With the new version of the Paycheck Fairness Act there’s been a lot of talk lately about equalizing pay between men and women. The legislation is designed to more aggressively punish companies that pay women unfairly. That’s great but wouldn’t it be better to get to the root of the problem and fix the wage gap before it becomes a legal problem? The first step to resolution is figuring out why men earn more than women in the first place.
Let’s consider the findings from TD Economics recent research, Career Interrupted—The Economic Impact of Motherhood, as reported in the SHRM article, ‘Motherhood Gap’ Explains Differences in Gender Wages.
$ "Previous studies on wage differences by gender have found that roughly half of an observed 20 percent gender gap cannot be explained by the usual factors that drive wages, such as experience, hours worked, occupation, industry, age and the like," said report co-author Beata Caranci, deputy chief economist at TD Economics. "The research leads us to conclude that exits from the labor force, most often related to family or motherhood—not gender—are the culprit behind this 'unexplained' wage gap."
$ “Women who exit the workforce to have children tend to experience an unexplained but persistent 3 percent wage penalty per year of absence. The report indicates this persistent wage penalty is as much as three times more severe for frequent exits (three or more) than it is for long absences. So while a depreciation of skills is an issue with any extended leave, it is not the headwind previously thought. Employers typically use the frequency of entry and exit in the labor force as a signal of attachment or commitment.”
$ “Another contributing factor of the motherhood wage gap is that mothers returning to the workforce have greater responsibility on the home front, which makes work-life flexibility a key underpinning toward retention of women in the workplace. These changing priorities can mean mothers become less responsive to classic job incentives like wages and more attracted to work-life balance.”
$ “The report finds that there are ways for women to reduce the motherhood wage gap. Women incur far less financial penalty if they are able to build more experience before temporarily exiting, irrespective of the length of time they ultimately remain out of the workforce. Returning to the same employer also lends itself to a lower wage penalty, as social networks and other firm-specific skills remain better preserved.”
If the ‘motherhood gap’ is truly the root of the pay inequity problem, how can we fix it? Not easily. The findings of this study propose that half of the gender pay inequity is a result of choices that families make—women (rather than men) stay home to raise children and women (rather than men) accept lower salaried jobs to ensure a better work-life balance. Employers recognize that women with families value jobs that require less travel, less overtime, less commute time, less stress, and more flexibility. They know they can pay women below the market rate for this tradeoff. So until men leave the workforce to care for their children in equal numbers to women and until men value flexibility over salary when re-entering the workforce, this gender pay disparity is likely to continue.
However, there is one foolproof solution to gender pay inequality. Pay each employee (regardless of their gender) a salary that is directly tied to their experience and skill set. Then offer each employee an incentive plan that rewards them for the specific results they generate for the company. I think this would immediately and permanently eliminate gender pay inequality.
GUEST BLOGGER -- Amy Levitt is Marketing Director for Romanoff Consulting. With over 20 years of experience as a professional marketer, she has focused her energy on innovative companies in emerging industries--from consulting services, to books and custom magazines, to high-tech products. Amy has authored hundreds of blog entries, mostly directed at marketing executives.