March 2019

Same same but different: it’s time to close the gender pay gap

This article was first published on LSJonline - the Law Society of NSW’s Online Journal, on 7th March 2019.

It was widely reported that Lisa Wilkinson resigned from her role as co-anchor of the Nine Network’s Today Show after a decade because the network did not match her salary with that of her male co-anchor, Karl Stefanovic. The Nine Network was allegedly paying Wilkinson $200,000 less than Stefanovic, whose salary was $2 million.

Hollywood actress Claire Foy, who played the leading role of Queen Elizabeth II in the Netflix drama ‘the Crown’, was paid less than her male co-star, Matt Smith, despite winning a Golden Globe and two Screen Actors Guild awards for the role. Matt Smith did not receive any such accolades for his role in the show. Though it was never actually disclosed how much Smith had been paid, when the news of the pay disparity broke it was reported that Netflix and the producers of the Crown agreed to pay Foy $363,000 in back pay. These prominent and recent examples of wage disparity remind us that, despite jokingly being referred to as the ‘fairer’ sex, when it comes to remunerating women for their work, nothing about it seems fair.

This article looks at the causes of the gender wage gap (in particular, in like-for-like roles), and suggests actions that employees, employers and the Government can take to reduce the gender wage gap sooner, rather than later.

What is the ‘pay gap’ ?

Earlier this year, the Workplace Gender Equality Agency (‘WGEA’) reported that Australia’s national gender pay gap amongst full-time workers is the lowest it has been in the last 20 years at 14.1 per cent. The national gender pay gap represents the difference between the average full-time salaries of men and women. However, there is still a lot of work to be done to close the gap, given reports that the gap won’t close for at least another 50 years.

At an organisational level, the WGEA has broadly identified three types of pay gaps that can exist:

  • Like-for-like gaps – where men and women performing the same role, or different, but equivalent work of equal, comparable value are paid unequally.
  • By-level – where men and women are within the same level of an organisation’s hierarchy, but more men are at the top of a pay band or manager category, or male dominated roles are valued (and therefore compensated) more highly than female dominated roles.
  • Organisation-wide – where there is a gap between the average remuneration between men and women across the entire organisation.

Keeping in mind the different types of pay gaps that exist within an organisation, there are a variety of systemic reasons which could explain why a pay gap may exist:

  • lack of promotion of women to, and underrepresentation of women in, top management positions, which generally attract higher salaries;
  • extended periods of leave from work by women (i.e. women on maternity leave) meaning fewer promotions and pay rises over time;
  • lack of availability and affordability of childcare, meaning that women are choosing not to participate in the workforce in order to raise a child;
  • the fact that women are more likely to work part-time (and therefore, earn less) than men;
  • the difference in importance placed on male and female dominated industries, reflected by the value of remuneration;
  • cultural expectations on women to do non-paid work such as domestic duties meaning that women work less hours than men; and
  • the fact that men tend to be involved in more unionised work, and there is evidence to suggest that unionised workers negotiate and receive higher remuneration overall (Blau and Kahn, 2007).

While the above factors may assist to explain why the national wage gap exists, they do not explain why women receive less pay compared to their male colleagues in like roles when all other factors are equal. Several studies have shown that there is a significant pay gap between men and women performing similar work when all other factors are equal. For example:

  • One study examined the remuneration of law graduates from classes of 1972 to 1975 of Michigan Law School over a 15-year period1. The study revealed that men and women had a small wage gap at the beginning of their careers, but that 15 years later the gender pay gap had increased significantly such that the women were earning 60 per cent of the salary of the men. After controlling for variables such as the decision by women to work shorter hours, qualifications, family status, race, location, grades at university and work history, the men still earned 13 per cent more than the women.
  • Another study of data from a national survey of academic physicians yielded similar results, with women receiving less compensation than their male colleagues within the same rank, even after variables such as specialty, job characteristics and productivity were controlled2.
  • Another study looked at whether female executives in large Australian firms were paid equitably as compared to male executives during the period from 2011 to 20143. The study found that overall, the mean pay of women executives was 80.7 per cent of the mean pay for male executives. After controlling variables such as the level of the executive position (CEO, CFO, company secretary etc.) and individual and firm characteristics (such as, for example, firm size, which is often associated with higher pay) the study concluded there was still a 15.1 per cent gender pay gap at the executive level.

What is worse is that once a pay gap is established between men and women from the outset of their careers, the trend is that the gap only becomes wider over the course of their respective careers as future pay increases are predicated on the base salary (generally, as a percentage of the current salary), which only furthers the pay gap.

In many countries (including Australia and the United States) it is unlawful to discriminate against a person on the basis of their sex in the terms and conditions of their employment (including pay and other benefits). So the question must be posed, with all other things being equal, why are men and women still being remunerated differently for performing the same work?

Reasons for the pay gap

There are three possible explanations for why a gender pay gap may exist in like-for-like roles:

Women don’t ask

As the saying goes, ‘ask and you shall receive’. One potential reason that women are not being paid the same amount as men for the same type of work is that women are not negotiating their salary offers as often as men.

