Why the Gender Pay Gap Persists – and How to Really End It

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By Sheelah Kolhatkar

Embedded in a new research paper (PDF) by Harvard economist Claudia Goldin is a valuable piece of news for anyone who is frustrated by the stubborn persistence of the gap in earnings between women and men. It has long been held that women earn only $0.77 for ever dollar that men do, in large part because of discrimination. But, Goldin argues, most of the difference comes down to factors that have nothing to do with sexism: The number of hours a person works and the degree of job flexibility.

This means that companies offering true, stigma-free flexibility and linear compensation-meaning the same pay per hour worked, regardless of when it is worked-have the lowest gaps in pay between men and women-and, in many cases, more women employees overall.

All that’s left is for corporate America to do something about it.

“The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours,” Goldin writes in “A Grand Gender Convergence: Its Last Chapter.” “Such change has taken off in various sectors, such as technology, science, and health, but is less apparent in the corporate, financial, and legal worlds.”

The last 100 years have seen huge shifts in the numbers of women and men in the workplace, the number of hours they work, the majors they pursue in college and the number of college degrees they obtain. In general, all those things have converged for the genders. The amount they are paid has converged as well, with the ratio of what women earn to what men earn increasing from a little more than half in 1980, according to Goldin, to nearly three-quarters in 2000. Today it sits at 77 percent. Notably, it has moved little in the last decade.

Part of the gap, Goldin says, can be explained by differences in education and experience, but the residual, unexplained portion remains and is often attributed to outright discrimination. Goldin suggests that it’s really about flexibility, which is much easier to address. This explains why the gap gets bigger as workers age, as women are severely penalized in terms of earnings and advancement for taking time off when they have children; even short breaks come at huge cost. Individual men are penalized, too, though fewer have traditionally taken significant time off for parenting.

It won’t come as a shock to learn that Goldin singles out law and finance as two of the most rigid-and consequently, worst-offending-fields. She finds (PDF) that the earnings of MBA students are almost the same right out of business school; 16 years later, the women are making 55 percent of what the men earn. Two-thirds of the penalty comes from taking any time out at all.

In law, the trend is similar, exacerbated by the fact that lawyers who work more hours tend to bill higher hourly fees, showing how intertwined the idea of long hours is with value in the legal profession. In pharmacies, by contrast, compensation is completely different and is generally the same, regardless of number of hours logged. Women now represent 55 percent of all pharmacists and 65 percent of new entrants in the field.

The solution, Goldin posits, is for companies and industries to embrace true flexibility, let go of outdated notions of face time, and focus more on results, rather than precisely where or when the work was done.

As Bloomberg Businessweek has shown, men are increasingly the ones demanding more flexibility and balance in their lives. A Pew study last year found that 50 percent of working fathers found it difficult to balance their family demands, compared with 56 percent of working mothers. This is something that Ernst & Young sensed was happening after they studied the issue several years back. The firm conducted a study of younger workers and found that flexibility was their most important “non-cash” priority, then went about designing its benefit programs accordingly. The firm offers paid parental leave to both men and women, full benefits to employees working part-time schedules, and generally encourages a culture of accommodation.

As a result, the gap between men and women leaving Ernst & Young has disappeared, and the number of female partners has gone from 3 percent to 20 percent. “It’s been a competitive advantage for us,” says Karyn Twaronite, an Ernst & Young partner and the firm’s Americas Inclusiveness Officer. “More of our programs are more about fixing the environment, rather than fixing the women — flexibility for all, women and men,” she says. “Everyone who works here wants meaningful personal lives and professional lives. Whether you’re a working parent, it’s still incredibly important.”

Sheelah Kolhatkar is a features editor and national correspondent for Bloomberg Businessweek. Follow her on Twitter @Sheelahk.

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