The Hidden Factor Affecting Your Company’s Financial Performance

Katica Roy
May 9, 2019 · 5 min read

When 72% of women polled in a recent Glassdoor survey said they would not apply to work at a company where a gender pay gap exists, it’s time business leaders pay attention.

Not only are consumers speaking up for change these days, but our labor force is too. It’s likely hurting your company’s financial performance.

What You Need to Know About The Gender Pay Gap in 2019

Women will, on average earn 80 cents for every dollar men earn. The gender pay gap starts early and grows worse throughout a women’s working years — and even into retirement.

Right from the beginning, either with the first job or entry into college, the gender pay gap impacts women in a measurable way. Although women and men pay the same college tuition, women hold two-thirds of all student loan debt in the United States. Women have more difficulty paying down their debt because of the pay gap.

Upon entering the labor force, with or without student debt, women get their first experience with the wage gap. The gap increases in severity as women progress through their working years. Below are the current wage gaps that exist between women and men working full-time, year-round:

  • Women ages 15–24: 88 cents for every dollar their male counterparts are paid.
  • Women ages 45–64: 76 cents for every dollar their male counterparts are paid.
  • Women ages 65 and older: 67 cents for every dollar their male counterparts are paid.

These discrepancies add up. The average 20-cent gap costs a female employee about $10,000 per year in lost earnings. If she works a 40-year career, full-time and year-round, she can expect to lose around $403,440. She could certainly make up for this lifetime wage gap, but she’ll have to work an extra 10 years longer her male colleagues.

The lost wages during a women’s working years translates to trouble during retirement. In fact, women are more likely to live in poverty during retirement because the wage gap stifled their ability to save for retirement. Let’s not forget the average Social Security benefit for women during retirement is $14,044 per year compared to $18,173 for men of the same age.

How The Gender Pay Gap Is Affecting Your Financial Performance

Viewed solely from a financial perspective, a lack of gender equity — on all rungs of the company ladder — is bad news for both businesses and the economy. The McKinsey Global Institute estimates that we are missing out on $12 trillion in annual gross domestic product globally as a result of the gender equity gap. (Remember, the gender equity gap reinforces the gender pay gap.)

But it doesn’t have to be all bad news. Businesses can turn this insight into a profound, $12 trillion opportunity. In my home state of Colorado alone, we can add $9.2 billion to our economy by closing the gender pay gap.

Closing the gender pay gap starts with recognizing the importance of promoting gender equity in all levels and departments of a company. The Peterson Institute for International Economics shows how increasing the numbers of women in C-Suite positions from zero to 30% is associated with a 1% increase in net margin, or a 15% increase in overall profitability, for the average company surveyed. Gender-bias firms are missing out on profitable business opportunities.

From a labor economics perspective, businesses with gender pay gaps are also missing out on top talent. While 72% of women said they would not apply to work for a company with a gender pay gap, a different survey showed that 80% of women would even switch employers if they felt another company offered greater gender equality.

In a time when the US economy is less than one year away from being short 5 million workers (globally that shortage jumps to 40 million), businesses simply cannot afford to maintain their gender pay gaps.

Ignite Your Business’s Economic Potential and Improve Your Financial Performance

Closing the gender pay gap (as well as the gender equity gap — there’s a difference) is no longer optional for businesses. It’s essential for their financial performance. Now is the time to make practical decisions to close your company’s gender pay gap. Start by asking yourself these three questions.

1. Do We Have a Pay Gap?

You need to determine whether or not you have a pay gap. Compile all your company’s data on compensation, performance, and potential. Analyze and review the data. Remember, you can’t close the pay gap by starting with pay. Be mindful of unconscious bias that might exist so you get an accurate picture of your company’s current gender equity status as it relates to pay.

2. How Can We Close the Gap?

Once you’re equipped with the data, you need to begin executing the right decisions. Look at the facts and implement steps where needed. A good place to start is by organizing your data around the five pillars of talent: hiring, pay, performance, potential, and promotion. Pay is just one of five pillars. You must take a holistic view of your company. Consider, for example, the rates of promotion amongst male and female employees. Are men and women being promoted equitably both within and among departments? Perhaps you need to increase the number of women in leadership positions or introduce policies to retain female talent.

Be smart. Leverage advanced technologies, such as AI and cloud computing, to analyze and recommend the right decisions for your company. Platforms such as Pipeline already exist for this reason.

3. How Do We Keep It Closed?

Closing the gender pay gap is only part of the process. Without an ongoing solution to address their gender pay gaps, companies will inevitably (and oftentimes unknowingly) reopen their gender pay gaps. Salesforce refers to the gender pay gap as a moving target. You can spend months analyzing and closing the gender pay gap, but the very next day a decision could be made that engenders the very gap you sought to close.

Continually monitor your data and take steps to keep the gap closed. Regularly review your company’s progress toward gender equity to ensure you’re making the right decisions according to your gender equity goals.

Closing the pay gap results in measurable economic benefits for every company. What are you doing about it?

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Katica Roy

Written by

CEO of Pipeline Equity | Gender Economist | Award-Winning Leader | On a mission to achieve gender equity, once and for all.

AppExchange and the Salesforce Ecosystem

Brought to you by Salesforce AppExchange, learn customer and business success insights - straight from leaders in the Salesforce ecosystem.

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