Preventing the Female Talent Drain: What Leaders Should Do to Achieve Pay Parity

by Pranav Ramesh
January 14, 2021
How leaders can ensure equal pay for employees

Introduction

The US workforce is facing a serious problem with a mass exodus of its female employees. This poses a major setback for businesses across the nation as women make up about half of our human resources. The sudden drain of talent will not only reverse the progress female employees have made over the last decade but will also deprive employers of some of their most promising employees and cause businesses across the nation to lose out financially.

McKinsey and company point out that organizations perform better under diverse and inclusive leadership by promoting a sense of belonging in the employees. Companies that support gender diversity are more likely to get higher annual returns than their peers due to improved employee engagement, which facilitates innovation and efficient problem-solving. Additionally, unbiased HR policies and gender-neutral team cultures have proven to retain talent by boosting employee morale and satisfaction.

In 2020, the United Nations observed September 18th as the International Equal Pay Day for the very first time. But in the same month, it was noted that hundreds of thousands of women either dropped out of the workforce or were laid off in the aftermath of the COVID-19 crisis.

According to Stefania Albanesi, an economics professor at the University of Pittsburgh, though the nation’s unemployment rate dropped to 7.9% in September—an improvement compared to the 15% in April—a significant share of this drop was due to people exiting the job markets altogether, as opposed to economic growth.

Of the employees who dropped out, the majority of them were women. About 800,000 women aged 20 and above quit their jobs (including 58,000 African American women and 324,000 Latinas) as opposed to the 216,000 men who did the same.

Why would women willingly opt-out of their jobs amidst the largest economic crisis of the century? The answer is unfortunately simple; the pay is not worth it. Women have been earning less than men ever since they joined the workforce, with the current global gender pay gap estimated at 23%.

Throughout 2020, we came across numerous studies that point out how women are overworked and underpaid as they try to juggle households and full-time jobs. Many working mothers are considering downshifting or resigning because they are not supported or compensated enough for the effort they put in.

Businesses need to address this head-on. Here’s what leaders need to know and do to correct the persistent gender gap that is robbing businesses of talent, growth, and employee engagement:

The Existing Gender Pay Gap: The Figures to Take Note Of

Women who work full-time in the US only earn about 82 cents to every dollar earned by a male co-worker. Globally, women make only 77 cents to every dollar paid to a man. For women of color, working mothers, single mothers, and immigrant women, the gap is even bigger.

Though women are on par, and in many cases, surpass men in higher education, the gender pay gap affects them throughout their lives:

  • Since they are paid less, they have a harder time repaying student loans.
  • Due to lower lifetime earnings, women receive less in pensions and social security.
  • Their retirement income will only be 70% of what their male counterparts will have.

Given these stark disparities, if we calculate a woman’s income over a 40-year tenure, keeping in mind the presumptive raises, they lose about $900,000 on average in a lifetime.

The Effect of COVID-19: The Escalated Pay Gap

To further exacerbate these discrepancies, the pandemic has pushed millions towards extreme financial hardship. 96 million people could experience poverty in 2021 alone, which would mean, the number of girls and women surviving on $1.90 per day will escalate to