The headlines are consistent: The gender pay gap has narrowed, but American women who work full time still make only 84 cents for every dollar men do. That’s certainly better than at the turn of the century—when it was 77 cents—but far short of parity.
So, is this proof of continuing workplace discrimination? Not so much, says new research from the McKinsey Global Institute (MGI). The pay gap figure is a snapshot of a moment. The MGI research is more like a time-lapse video. Using a data set of 86,000 online work histories, MGI analyzed individual career decisions over time, allowing it to gain insight into how people navigate their careers. The research found that the great majority—some 80%—of the total pay gap between male and female earners in part-time and full-time roles was attributable to the differences in the way men and women pursue their career paths
There could be many motivations behind what MGI calls the “work-experience gap,” and these are exceedingly difficult to discern from the data. But the point is that the differences exist, and they matter. Looking at the mean annual wages in the data set—which is overweighted with white-collar, higher-paid professionals who are of particular interest to talent-scouting employers—we estimate that over a 30-year career, the gap adds up to about $500,000 per woman.
One third of the work-experience pay gap is due to women working fewer hours than men, because they are more likely to be in part-time roles. Women are also more likely to take breaks between jobs, and they stay out longer each time. Combined, this results in women gaining an average 8.6 years of work experience for every 10 gained by men.
The other two-thirds can be traced to career dynamics. This starts early: Just over half of all men in the sample entered the workforce in top-pay quintile occupations, compared with 35% of women. And then the pattern continues. Women are more likely to switch to lower-paying occupations and roles during their careers.
Even among men and women who start off in the same occupation, women were 1.5 times less likely to move into top-paying occupations. For example, among those who started as brokers, women were apt to move into roles like credit counselors, and men into highly competitive—and better-paid—roles like fund management. In nursing, a woman-dominated profession, the patterns are similar, with 41% of men advancing to higher-paying occupations, such as medical and health services managers, compared to 20% of women.
In short, the data found that women consistently make trade-offs, choosing roles with more flexibility and less competition but also lower pay. Not all women, of course, or all the time, but often enough to make a difference.
Given tight labor markets and a future in which there could be fewer people entering the workforce at all, talent is at a premium. Business leaders, then, might want to think about how they can reduce the work-experience pay gap in their own companies, so that they can they keep women working more and advancing more reliably.
One set of employers seems to excel at doing just that. These “Performance and People (P&P) Winners,” who comprise about 10% of companies studied, not only facilitate career pathways for women that lead to smaller pay gaps, but also deliver top-tier financial performance and have lower attrition. They achieve this by creating skill-building opportunities for all employees through internal job rotations and training. They cultivate mobility opportunities and offer skill-building and apprenticeship programs, especially for midcareer talent. All this has been shown to increase employee satisfaction and retention. P&P winners also foster a performance-oriented culture with clear expectations that rewards employees for entrepreneurialism while coaching and supporting them. And not only is the pay gap smaller, but pay itself is higher for both men and women who passed through P&P employers at some point in their careers, even after adjusting for industry.
The gender pay gap is real. But it exists largely as the outcome of decisions of millions of individuals, who trade off the financial and non-financial attributes of work against other considerations. Understanding these choices is a vital step toward determining what to do.
For employers, it can also be an opportunity to craft a talent-management culture that works for everyone. Individuals make their own choices, but employers can do more to adapt to them, and to position themselves for the future.
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