advertisement
advertisement

How Ikea’s Paid Parental Leave Policies Can Help Close The Wage Gap

Offering paid parental leave to both men and women can help close the manager divide and by extension help close the wage gap.

How Ikea’s Paid Parental Leave Policies Can Help Close The Wage Gap
[Photo: Flickr user Håkan Dahlström]

Ikea just announced it is giving all of its 13,000 U.S employees (both mothers and fathers) up to four months of paid parental leave, no matter how many hours they work. That means both part-time and full time staff who’ve put in at least a year with the home furnishings retailer get their full base pay for the first six weeks and half of their base pay for the next six weeks of leave. And those who’ve worked at Ikea for three or more years will get eight weeks of full pay and another eight weeks for half their base pay.

advertisement

The Imbalance Of Paid Parental Leave

This is a big deal, because even though there’s been a raft of announcements by companies introducing or extending their paid parental leave programs, the benefits usually only cover birth mothers in higher wage industries like finance (see: AMEX’s latest announcement that ups paid leave to 20 weeks).

For example, in contrast to tech companies’ policies such as Spotify’s and Etsy’s of up to six months of paid parental leave, hospitality chain Choice Hotels (parent of Comfort Inn, Econo Lodge, and others) announced in September that it would offer up to four weeks of parental leave for either parent and 12 weeks for new mothers at full pay. A spokesperson for Choice Hotels told me approximately 1,300 Choice associates in the U.S. are eligible for the plan, including those who work at corporate offices in Maryland and Arizona. Policies like that leave out thousands of employees because the chain has more than 6,400 franchised properties that make their own policies in more than 40 countries.

We know that the U.S. lags behind almost all other countries that provide federally mandated paid leave. Some cities and states have implemented their own legislation, but the Department of Labor estimates that only 12% of U.S. employees get paid leave through their employers.

Although these benefits cost companies money, both research and anecdotal reporting from the likes of Google, Change.org, 15Five, and others make a strong case that not offering paid parental leave comes at a higher cost for employers. Now a new report from Visier, a cloud-based workforce intelligence company, extends the implications even further. The findings in Visier’s Gender Equity report suggest that offering paternal leave policies like Ikea’s could also close the gender pay gap.

A Hidden Factor In The Wage Gap

To reach that conclusion, Visier used aggregated and anonymized workforce data from large U.S.-based employers that collectively employ 165,000 workers. Industries range from health care, technology, financial services and insurance to energy and manufacturing.

Questions for data analysis included, ‘What is the salary for women at different ages?’ and results were validated by comparing them to publicly available measures, such as those from the Bureau of Labor Statistics (BLS) and the Equal Employment Opportunity Commission (EEOC).

advertisement

The concern with salaries, the report’s authors write, is:

Despite decades of tracking and research, publicly available benchmark data on gender equity is limited: You can get a picture of workforce composition, see how many women compared to men hold various roles, and compare average weekly salaries by gender and occupation, but the ability to examine the data from multiple dimensions to uncover new findings is highly constrained. As a result, there has been limited insight into why the gap exists and persists, which can guide companies and policy makers on how to close the wage gap.

PayScale just released the results of its sweeping analysis of the gender wage gap and the complexity of trying to narrow it down to just one cents-on-the-dollar figure. It found that in their early careers, workers are generally in roles as individual contributors who don’t supervise other employees. That changes with age as men are 25% more likely to enter management roles between the ages of 35 and 40 and are 85% more likely to be vice presidents or C-suite executives by mid-career.

The Manager Divide

Visier’s report also revealed an age-related gap. Women earned 90¢ on the dollar up until their early 30s, after which the wage gap widened to 82¢ on the dollar by age 40, exposing a direct correlation between the so-called Manager Divide, a growing gap in the percentage of men and women in management positions from age 32 onwards, with a drop in women’s wages across education levels and occupations. The report concluded that eliminating the Manager Divide would cut the gender wage gap by nearly one-third.

The authors pointed out that this is not a generational issue, nor does it reflect the hard work and achievements of older generations of women to achieve equity. Why they’re sure it’s not is because the findings show that women appear to be leaving and rejoining the workforce, and participating at higher rates after age 50 than before age 30. The wage gap actually narrowed among workers over 55.

Furthermore, they note: “We also did not see a bias for men in performance evaluations. In fact, women generally received higher performance evaluations than their male counterparts across all age groups.” In fact, women are promoted at the same rate as men during their early 30s, but men are more likely to have direct reports.

As Josie Sutcliffe, vice president of marketing for Visier, tells Fast Company, “The Manager Divide is about a women being underrepresented in positions in which they have responsibility for one or more direct reports and occurs during the years in which women are most likely to have young children. This impacts their earning potential, as managers on average earn twice that of non-managers.”

advertisement

By scaling up the fraction of female workers who are managers to match that of male workers who are managers, and applying the female manager salaries to this artificially generated population of female managers, the gender wage gap between all male and female workers was cut nearly in half for employees over age 32.

How Gender-Neutral Policy Impacts Salaries

But back to Ikea, an oft-cited Swedish study on paid parental leave, and the potential impact on the U.S. gender wage gap. In its home country, Ikea employees get 68 weeks of paid parental leave. The gender-neutral policy was implemented in 1995 when the country introduced a monetized incentive for fathers to take parental leave. Since then, analysis shows that there’s been a 7% increase in a mother’s future earnings for each additional month of parental leave a father takes.

That’s because they’re less likely to resign if their partners are available and encouraged to take time off as well. Visier’s research found that between the ages of 25 and 40, women experience increased child care demands that correlate with an increase in the number of women resigning. This reduces female representation in manager positions that results in a greater gender wage gap.

Sutcliffe says that Visier’s research was not focused specifically on lower-wage or part-time workers, such as those who are now covered by Ikea’s new U.S. policy. But she maintains that the Manager Divide is still an important consideration in gender equity, as is paid parental leave that is socially acceptable for both fathers and mothers to take. 

“Whether individual women aspire to team lead, supervisor, or management roles or not, or whether they work full- or part-time,” she says, “ensuring both men and women have equal opportunity to take on manager roles can reduce the overall gender-wage gap by up to 50%.”

CORRECTION: This article has been updated to reflect an amended number of employees covered by Choice Hotels parental leave policy and edited for clarification.

About the author

Lydia Dishman is a business journalist writing about the intersection of tech, leadership, commerce, and innovation. She is a regular contributor to Fast Company and has written for CBS Moneywatch, Fortune, The Guardian, Popular Science, and the New York Times, among others.

More

Video