The war zone of the wage gap battle usually seems like a worker’s strike line. On the other side are the powerful political forces denying the reality of statistical disparities in earnings between men and women. Others argue that the wage gap is overstated. They contend that market forces will eventually correct pay gaps on their own. I am more hopeful and convinced than ever that we need to fill this gap. This is more than a question of fairness – it’s an economic imperative for companies that wish to succeed in today’s hyper-competitive economy.
For years, I’ve been paying attention to how businesses are wrestling with diversity and inclusion. And a great number of those companies are more intentional about their hiring. Yet the persistent pay gap suggests that more fundamental problems remain. It’s more than just overt acts of discrimination. A complicated, multi-layered system of issues continues to quietly hold women back on the job.
The most important of those is the effect of caregiving burdens. Women remain the more likely sex to leave the workforce to provide childcare and family care responsibilities continue to fall on women. This results in career disruptions and delayed career progression, which hurts their long-term earning potential. Similarly, women may choose to work fewer hours per week to balance work and family responsibilities, further affecting their income.
Occupational segregation factors in. Even as we’ve made progress in just about every arena, women continue to be overrepresented in the kinds of jobs that just pay less. Women who go into male-dominated professions such as management, business, finance, law or STEM careers pay a big price. They need to continue to battle fiercely for pay equity within these sectors.
Education levels, incredibly, aren’t an automatic fix. Women are receiving bachelor’s degrees and above at historic levels. They continue to experience a motherhood pay penalty, making less than men doing the same work. This indicates that something more than qualifications are driving pay decisions.
And even today, family obligations still bog down women’s long term career prospects. The truth is, as we all know, women continue to be the ones most often left holding the bag on primary responsibility for kids at home. This in turn can affect their ability to work in their jobs of choice at full employment, achieve upward mobility, and eventually earn a higher wage.
What if we turned the narrative on its head. What if instead we saw pay equity as an opportunity? By welcoming it, we can find hidden potential and turbocharge our business success.
Increased productivity is the biggest one. When women get paid what they’re worth, their commitment and drive to succeed in the workplace increases. This increase in employee spirit results in improved quality of workmanship with higher productivity rates. A third major benefit is lower turnover and recruitment costs. When businesses pay women equally, they lower turnover costs by keeping experienced employees—saving valuable time and money spent on recruitment and training.
Employee morale and engagement are major benefits. Enforcing pay equity fosters a stronger workplace culture and higher employee morale. In turn, employees enjoy increased morale and demonstrate increased dedication to their jobs.
Additionally, addressing the wage gap increases an employer’s competitiveness. It helps strengthen a company’s talent pipeline and retain its best employees. In today's competitive job market, companies that prioritize diversity and inclusion are more likely to attract skilled and ambitious women.
Arguably, in the long-term, pay equity makes a company more competitive. Employers that practice equal pay for women demonstrate a commitment to doing what’s right and being good corporate citizens. This commitment can bring customers and investors to the firm who value diversity and inclusion.
Here are three ways businesses can begin to close the wage gap in meaningful, real-world ways.
Fostering an inclusive culture should be top priority. This includes making a concerted effort to address the business case for pay equity and having both women and men participate in the discourse. Initiatives like Salesforce's Women Surge, which requires diverse representation in important meetings, can help ensure that women's voices are heard and valued.
Training managers to communicate the fairness of pay decisions is equally important. First and foremost, pay transparency demonstrates that your organization is trustworthy and fosters understanding among your employees. Managers should be prepared to address any questions or issues that arise.
While a vital piece, coaching leaders is not enough. In addition, it allows them to better respond to inquiries from investors and regulators about the company’s dedication to pay equity. Transparency and accountability go a long way toward building trust and proving that you’re genuinely committed to doing the right fair thing.
Transparency from employers to boards about the process and methodology used to ensure pay equity is equally critical to the process. This brings visibility and accountability to pay equity, making sure it’s top of mind at the highest levels of the organization.
The recently finalized EU Pay Transparency Directive is a real game-changer. It forces employers to be transparent about their pay and rectify wage gaps. By 2026, this directive will be fully incorporated into national laws across the EU. Consequently, companies throughout Europe will be held to stricter standards of accountability.
In fact, one study found that workers were 13% more productive when they had access to managers’ salaries. A 2018 experiment from the National Bureau of Economic Research showed just how effective pay transparency can be. It plays a huge role in shaping employees’ expectation of their pay.
The EU’s Pay Transparency Directive provides for an unprecedented level of transparency not just in pay but in career advancement. By 2027, firms will need to significantly analyze and disclose their mandates to pay equity. Gender equity picture They will need to assess career trajectory, ensuring that women have the same opportunities for advancement.
Ultimately the wage gap cannot be closed through compliance and social responsibility alone. It’s about building an inclusive workplace where all of us can succeed. By taking a stand in favor of pay equity, businesses can empower their entire workforce to thrive and be positioned for long-term success. The playing field is tilted enough against small businesses already—the time to level the playing field is now.
