A massive six-year study by the ADP Research Institute confirms that women, on average, are paid substantially less than men.
The research tracked the compensation of approximately 11,000 people who were hired into exempt salaried positions during the third quarter of 2010 and continuously worked for the same company through 2016.
At the outset of the study period, women’s average base salary was 82% that of men’s base. Thereafter, although the average annual growth in base compensation was marginally higher for women, it was inconsequential in closing the salary gap. At the end of the study period, women’s salary was still only 84% of men’s.
The key differentiator appears to be that more women were hired into lower-paying jobs. In the $20,000 to $40,000 salary range, 121 women were hired for every 100 men. In the $40,000 to $60,000 range, an equal proportion of men and women were hired.
For higher-paying positions, far more men were hired than women. In the highest-salary category, $150,000 and up, only 44 women were hired for every 100 men.
In fact, despite the marginally better annual salary hikes for women, in total compensation they actually ended up further behind, at 81% of what men made. That’s because women’s average ratio of bonus to base pay was only 83% that of men.
“It seems that once an employee starts with a lower salary, it becomes an insurmountable obstacle to cross,” the study report says.
The new hires were also categorized by age. In the 20-to-30 age group, women’s starting base pay was 99% that of men’s. However, there were significantly more women in that group — 121 women for each 100 men. In all other age groups, more men were hired than women.
The youngest women immediately started to fall behind the youngest men in total compensation because of lower bonus pay. By December 2016, women in that age group were earning just 95% of their male counterparts.
The study also shot down the popular belief that women’s average compensation is lower than men’s partly because women leave the work force in greater numbers in order to serve as primary caregivers for children. The rate at which the respective genders leave employers is equal, according to the ADP Research Institute.
Authors of the study didn’t mince words in stating why women are paid less. “Disparities in pay observed between comparable peer groups are … likely to represent some form of systemic gender bias in the workplace that may occur due to recruitment, promotion, performance review, or pay practices,” they wrote.
Unequal pay is a significant social issue, of course. But, the study notes, employers also should address it to mitigate the risk of legal problems or negative publicity. The study points out some actions that could be taken:
- Conduct a comprehensive pay-equity review that encompasses base pay, incentive pay, and total compensation.
- Review recruiting practices and guidelines provided to hiring managers to negotiate salary and incentives for new hires.
- Examine promotion decisions for evidence of pay bias — i.e., awarding promotions based on salary history rather than performance and fit for the position.
- Create an HR technology ecosystem that supports monitoring and analysis of all aspects of compensation on an ongoing basis.
- Improve communication practices to help ensure that employees and supervisors have a clear understanding of fair pay practices.
As CFO reported earlier this year, women CFOs earn 45% less than men, but only 14% less after controlling for certain variables that may make apples-to-apples comparisons deceiving.