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These 3 factors could end the pay gap

Sunshine Farzan observes that a sharper focus on pay transparency, skill-based compensation, and hybrid working models—can each help bolster women’s pay.  

These 3 factors could end the pay gap
[Photos: Klaus Vedfelt/Getty Images; Alexander Schimmeck]

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Every year, Equal Pay Day is a reminder of the gender pay gap, marking how far into the year women in the U.S. must work to earn the same amount as men did the previous year. This year, the day fell on March 15, 2022.  

The COVID-19 pandemic has already taken a disparate toll on women’s career paths. From February 2020 through April 2022, according to data from the U.S. Bureau of Labor Statistics, the economy experienced a net loss of over 1.4 million jobs  According to estimates from the National Women’s Law Center, women have accounted for more than two-thirds (68.5%) of those job losses.  

With companies now offering attractive pay increases to win the war for talent and lure in job candidates—a move that potentially disadvantages incumbent employees—the gender pay gap may be stretched even further if companies are not mindful of compensation practices.  

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While these conditions paint a grim picture for pay equity in the workplace, there are three trends on the horizon offering hope for mending the gender pay gap: greater pay transparency, skill-based compensation and long-term hybrid work models.   

Avoiding casualties in the war for talent

Alluring sign-on bonuses, enhanced perks and wage hikes have run rampant in the employee-centric labor market we’ve been in since the early days of pandemic recovery. Companies, such as Hilton Hotels and McDonald’s, have been offering hundreds or even thousands of dollars for new employees just to sign on.  

Wage growth is evident across the U.S. labor market with companies reportedly allocating 3.9% of their payroll budgets to raises in 2022, according to data collected by The Conference Board. While this marks the highest wage growth for employees since 2008, new hires appear to be getting a greater share of the pie.  

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According to the ADP Workforce Vitality Report, U.S. wage growth increased 3.3% near the end of 2021, a figure on par with pre-pandemic growth. However, since September 2020, wage growth for job switchers doubled this growth at 6.6%.   

These trends can have a varying effect on the gender pay gap.  

On one hand, according to longitudinal data published by LinkedIn back in 2016, women were found to more commonly “job hop” than men. LinkedIn’s data published this year reiterated these findings, with job transitions for women up 54% year-over-year in 2021 compared to a 46% increase for men. If women continue to search for new opportunities at a higher rate, they may make some gains in closing the gender pay gap.    

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On the other hand, companies pushing large wage increases to lure job candidates are likely to discover vast pay disparities in their compensation structures at the end of 2022, as new employees are compensated better than employees who have been there longer. This discrepancy may be particularly detrimental for women workers, who are already paid less than men.  

How can companies avoid sacrificing gender pay equity as a casualty in the war for talent? According to a recently released study from Payscale, 66% of organizations say they plan to conduct a pay equity analysis this year.  

Companies are signaling a sharper focus on pay transparency, skill-based compensation, and hybrid working models—which can each help to bolster women’s pay.  

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Shifting to pay transparency

As regulators and employers in New York City prepare for new transparency laws to take effect later this year, companies will be compelled to update their compensation disclosure practices. Pay transparency laws, like the one passed earlier this year in New York City, are already in effect in several states, including California, Connecticut, Nevada, New Jersey and Maryland.  

Even when a pay transparency law simply requires job postings to include salary information, it raises the stakes on pay equity by fundamentally changing how companies manage hiring and promotions. In order to comply and maintain credibility, employers, in effect, will have to maintain justifiable compensation structures, update job descriptions more often and document their compensation decisions. 

These laws will not just change the situation for new hires. Some pay transparency laws also specify the right of current employees to request information on their current or prospective payment structure. But even when the law does not specify this, the pay scale ranges published with new job openings will inevitably shed light on how current employees are being paid relative to peers.

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New levels of transparency can potentially trigger a chain reaction for companies and female workers.  

Using the federal Equal Pay Act (EPA), Title VII, and other similar anti-discrimination laws as the basis, more women will be able to file claims of pay discrimination if they are being paid less than male colleagues for similar work.   

Pay transparency may also change two core factors that have been widening the gender pay gap: salary raises and negotiations. New research published by Glassdoor finds women are less inclined than men to ask for a raise and also less likely to negotiate for a pay raise, bonus or cost of living increase.  

