fields dominated by men, even when the jobs require the same level of skill, education, and training,” according to the report.

“Workers in women-dominated fields are paid lower salaries than workers in fields dominated by men, even when the jobs require the same level of skill, education, and training.”

Second, the AAUW noted that “women are more likely to work in lower-paying jobs.” In fact, they make up about two-thirds of the nation’s low-wage workforce.

Third, the report says that “mothers face discrimination in the form of the “motherhood penalty.” It says, “Employers are less likely to hire women with children (including those who never left the workforce), and they offer mothers lower salaries and fewer promotions than they offer to women without children.”

“Employers are less likely to hire women with children, and they offer mothers lower salaries and fewer promotions than they offer to women without children.”

Finally, the report says that “caregiving expectations suppress women’s earnings over time.” It adds that “because caregiving responsibilities fall disproportionately to mothers, women are more likely to take time out of the workforce, scale back their hours or postpone advancement opportunities.” Furthermore, the pandemic accentuated this phenomenon. Data from the US Census Bureau shows that, at the onset of the pandemic, the share of mothers actively working decreased more than fathers. “Mothers dropped 21.1 percentage points, while the share of fathers dropped 14.7 percentage points.”

What are the consequences, and why does it need to be fought?

The gender pay gap affects not only the women who are not paid fairly but has consequences for communities, businesses, and the economy as a whole.

Bela Salas-Betsch, a research assistant with the Center for American Progress’s Women’s Initiative (CAP), a progressive think tank dedicated to improving the lives of Americans through ideas and action, explained that the gender wage gap hinders the economic security of women and their families – and has lifetime consequences. “The gender pay gap is more than just a few cents — it is a loss of wages that compounds over time and leads to higher rates of poverty, lower accumulation of wealth, and less financial security,” she said.

“The gender pay gap is more than just a few cents — it is a loss of wages that compounds over time.”

Furthermore, having worked less in formal employment but having carried out much more unpaid work at home, many women will retire on lower Social Security benefits and see out their final years in poverty. “Living an average of nearly six years longer than men, women over 65 are today more than one and a half times more likely to live in poverty than men in the same age bracket,” according to the Organization for Economic Co-operation and Development (OECD).

Among the reasons to fight against pay discrimination, experts argue that besides allowing women to earn more income, equal pay will also allow women to finally achieve economic security and dignity. “Higher wages are associated with higher capacities to save and accumulate wealth, as well as retire with dignity,” said Salas-Betsch.

“Higher wages are associated with higher capacities to save and accumulate wealth, as well as retire with dignity.”

Moreover, restoring a balance in wages between both genders would reinforce the country’s entire economic security. Women make up about half of the US workforce, “so their economic security and advancement is tied to the economic security of the entire country,” said Salas-Betsch. However, they are disproportionately employed in low-wage jobs, and “low pay has long been associated with high employee turnover, lower productivity, and lower economic growth.”

“Restoring a balance in wages between both genders would reinforce the country’s entire economic security.”

Salas-Betsch points out that “women often face higher health care costs, higher caregiving costs, and more. This state of affairs contributes to continually hinder women’s economic security,” she said.

What can be done to fight it?

In June 2021, the Paycheck Fairness Act to close the gender wage gap failed for the fourth time in Congress. The bill, which was first introduced in 1997, aims to end loopholes in pay discrimination laws but died in the Senate last year. “While the Paycheck Fairness Act will not, on its own, close the gender wage gap, it’s a crucial step that could bring women one step closer to securing equal pay,” said Salas-Betsch.

The Paycheck Fairness Act would improve workers’ wages by strengthening equal pay protections and enforcement and combating discriminatory pay practices. Among its various proposals, the bill asked to “increase prohibitions on retaliation against workers who discuss their pay or challenge pay discrimination, limit employers’ reliance on salary history, which can perpetuate existing gender pay gaps or require employer collection of pay data disaggregated by race and ethnicity,” said Salas-Betsch.

But non-profit organizations say a multi-faceted approach is needed to fight against unequal wages. According to the AAUW, the most important thing to secure would be “adequate paid leave and reliable childcare” implemented with new laws that guarantee paid family and medical leave and access to affordable, high-quality childcare.

“The most important thing to secure would be ‘adequate paid leave and reliable childcare’.”

Moreover, the AAUW advocates for “expanded unemployment compensation, a higher minimum wage, nutrition and food assistance programs, housing assistance and relief from crushing student debt.”

Salas-Betsch adds that fighting for equal wages also comes with “addressing sexism, racism, and other forms of bias in hiring processes”, as well as practical things such as “ensuring workplaces offer flexibility and predictable schedules to support women who are both workers and caregivers”, or “advancing women’s leadership and representation.” There may be no simple answers, but it’s an area that demands consideration.

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