Data in Action: Understanding the Gender Wage Gap

Jan 17 / 2017

For decades we’ve known that a gender wage gap exists, but only very recently, with the help of data science, have we been able to examine the issue from new angles, understand the contributing factors, and explore solutions to minimize or eliminate it. 

When Vancouver-based Visier, a workforce intelligence solutions company, published their latest research study the data revealed a valuable insight. 

The report aggregated the workforce databases of 31 large U.S. companies across a range of sectors including healthcare, technology, finance, retail, and manufacturing, and analyzed data around the salaries and positions of their 165,000 employees. 

“First, we compared how salaries for men and women differ by age. While at all ages women earned less than men, the data showed a clear inflection point, where the gender wage gap widened significantly.”

From the age of 32 onwards, women earn only 90% of the wages of their male counterparts, and that number continues to fall to 82% by the age of 40. This age range of increasing wage disparity directly correlates with the ages in which fewer women hold managerial positions; a finding Visier calls the Manager Divide. 

According to the study, this underrepresentation of women in manager roles is a dominant driver behind the gender wage gap — since managers on average earn double the wages of non-managers. But what’s behind the Manager Divide?

From the vast amount of data, Visier discovered another key correlation: the proportion of women in the workforce by age. Between the ages of 25 and 40, the ratio of women to men in the workforce, not only in manager positions but overall, declines steeply. 

So where do all the women go? The quick answer is they go to raise a family. The report identified the age range in which women earn significantly less than men, leave the workforce at a higher rate than men, and have less representation in manager roles than men, to be the same age range in which women commonly have children. During this time, women receive promotions at the same rate as men; however, they are increasingly underrepresented in the typically higher paid manager positions (positions in which they manage one or more direct report). 

The key takeaway from the report is that parental leave and/or increased childcare demands have a direct impact on earnings. And, with women taking more leave for this reason than men, they are put at a disadvantage. One solution, Visier suggests, is to offer equal paid parental leave to women and men.

Whether Visier’s clients change their policies as a result of these findings remains to be seen, but now, thanks to data scientists, these companies have a clear benchmark with which to compare their own standards and practices. They’ve been given definitive answers to decades-old questions and the knowledge to make data-driven decisions should they so choose.