Why Women Earn Less

(Bloomberg) -- There are many ways to look at the explosive issue of why women earn less than men: Are you comparing men and women in the same exact job, at the same company? Or aggregate figures skewed by the fact that more women work in schools and hospitals and fewer advance to the top ranks of lucrative professions such as banking? What the numbers lay bare depends on how they're assembled. Yet in almost all cases, they provoke outrage, like the revelations about the gender pay gap in Hollywood, professional sports, at the BBC and among Uber drivers. In the U.K., a new law requiring large companies to disclose their pay gap is putting real numbers on wage inequality. Advocates say the flood of data will push women's wages up. Skeptics say it's a simplistic way to look at a stubborn problem.

The Situation

Companies with 250 or more workers in Britain were required to unveil a blunt, uniform assessment of what women earn versus men by April 4. Some of the widest gaps appeared at banks such as HSBC Holdings Plc and Goldman Sachs Group Inc., which pay women in their workforce less than half of what men earn on average. That's largely because women are under-represented in senior roles. A new German law gives workers the right to compare their pay with up to six colleagues of the opposite sex who have the same job. The U.S. has moved away from requiring more reporting. President Donald Trump's administration reversed an Obama-era rule change that would've compelled companies to report pay information to the government. But some companies are doing it anyway: Under pressure from activist shareholders, several large U.S. banks, including Citigroup Inc. and JPMorgan Chase & Co. disclosed figures that revealed — after adjusting for factors such as job title and geography — an identical 1 percent gap. That led some critics to question the data. In the U.S., the typical job-to-job gap, for workers of equal education and experience, is about 5 percent. In France and Germany, it's about 3 percent.

The Background

Historically, the pay gap has been fed by beliefs that women should stay at home or doubts that they could perform jobs as well as men. Thus they earned lower salaries, even as they entered the workforce in larger numbers. These days, the debate is colored by the fact that women still do a disproportionate share of household work and childcare, so are more likely to work part time, work from home, or drop out of the workforce after they have children. When the U.S. passed the Equal Pay Act in 1963, American women earned, in aggregate, roughly 60 percent of what men did. Over the next 30 years the gap was cut in half to about 80 percent but has been relatively stagnant since the 1990s. Nordic countries are often lauded for having near economic parity but they still have female workforces that earn at least 15 percent less than men on average.

The Argument

Critics say the disclosure rules create a burden for employers, and that the data can distort the issue, sow confusion and damage reputations. When comparing how much all women earn versus all men, much of the gap is caused by the way women “cluster” in lower-paying fields such as education, nursing or administration. Yet studies show that the gap widens as women age, have children and enter higher-paying careers. In that sense, the figures can highlight a gap in economic opportunity. Supporters of more equality say the new transparency provides a deeper level of insight that makes it easier to address discrepancies and monitor results.  Many companies have vowed to revise their hiring and compensation practices to create an egalitarian workforce. The Silicon Valley company Salesforce Inc., for example, runs an annual analysis of its workforce and adjusts the salaries of any employee — woman or man — found to be inexplicably underpaid. Then there's the question of whether fixing the disparity means paying women more, or paying men less. The BBC decided not to address its 9.3 percent average gender pay gap by only raising the salaries of underpaid women; it also reduced the salaries of select men.

The Reference Shelf

• U.K. companies have disclosed their gender wage gap on this government website.
• A QuickTake on the U.K.'s new disclosure rules.
• Five years after “Lean In,” Bloomberg Businessweek explores what has changed.
• Businessweek asks why the wage gap is so stubborn.
• OECD data on the global average wage gap.
• A Stanford University research paper and Freakonomics Radio episode on why female Uber drivers earn less than men. 

First published March

To contact the author of this QuickTake: Claire Suddath in New York at csuddath@bloomberg.net.

To contact the editor responsible for this QuickTake: Leah Harrison at lharrison@bloomberg.net.

©2018 Bloomberg L.P.