Is the Gender Pay Gap Real? (Causes, Myths and Evidence)

Hint: it’s not science fiction.

Reviewed by Chris Leitch

Gender Pay Gap

The gender pay gap is a phenomenon that’s been present in the world of work for decades, but it’s only in recent times where its severity and impact have gained widespread attention. As such, the gender pay gap can often be misunderstood in terms of what it is and the effects it has on women and the world of work.

This article covers the definition of the gender pay gap, the impacts it creates, and how the gap correlates to wider issues connected to inequality. We will also debunk some myths regarding the gender pay gap and illustrate the impact it has on women and the wider economy.

What is the gender pay gap?

The gender pay gap can be explained as the difference in average earnings between men and women in the workforce. This gap is influenced by a complex interplay of social, economic and cultural factors.

The gender pay gap is typically expressed as a percentage of men’s earnings, and it reflects the disparity in income between genders. The US Bureau of Labor Statistics estimates that women earn 84% of men’s pay — weekly earnings of $996 compared to $1,186 — with the industries with the narrowest (favorable) margins being sales and office, and the least favorable being construction and maintenance.

It’s also prudent to analyze the gender pay gap according to demographical variables, as this illustrates how the issue is connected to wider concerns regarding inequality. The Center for American Progress highlights how the gender pay gap is most apparent for women of color, with Hispanic or Latino women earning 54 cents on the dollar compared to White men, and Black women earning 62 cents on the dollar.

The gender pay gap exists in many countries and across various industries. For example, in the EU, a region known for forward-thinking and progressive policies aimed at combating the gender pay gap, women are paid as much as 20.5% less than men in Estonia, in particular, with the overall average being 12.7% less.

A UN report estimates that, globally, women earn 77 cents on every dollar earned by men, whereas the 2023 Global Gender Gap Report administered by the World Economic Forum put the percentage at 68.4% which, although lower, actually represents a slight narrowing of the gap from the previous year.

These statistics point not just to inequality issues but also to persistent and long-lasting pay disparities that, over time, create serious and far-reaching challenges for women and the wider economy.

The causes of the gender pay gap

The gender pay gap is a complex issue caused by many factors. These factors are not exclusive, and interact and reinforce each other. This is one of the reasons why the gender pay gap is so persistent and difficult to close. Here are five leading causes of the gender pay gap:

1. Childcare-related causes

Women often face an earnings penalty when they become mothers. This can be attributed to factors such as taking time off work for maternity leave, reducing work hours to care for children and being passed over for promotions or opportunities due to the assumption that women are expected to care for children more than men.

Additionally, taking time off for childcare can result in women missing out on incremental wage increases or other market-led or inflation-driven pay adjustments. This penalty can have a long-term impact on women’s earnings that become more apparent as the years go by.

2. Lack of negotiation

Studies have shown that women are less likely to negotiate their salaries compared to men. This isn’t due to a lack of skills, but rather stems from social expectations, including backlash against women who ask for raises or promotions, which can be perceived by some as being uncommonly assertive behavior. It has also been suggested that women may be less inclined to negotiate in the first place.

Negotiation training might help bridge this gap in negotiation ability. As it stands, this tendency to avoid negotiation is causing women to start jobs with lower salaries and receive smaller pay raises over time, widening the gender pay gap.

3. Overrepresentation in informal work

There is a tendency for women to be overrepresented in “informal” work, such as part-time or gig economy jobs, where remuneration is often lower, and benefits might be severely limited or even non-existent. Similarly, women are more likely to perform unpaid work, such as housework or childcare.

This leads to two main issues. Firstly, it skews women’s income due to the high number of women working in these areas and, secondly, it makes it harder for women to break free from these responsibilities and find better-paid employment elsewhere.

4. Recruitment and workplace discrimination

Workplace discrimination manifests as explicit bias or through subtler situations.

Explicitly, women can be paid less than men for the same jobs. Similarly, women can be ignored by recruiters for certain roles simply because these roles are perceived as more “masculine” or passed over for training opportunities for the same reasons.

Subtly, women are often overlooked for promotions or raises and may struggle to access mentoring or networking opportunities. Ultimately, recruitment or workplace discrimination can result in women being paid less for the same work as their male counterparts.

5. Variances in occupations

Women and men often work in different industries and occupations with varying levels of pay. Certain fields, like technology and finance, tend to offer higher salaries and are often male dominated. Conversely, senior roles in organizations are predominantly held by men, while women are more likely to be found in lower-paying professions like education or healthcare.

Although these issues are improving, occupational segregation still remains a challenge.

The arguments against the gender pay gap

The gender pay gap is a complex and often misunderstood issue, leading to various misconceptions and discussions about whether the gap is real or fake. These, in turn, give rise to arguments against addressing the gender pay gap. Therefore, it’s important that these myths are debunked so we can gain a more accurate understanding of the topic. Here are some common myths about the gender pay gap:

1. Companies not hiring more women

A common argument against the existence of the gender pay gap is that, if it did exist, companies would surely hire more women to save money on salary payments. The reality is that the gender pay gap is largely manifested through women having to take time off for motherhood or caregiving, not through base salary differences.

