Unless you’ve been living off-the-grid in recent months, you’ve probably heard a lot about the gender pay gap.
The topic has dominated headlines from the New York Times, to Fortune, to Freakonomics, to the Atlantic, to the Wall Street Journal-and was a point of discussion at the World Economic Forum in Davos. Even Hollywood stars are shining the spotlight on the fact that male and female actors often are not paid equally for appearing in the same film. And in January, President Obama proposed new rules aimed at closing the gender pay gap.
And yet, despite all this attention being paid to the issue, the facts remain discouraging:
Closing the gender gap is clearly the right thing to do, and would greatly benefit not only women, but businesses themselves, and indeed the entire economy. Yet many business leaders have been slow to take meaningful steps to fix the problem.
For those in the business community who are either too stubborn or too unaware to accept that pay equity is a serious issue, here are four reasons, tongue firmly in cheek, why they shouldn’t support pay equity:
In a competitive business environment, fair pay policies can help attract and retain the best workers. There is substantial evidence that good HR policies, such as pay equity and parental leave, make for happier employees-and happier employees make for more productive workforces and more successful companies. On the flip side, companies that do a poor job of retaining and motivating their employees can be at a distinct competitive disadvantage.
Pay equity can be a key driver of greater gender diversity in corporate leadership,4 and numerous studies show that improved gender diversity in corporate leadership can lead to better long-term financial performance. Closing the pay gap is one piece of the larger pie when it comes to closing the overall gender diversity gap in the workforce. And companies that are best able to take advantage of the entire workforce, not just the male half, are better positioned to succeed.
Gender pay inequality is a material risk to companies because businesses that discriminate against any class of employees face increased regulatory, litigation and reputational risk. In the United States alone there were 1,880 wage enforcement/litigation actions related to gender from 2010-2014.5 While most settlements may not be large, the time and expense involved in
defending such lawsuits can be substantial. What’s one thing companies can do to avoid gender discrimination lawsuits? Pay their employees fairly.
Women’s wages aren’t the only thing that would grow by closing the pay gap. Studies suggest a significant boost to gross domestic product (GDP) growth would be associated with equal
employment opportunities and pay equity for women.6 In fact, Goldman Sachs economist Kevin Day calculated that eliminating the remaining gap between male and female employment would lift GDP in the U.S. by 9%.7
The reality is that pay equity is complicated and there are many factors that contribute to the gender pay gap, including occupation selection, experience and hours worked; however, discrimination and unfair pay practices still play too large a role.
Simply raising awareness about this issue is not enough. Companies need to take action to fix the problem, from conducting internal pay assessments, to examining pay ratios by gender, to making such data public, and taking other proactive steps to close whatever inequities may exist (See Salesforce and GoDaddy for examples of this proactive approach).8
We have a lot of work to do to right this wrong, and in my view, businesses need to lead the way in finding solutions. That’s why Pax Ellevate submitted a letter to the SEC urging the agency to either require companies to disclose pay equity data, or to issue guidance for the voluntary disclosure of such information. Because the fact of the matter is this: the sooner men and women are paid equally for equal work, the sooner businesses and society as a whole can enjoy the economic benefits of engaging the talents of our entire workforce, not just one half.
1 National Women’s Law Center, FAQ About the Wage Gap, September, 2015.
2 Allison Maloney, “What have we learned about the gender gap after a decade of study?,” The New York Times, November 18, 2015.
3 Lisa Quast, “The Gender Pay Gap Issue Is Fixable – But May Require Bolder Actions To Overcome,” November 22, 2015.
4 Mercer, “When Women Thrive Businesses Thrive,” 2015.
5 U.S. Equal Employment Opportunity Commission, Enforcement & Litigation Statistics, Based by Issue 2010-2014.
6 Joanna Barsh and Lareina Yee, “Unlocking the full potential of women in the US economy,” McKinsey & Company, April, 2011.
7 Kevin Daly, Global Economics Paper No: 154, “Gender Inequality, Growth and Global Ageing,” Goldman Sachs, April 3, 2007.
8 As of 12/31/15, Salesforce was 1.4% of holdings of the Pax World Growth Fund. GoDaddy was not held by any Pax World Funds. Holdings are subject to change.
Pax World Management LLC
Pax World Management LLC, investment adviser to Pax World Funds and creator of the Pax Global Women’s Leadership Index,* is a pioneer in the field of sustainable investing. Pax World integrates environmental, social and governance (ESG) research into its investment process to better manage risk and deliver competitive long-term investment performance. Across all of its funds, Pax World withholds support from all-male corporate board slates, and working with other institutional investors, actively engages with companies to embrace gender diversity on their boards and advance women in the workplace. For over 45 years, Pax World has made it possible for investors to align their investments with their values and have a positive social and environmental impact. Today, its platform of sustainable investing solutions includes a family of mutual funds, as well as separately managed accounts.
* A custom index calculated by MSCI. One cannot invest directly in an index.