How Do We Close the Wage Gap in the U.S.?

The gender pay gap is now the narrowest it’s ever been, and yet it’s still 2.5 times the size of those of other industrialized countries. So what’s to be done?

A&Q is a special series that inverts the classic Q&A, taking some of the most frequently posed solutions to pressing matters of policy and exploring their complexity.

By all accounts and figures, women in the work force have made enormous economic progress in the last 50 years. In the 1980s, women only made 60 cents to every dollar of male earnings. The latest figures show that gender wage gap narrowed substantially, with women making nearly 80 cents to the dollar in 2015.

The last three decades have seen American women move up in both educational attainment and into higher paying jobs. The gap is now the narrowest it’s ever been, and yet it’s still 2.5 times the size of those of other industrialized countries. So what’s to be done? How can America get its men and women paid equally?

ANSWER

The government should make it illegal for companies to pay men more than women.

QUESTION

It already has. So why hasn’t that worked?

Since 1963, the Equal Pay Act has stated that men and women doing the same work have to be paid equally. More recently, the Obama administration has announced an executive action that will require companies with 100 employees or more to report pay data broken down by gender. The problem with legislating equal pay is that it puts the onus on female employees to bring lawsuits showing that they have been discriminated against. (The California Fair Pay Act has now added additional protection, saying that women need not have the same title in order to have a claim of doing equal work and protecting them from retribution if they ask about the fairness of their pay.)

Of course, this helps if men and women are doing the same work. But a big part of the gender wage gap is due to the fact that they aren’t. So what’s to be done about that?

ANSWER

We should encourage women to take jobs that pay more, and in fields that pay more.

QUESTION

That would definitely help women get paid more. But will they get paid as much as the men in those roles?

Nope. As the Harvard economist Claudia Goldin writes: “Surprisingly, the differing occupations of men and women explain only 10 to 33 percent of the difference in male and female earnings. The rest is due to differences within occupations, and part of that is due to the observable factors.”

While encouraging women into higher paying fields is a good thing, it’s hard to ignore that even when they make it there, they are paid less. Women now make up a third of lawyers and doctors, but they’re still paid less than their male counterparts in those professions. Having more women in higher-paying fields won’t solve the problem if they aren’t compensated at the same rates as their male peers in those fields.

The other problem with this approach is that often the fields that are the highest-paying—such as finance, executives management, and tech—are often reported to be hostile environments for women. It’s not hard to imagine that women in those fields might occasionally walk away from a high-paying job to escape a sexist work environment. So while getting women into high-paying jobs (perhaps by encouraging them to study STEM or other profitable majors) can pay off, part of that solution has to include changing workplace cultures that are inhibiting women from taking jobs that increase their wages.

Then again, many women don’t want all-or-nothing jobs, and many work fewer hours than men do.

ANSWER

So let’s encourage women to work more hours.

QUESTION

Though, again, there’s reason to think this would help, is it fair to ask women to work harder when they’re bottomlining more of the work at home?

Men in the U.S. work more hours than women do. Some economists to argue that, because of this, paying women exactly the same when they work less than men would be unfair. According to data from the Bureau of Labor Statistics, 26 percent of men who work full time worked more than 41 hours a week, whereas only 15 percent of women worked those hours. One study found that this accounts for 10 percent of the gender pay gap. (However, it’s worth noting that men may not be working as much as they say, and women’s honesty with regard to hours may be stymying their advancement in the workplace.)

National surveys from the Bureau of Labor Statistics overwhelmingly support the notion that women spend a lot more time on chores than men do, which is why many proponents who want to close the gender gap argue that one way men can contribute to closing the gender wage gap is ensuring equality on the home front.

Perhaps there can be policies that would support that too, which brings us to ...

ANSWER

Give women flexible work, better maternity-leave policies, and free childcare.

QUESTION

Will that get us to equality?

Data shows that the wage gap is the smallest for young women. According to an estimate by Pew, women ages 25 to 34 have closed the gap to 93 cents to the dollar. This is consistent with research that while young women are catching up to their male peers in early career, it’s mid-to-late-career women for whom the pay gap is much larger. Here’s another statistic: Women who never married earn 94 percent of their male counterparts, while married women earn only 78 percent.

This is what’s often referred to as the motherhood penalty, which happens later in a woman’s career. Women who have children often report that they take time off, reduce hours, and sometimes quit work in order to take care of their children. One study found that while men’s earnings increase by 6 percent when they have children, women with children saw their earnings decrease by 4 percent for each child.

There are two ways to go about fixing this huge part of the gender wage gap. The first is for companies or the government to implement policies that enable women to be both moms and workers, such as paid family leave and supported childcare. But there’s also a cultural shift that needs to happen: The assumption that mothers are not as good at their jobs, not deserving of promotions, or won’t work as hard is discrimination. Employers need to do their part in seeing women who are mothers as valued as employees.

And until then, women are just going to have to ask for more money, which can often backfire.

ANSWER

Okay, so maybe we should end negotiation. Women are bad at it and it’s widening the wage gap.

QUESTION

Does banning negotiation guarantee equality?

This is the approach that Ellen Pao enacted when she was the interim chief executive of Reddit. Pao argued that negotiation was always going to be a man’s game, and that instead of asking women to behave like men, just ban the practice. The problem with this approach is that it puts an awful lot of power in the employer’s hands: If nobody negotiates, companies can still offer men more, and women have no recourse.

So this doesn’t work without pay transparency, which is actually a pretty good solution to the whole problem. For many employers, even just the process of collecting and providing the data can lead to a reckoning. The company Salesforce did just that: An internal audit showed that female employees were paid less, and the company spent $3 million on adjustments to ensure pay equality.

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One of the biggest questions remaining is what will happen the Obama administration’s new equal-pay rules go into effect in 2017?  These rules will require companies with more than 100 employees to report their employees’ compensation, broken down by race, ethnicity, and gender, to the federal government.

Another question is what will be the impact of the efforts to raise the minimum wage, since minimum-wage earners are disproportionately female?

And finally, there’s the question of whether more companies will simply see it as in their interests—whether because of internal outcry or public pressure—to pay their women more. Salesforce did it. Maybe other places will follow suit.