How employers can mitigate a future retirement gap
Through the past decade we’ve seen the slowest progress on closing the gender pay gap in almost half a century. While there have been a variety of companies announcing commitments to equal pay and employee motivations for equal pay have increased, progress has stalled.
As we’ve seen more recently, the gender pay gap does not only affect those currently working. Wealth disparities often extend beyond working time into retirement. In fact, a recent study found that older women receive only about 80% of the retirement income older men receive. This 20% disparity nearly perfectly mimics the current gender pay gap, a sign that the gap is not only a financial problem for working women, but for women in their third act of life as well. On average, women live about six to eight years longer than men, so this retirement income discrepancy can significantly impact their quality of life and ability to pay for healthcare needs in their final years.
So what can employers do now to help equalize pay for all and mitigate this retirement income disparity for future generations?
In the midst of the COVID-19 pandemic, gender pay gap may not seem like the highest priority for businesses, and some countries are even rolling back gender pay gap reporting requirements. However, the gravity of this issue has not been lost on consumers. In fact, when asked what they think companies should prioritize most during the COVID-19 pandemic (as it relates to total compensation), nearly one in four (23%) Americans said equal pay. This unprecedented and swift change in the world provides a rare moment in time where businesses can pause and evaluate how to make a real impact on the future of the gender pay gap.
Let’s discuss three ways that businesses can implement solutions to create pay equity for generations to come.
Provide a requisite for caregivers: More than 75% of caregivers are female, and women may spend as much as 50% more time providing care than males. This can take a toll on their earnings through their careers and into retirement. Due to a lack of flexibility in many positions, caregivers are often forced to choose between their caregiving duties and work. We’ve seen through the current pandemic that remote work and flexibility is a real long-term possibility for many more companies than previously believed. Businesses should lead by example to create a workplace that provides equal opportunity for those in caregiving roles, by creating more flexible policies for the future during this time of extreme workplace change. For example, increased sick and personal leave policies and flexible work arrangements can make it possible for women not to have to choose between working and their caregiving responsibilities.
Evaluate financial inequalities: On average, women earn about $900,000 less than men through their careers. This means they either need to continue working through to a much older age to catch up or live on lower retirement income. The answer to keeping this trend from becoming a continued problem for generations to come is to equalize pay now. Through the pandemic, and even as states and countries begin to reopen, companies have had to take a step back from usual activity and focus on how to survive as a business through the pandemic and beyond. This pause in normal business activities provides companies the time to reevaluate their own compensation practices, using data that likely already exists to understand where bias might occur. Without understanding where in the chain of hiring, promotions, or benefits, there is inequality, it’s nearly impossible to fix it.
Promote pay transparency: Transparency around compensation is key in closing the gender pay gap, and thus the retirement income gap for the future, as it creates accountability for employers and trust with employees. It also provides a culture of honesty, allowing senior leaders to set a positive tone for the compensation conversation and reducing potential misinformation between employees. Practicing pay transparency is critical to future recruitment and retention as well, as Gen Zs (70%) and Millennials (60%), who make up the majority of the current workforce, would be more willing to work at a company that discloses its gender pay gap figure each year. For companies that do not feel prepared to disclose their gender pay gap figure, there are other ways to provide pay transparency. For example, employers can share a formula for how employees’ total compensation is calculated (including salary, bonuses, non-cash rewards, etc.).
While we are all immersed in this time of uncertainty, we cannot forget to look forward and act to implement solutions that can improve pay equity now for an equal future.