It’s also important to note that gender pay gap reporting often only considers certain age ranges, which can provide unreliable data. Hiring more women wouldn’t necessarily save a company money, as if women were taking time away from work, it would require more employees to fill these roles.

2. The gender pay gap is closing

The gender pay gap has been evidenced by numerous reports and a plethora of statistics and data. What makes reporting it challenging is that the gender pay gap fluctuates by country and across demographics and industries.

While legislation is narrowing the gender pay gap, and other factors such as improved training, education and awareness are also helping, the gap still exists. And in many cases, it is still as significant a problem today as it was in the past, partly due to the interrelated nature of the factors causing it.

3. There are no lawsuits

While there have been some famous and notable examples of gender pay gap litigation, like Goldman Sachs’ recent $215 million settlement, situations where the gender pay gap can be proven don’t always progress to lawsuits.

This is partly because people may not always see the value in taking legal action or may fear the impact this might have on their future career. Additionally, litigation can only go so far. While legislation has made progress in addressing pay discrimination, the gender pay gap persists for numerous complex reasons.

4. Women are actively choosing lower-paying jobs

While there is evidence that women are less likely to negotiate higher salaries and are more likely to work in lower-paid industries, it’s incorrect to say that these behaviors are conscious choices. The tendency to avoid negotiation is, as discussed, rooted in cultural norms.

In many cases, women have little choice other than to work in lower-paid jobs due to societal expectations, the need for caregiving or other systemic issues such as educational disparities, historical biases and occupational segregation. These issues mean that women are often directed towards certain jobs from an early age.

5. Women are choosing to leave the workforce

It is true that some women disproportionately leave the workforce or reduce their hours due to caregiving responsibilities, either following maternity leave or at some other point in their career. However, this often happens because of a lack of affordable and accessible childcare options.

In many cases, staying at home or working reduced hours is actually a better financial decision than working full time and paying for care. Therefore, women leaving the workforce is not always a choice — but a necessity.

Is the gender pay gap real?

The gender pay gap is an indisputable, entrenched and pervasive issue that continues to affect women’s earnings in workplaces worldwide. Here, we will delve into the multifaceted facts why the gender pay gap is undeniably real.

1. Data shows persistent wage discrepancies

At the heart of the gender pay gap lies the fact that, on average, women earn less than men. This discrepancy varies but, in general, it’s evident across most industries, occupations and educational levels. Data consistently shows that women’s average earnings are considerably lower than those of their male counterparts.

Research conducted by organizations such as the World Economic Forum and the BLS confirms this stark reality. Despite some evidence of narrowing, the gender pay gap persists even though women are achieving higher levels of education and entering the workforce in larger numbers.

2. Discrepancies highlight the gender pay gap’s presence

As mentioned above, the gender pay gap is not uniform among all women. It intersects with other factors such as race, ethnicity and age, resulting in even greater disparities for specific groups.

Women of color face particular challenges through experiencing both racial- and gender-based pay gaps. Research demonstrates that African American, Latina and Native American women typically earn less than their White counterparts, exacerbating economic inequality within these communities.

3. Gap causes are diverse

The gender pay gap is a multifaceted issue with a multitude of causes. While wage discrimination is a significant factor, it’s not the sole driver of the pay gap. Other factors, such as differences in career choices, negotiation skills and societal expectations also impact the gender pay gap.

While some argue that women may choose lower-paying jobs or prioritize work–life balance differently, these choices are often influenced by societal norms and expectations. Because women are less likely to negotiate their salaries compared to men, this also leads to lower initial earnings and smaller pay raises over time.

4. Impact on lifetime earnings

While some aspects of the gender pay gap can be overlooked in the mass of economic data and reports, variances can become starkly apparent when looking at women’s lifetime earnings, which can be substantially lower compared to those of men.

A study by the National Women’s Law Center in the US estimates that, over a 40-year career, the gender pay gap can lead to a loss of hundreds of thousands of dollars for the average working woman. This, in turn, affects financial security, retirement savings and overall economic wellbeing. This lost income has implications for women’s ability to support themselves and their families, and it ultimately contributes to gender-based economic disparities.

5. It’s a global problem

The gender pay gap is not confined to a single country or region; it is a global phenomenon, albeit with varying degrees of severity in different nations. Even in countries with relatively progressive policies and strong legal frameworks promoting gender equality, disparities in earnings persist.

For example, Nordic countries known for their gender-equal policies still grapple with a gender pay gap. In Finland, women earn around 84 cents for every dollar earned by men. This illustrates that the gender pay gap transcends geographical boundaries and requires multifaceted solutions.