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However, with greater pay transparency, women may feel more encouraged to make their case to employers for a raise and negotiate for more favorable employment terms.   

‘Pay for skills’ can mean more pay for women

The focus on pay transparency is a transformative trend because it holds companies accountable for their compensation practices. To keep pace, employers will not only have to comply with the disclosure obligations on job posts; as transparency becomes the norm in the workplace, each company must develop a system that clearly defines its compensation strategy and justifies pay disparities. 

For many companies, a ‘pay for skills’ approach can help them adjust to the changing regulatory landscape, laying the foundation for greater pay transparency and overhauling current compensation practices.   

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In a traditional role-based pay system, employees build their careers within their specific job function or department and are paid based on their job performance. However, in a ‘pay for skills’ system, an individual’s compensation is assessed by the concrete skills they bring to the table. Salary structures are often formalized and influenced by experiences, certifications, education and specialized training.   

According to the World Economic Forum, a simple reason for the gender pay gap is that the work done by women is still valued less. However, a shift to skills-based compensation can benefit women, in particular, by leveling the playing field and setting objective “rates” for specific skill sets.  

Historical data from Pew Research Center highlights the pivotal role skill development plays in closing the gender gap. For example, from 1980 to 2018, as the share of higher-skilled jobs grew, the inflation-adjusted average hourly wage for women skyrocketed 45% compared to only 14% for men. For roles emphasizing analytical skills, women’s earnings increased by 58% during this same period compared to just 23% for men.  

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More hybrid work, more inclusion

One of the greatest barriers to women participating in the workforce has been the disproportionate burden of caregiving. Two out of three caregivers in the U.S. are women, according to the Center for Disease Control and Prevention (CDC), meaning they regularly provide support to children, adults or someone with a disability.  

Data from the Kaiser Family Foundation (KFF) found the larger share of added caregiving responsibilities during the COVID-19 pandemic fell on the shoulders of women. Among people who were already caring for someone with special needs prior to the pandemic, 44% of women (as opposed to 37% of men) gained additional caregiving responsibilities as a result of the pandemic. Alarmingly, according to the KFF data, low-income women were three times more likely than high-income women to have quit their job during the pandemic.  

According to recent survey data from FlexJobs, 68% of women preferred to work remotely post-pandemic, versus 57% of men. Additionally, 80% of women ranked the ability to work remotely as a top job benefit, as opposed to just 69% of men. 

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However, the long-term adoption of hybrid and remote work options may be a game-changer for women. By empowering women to work where and how they are most effective, more women will be able participate in the workforce, stay at jobs longer, gain seniority and potentially earn more in the long term. 

Compared to the pre-pandemic job market, there will likely be a greater range of employment options for women who prefer to work remotely.  

While the majority of companies (63%) were exclusively on-site pre-pandemic, a majority of companies (53%) reported they will operate within a hybrid model in 2022 and beyond, according to data from Gallup. Another 24% of companies said they will operate exclusively remotely, while just 23% said they will be fully on-site.  

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Looking ahead: mind the gender pay gap

The last several years have been marked by ups and downs when it comes to closing the gender pay gap.  

It appears the pandemic has stalled some of the progress previously made. In 2022, women are expected to earn 82 cents for every $1 men earn – a figure unchanged from 2021 and just 5 cents more than 2016 according to Payscale’s 2022 State of the Gender Pay Gap Report released in March of this year.  

Data published by the U.S. Census Bureau earlier this year found the gender pay gap widens with age, even as women increase their education levels and break into occupational sectors traditionally dominated by men such as professional and related services.  

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However, recent findings from Pew Research Center show young women (those under the age of 30) are now out-earning young men in several U.S. cities. For example, in both the New York City and Washington DC metro areas, young women earned 102% of what young men earn; in the Los Angeles metro area, the earnings of young women and men were found to be identical.   

When you combine the upward mobility of young women with greater pay transparency in the workplace, skills-based pay and permanent hybrid work models, the future is starting to look brighter for mending the gender pay gap.  


Sunshine Farzan is a global marketing executive with a passion for helping companies build and scale their business through the integration of digital, marketing, product innovation, demand generation and public relations. She currently leads Global Marketing & Communications at Tricor Group, a PE-backed professional services firm.


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