Gender pay gap

The gender pay gap measures the difference in average earnings between men and women. The raw (unadjusted) gap compares all men’s median earnings to all women’s median earnings across the entire economy or workforce. The adjusted (controlled) gap compares pay for men and women in the same or similar roles, controlling for factors like experience, education, and industry. Both gaps exist and require different interventions.

The raw gap (typically 15-20% in OECD countries) reflects both within-job pay differences and occupational segregation (women concentrated in lower-paying fields). The adjusted gap (typically 5-8%) controls for job type, experience, and education, isolating pay differences for equivalent work. The raw gap is more societally significant; the adjusted gap is more legally relevant for equal pay claims. Closing the raw gap requires addressing both occupational segregation and within-job pay inequity.

Contributing factors: occupational segregation (women concentrated in lower-paying industries and roles), vertical segregation (women underrepresented in senior roles), unconscious bias in salary negotiation and annual review processes, career interruptions for caregiving (disproportionately women), the ‘motherhood penalty’ (wage reductions associated with having children, vs. the ‘fatherhood bonus’ for men), and ongoing discrimination in starting salary negotiations.

Pay transparency laws require employers to disclose salary ranges in job postings or to employees. Colorado, California, New York, Washington, and others have enacted such laws. Research shows transparency reduces pay gaps by limiting negotiation advantage disparities, enabling employees to identify underpayment, and incentivizing employers to audit practices proactively. The EU Pay Transparency Directive requires large employers to report gender pay gaps and provide individual pay data on request.

A rigorous pay equity audit: (1) collect all compensation data including base pay, bonuses, and equity; (2) identify comparable job groups using job evaluation; (3) run regression analysis controlling for legitimate pay factors (experience, performance, tenure); (4) identify statistically significant unexplained gaps; (5) model remediation costs; (6) implement adjustments; (7) monitor to prevent gap recurrence. This should be conducted with legal counsel privilege when possible.

Effective interventions: structured salary band adherence (limiting negotiation discretion), blind or structured candidate evaluation, pay equity audits with remediation, promotion criteria transparency, parental leave policies that reduce career interruption penalties, pay transparency disclosure, manager accountability for equity outcomes, and addressing the root cause of occupational segregation through career development and hiring diversity.