Several studies have shown that women are less likely to negotiate than men4, or not likely to negotiate where the job advertisement does not specify that salary is negotiable5. The question is why? Linda Babcock et al have suggested that women are less likely to negotiate to advance their own interests for two reasons:

  1. Women have been socialised to focus on the needs of others over their own. Women have not been taught to ask for what they want, but instead believe that they will be recognised and rewarded for their hard work; and
  2. Women fear they will be penalised for asking. Women are sometimes punished for behaving in a way that goes against societal norms and expectations, by advocating for their own interests. Women may experience ‘social costs’ of negotiating such as a damaged relationship with their supervisor or peers. This may discourage women from negotiating.

Women don’t ask for as much

It could be that women do ask, but due to lack of wage transparency they do not ask for as much pay as their male colleagues performing the same work. In the United States, wage transparency amongst federal employees has resulted in a lower wage gap amongst these workers6.

Women ask, but do not receive

There is a possibility that a like-for-like pay gap exists due to discrimination, or conscious or unconscious bias in pay decisions, in breach of existing anti-discrimination laws. One Australian study surveying approximately 4,600 randomly sampled workers across 840 workplaces found that women are just as likely to ask for raises and promotions as men, but are not as likely to receive them when compared to their male counterparts7.

What can we do to eliminate the like-for-like pay gap?

When studies show that women negotiate their pay less than men, it is easy to infer that women are to be blamed for the existence of a gender pay gap on a like-for-like basis. However, everyone has a role to play in combating the pay gap (including in like-for-like roles). Below, I have included some actions that employees, employers and the Government can take to close the gap.

For employees

  • Equip yourself with the ability to negotiate your pay, and don’t be afraid to ask for what you deserve. Roger Fisher and William Yury’s book ‘Getting to Yes’ teaches a method of principled negotiation which places importance on the ongoing relationship between the parties to the negotiations and aims to create win-win solutions. It is important to remember that it is equally as important to your employer that you receive pay equality for like-for-like work.
  • Come to the negotiation table with an understanding of what other employers are willing to pay for the same work through market research, by attending interviews with competitors, speaking to peers working in equivalent roles in similar sized organisations and reviewing industry salary guides and benchmarks.

For employers

  • Conduct regular pay analyses and identify whether your organisation has a pay gap (including on a like-for-like basis). If a like-for-like gap is identified, top up salaries to close the gap. Organisations that have recently taken such action include Energy AustraliaWestpac and PwC Australia.
  • Advertise salary as negotiable.
  • Organise training for your female employees on how to be more effective negotiators.
  • Organise unconscious bias training for managers, to help them identify attitudes which may result in a ‘social cost’ to women who negotiate.

For the Government

  • Require organisations to report not just on their overall pay gap, but to provide a breakdown of the pay gap between men and women for like roles.
  • Allow information about an organisation’s pay gap that is reported to the WGEA to be publicly available. The Australian Labor Party has indicated that they will introduce such a law.
  • Ban pay secrecy clauses in employment contracts, so that employees can freely discuss their pay without fear of consequences. Again, the Australian Labor Party is proposing legislation to give effect to this.
  • Mandate pay top ups for staff where a like-for-like gap is found to exist (although this could be seen as too interventionist in a laissez faire economic system).
  • Mandate wage transparency for organisations, so that organisations are required to disclose the pay bands for different roles.

Fighting the gender pay gap is OUR problem

As the saying goes, the journey of a thousand miles starts with a single step. On International Women’s Day this year, let us all take a moment to pause and reflect on the role that we can play within our organisation to close the gender pay gap (especially on a like-for-like basis). If we each take corrective action to close the gap, only then will women have a ‘fair go’ at earning the same salary as their male colleagues for performing the same work.

Author: Priti Joshi

 

1 Francine D. Blau and Lawrence M. Kahn, ‘The Gender Pay Gap: Have Women Gone as Far as They Can?’ (2007) 21(1) Academy of Management Perspectives 7.
2 Christine Lane and Barbara J. Turner, ‘Unequal Pay for Equal Work: The Gender Gap in Academic Medicine’ (2004) 141(3) Annals of Internal Medicine 238.
3 Yoshio Yanadori, Jill A. Gould and Carol T. Kulik, ‘A fair go? The gender pay gap among corporate executives in Australian firms’ (2018) 29(9) The International Journal of Human Resource Management1636.
4 Linda Babcock and Sara Laschever, Women Don’t Ask: Negotiation and the Gender Divide (Princeton University Press, 2009).
5 Andreas Leibbrandt and John A. List, ‘Do women avoid salary negotiations? Evidence from a large-scale natural field experiment’ (2018) 61(9) Management Science 2016.
6 Bilma Canales, ‘Closing the Federal Gender Pay Gap through Wage Transparency’ (2018) 55 Hous. L. Rev. 969.
7 Benjamin Artz, Amanda H. Goodall and Andrew J. Oswald, ‘Do women ask?’ (2018) 57(4) Industrial Relations 611.