6. Occupational segregation

One of the key drivers of the gender pay gap is occupational segregation, where women and men are concentrated in different professions and industries. Traditionally, women have been overrepresented in fields like education, healthcare and administrative roles, which tend to offer lower salaries compared to male-dominated fields such as technology, engineering and finance.

This occupational segregation is deeply rooted in societal expectations and historical biases. Women have historically been steered toward “female” professions, resulting in limited access to higher-paying jobs. Occupational segregation not only affects women’s earning potential but also reinforces gender stereotypes and inequality.

7. The “motherhood penalty”

Becoming a mother often leads to a measurable reduction in a woman’s earnings. This so-called “motherhood penalty” is a well-documented phenomenon where women experience a decline in their wages after having children. This penalty is due to various factors, including discrimination, taking time off work for maternity leav, and having fewer opportunities for career advancement and promotions.

Research reveals that mothers — particularly those with young children — face discrimination in the workplace. Employers may perceive them as less committed or capable, which can lead to missed opportunities for career growth and salary increases. As a result, women who become mothers often experience a long-term negative impact on their earnings.

8. Far-reaching economic implications

Beyond individuals and households, the gender pay gap has broader economic implications. One study has suggested that if women were earning as much as men in the workplace, the global economy would be as much as $160 trillion wealthier. Another study by McKinsey & Company estimates that closing the gender pay gap could add trillions of dollars to the global GDP by 2025.

Driving economic performance by closing the gender gap would improve women’s financial independence and contribute to reducing poverty rates among women and their families. By ensuring that women are compensated fairly for their work, economies can thrive and become more resilient.

9. There are substantial legal efforts to fix it

While the gender pay gap remains a pressing issue, various countries have implemented legal and policy measures aimed at mitigating wage disparities. Legislation such as the Equal Pay Act in the US and gender pay reporting requirements in the UK are steps toward greater transparency and accountability.

Nevertheless, legal and policy measures alone are insufficient to eliminate the gender pay gap. Comprehensive solutions also entail changing workplace cultures, promoting diversity and inclusion, and challenging norms that perpetuate gender-based wage disparities.

10. Unequal representation in leadership roles

Another glaring illustration of the gender pay gap’s reality is the underrepresentation of women in leadership roles and on corporate boards. Higher-paying positions, such as executive and managerial roles, are often dominated by men.

The glass ceiling effect remains a significant barrier for women aspiring to leadership positions. Research consistently shows that women face obstacles in their career progression, including biases in hiring and promotion decisions.

Why the gender pay gap is a problem

The gender pay gap is a pressing problem with profound social, economic and ethical implications. One of the most apparent ways this is manifested is that it remains one of the last open fronts of inequality in working life. This can reinforce gender stereotypes by suggesting that certain roles or people are more valuable than others — and this can incentivize an unscrupulous employer to discriminate against women in other areas, such as by race or age.

The gender pay gap ultimately harms women’s real-time earnings. When women are consistently paid less than men for similar work, it limits their ability to accumulate wealth, invest and achieve financial security. This inequality affects not only women but also their families. When women earn less than men, it can strain family finances and limit opportunities for children.

Mental health and wellbeing can also be impacted by the gender pay gap. Economic disparities resulting from the gender pay gap can lead to increased stress, anxiety and mental health issues for women. Financial stress can affect overall wellbeing and the quality of life for many people, including those not directly affected by a salary impacted by the pay gap.

Meanwhile, organizations can suffer because of the gender pay gap. When women are underpaid or face barriers to career advancement, they might choose to leave their industry or the workplace in general, moving into caregiving or other roles that might reinforce gender stereotyping. Organizations can, therefore, miss out on the valuable skills and perspectives that women bring to the workforce, hindering innovation and productivity.

These organizational impacts can manifest into larger economic issues. The gender pay gap is not confined to a single country; it is a global issue and, as we’ve discovered, it could be costing economies trillions in untapped potential. Closing the gap could have a substantial positive impact on global economies by increasing women’s economic participation and boosting overall GDP.

Key takeaways

The gender pay gap has far-reaching impacts for women and the wider economy. Though these impacts might vary in different settings, the gender pay gap is very real and presents serious challenges for the economy and especially for the advancement of women.

Here are some key points about the gender pay gap:

  • It is typically measured as what women earn as a percentage of male earnings.
  • It’s a global issue and even affects countries with advanced economies or progressive gender policies.
  • It’s connected to other areas of inequality, with the pay gap disproportionately affecting women from minority backgrounds.
  • The gender pay gap is often presented as being a byproduct of women’s behaviors in and around the workplace, but the truth is that these behaviors are precipitated by the pay gap.
  • The gap doesn’t just affect women, but also impacts their families and the wider economy.

What are your thoughts about the gender pay gap? If you are impacted by this or want to share your experience or opinions regarding the pay gap, or simply want to ask a question about this vital topic, please leave us a comment below.

Originally published on November 29, 2017.