Gender pay gap expected to persist for 25 more years, study finds

Despite years of efforts to close the gender pay gap, women continue to earn 15% on average less than men and aren’t expected to achieve equal pay for another quarter century. This disparity adds up to millions of dollars of lost financial benefits for women, according to an analysis by advisory firm Josh Bersin Company, which examined real-world pay policies at 113 U.S. organizations.

Female managers fare somewhat better than non-managers, with a pay gap of about 10%, the study found. This group will still need about 15 years to close the pay gap.

Counter to a prevailing theory that the gender salary imbalance is closely tied to organizations hiring more women for traditionally ‘female roles’ that are historically lower paid, the study found that women earn about 10% less than their male counterparts for the exact same roles, and the disparity persists through managerial and executive level positions.

There is good news, however. The gender pay gap has narrowed from 18% to 15% over the past six years, although there has been no new progress since 2020. For managers, the gap has decreased 4 percentage points over the past six years, with progress varying from year to year. 

Possible reasons for a temporary increase in the pay gap for women in 2021 include the different employment opportunities women had to take during the pandemic. Specifically, many mothers of young children had to decrease their hours to part-time work or even stop working to accommodate childcare responsibilities, the report said. 

The report suggests that progress may be accelerated by the European Union’s forthcoming pay transparency legislation, expected in 2026, which would mandate that all EU companies and companies doing business within the EU record and share salary information and take corrective action for gender pay gaps exceeding 5%. The law includes compensation for victims of pay discrimination and imposes fines on employers who violate the rules. 

The report also pointed to bottom-line benefits organizations who address gender pay gaps experience, including substantial improvements in market performance, customer satisfaction, employee experience and innovation. Most importantly, pay equity is 13 times more important for employee retention and satisfaction than pay level alone, the company said.

 “Only 5% of companies currently excel at pay equity, with most still working to meet legal and compliance standards. This gap presents a significant opportunity to foster a more equitable environment, drive innovation, and achieve superior business results,” said Josh Bersin, global industry analyst and CEO of The Josh Bersin Company. “However, if progress doesn’t accelerate, can we as a society afford to wait until 2048 to close the pay equity gap? Particularly given that the number of college-educated women in the workforce has now surpassed that of their male counterparts, such a delay would represent a substantial missed opportunity for the U.S. economy.”

Related: Gender pay gap persists, especially for women in STEM professions

As companies work to close the gender pay gap and address pay equity as an opportunity rather than a liability, they can take the following key steps:

• Understand how pay equity aligns with other organizational and HR priorities.
• Listen to employees, leaders and HR to analyze sentiments about equity and perceived issues of bias and unfairness.
• Elevate the pay equity conversation beyond legal or compliance to encompass overall equity in the organization and why it matters.
• Determine what specific behaviors need to change for equity initiatives to succeed and identify the required mindset shifts.