113: Gender Pay Gap Report: Facts revealed

[00:00:00] Join us on a journey where we unravel the latest trends, tackle your burning questions and explore innovative strategies that are shaping the future of compensation, all with a coffee in hand. Hello everybody and welcome to another episode of Comp and Coffee where we serve up fresh insights on all things compensation, HR and rewards.

[00:00:23] I'm your host Ruth Thomas and today we're diving into key findings from Payscale's 2025 Gender Pay Gap Report. And joining me today is Amy, welcome back to the podcast. Do you want to give a quick intro to who you are to the audience in case they don't remember you from prior episodes? Absolutely, yes. So as Ruth mentioned my name is Amy Stewart. I am the Principal Content Strategist here at Payscale for our Research and Insights team.

[00:00:52] I'm also the author of the Gender Pay Gap Report in terms of just the writing part of it. So I'm very excited to talk about the findings in that report and also talk about how pay transparency is impacting the gender pay gap, at least in the USA. Great, thank you. So if you listen to our episodes in order, in the last episode that you will hear, episode 111 I think,

[00:01:14] I talked about the fact that we released our Gender Pay Gap Report on March 24th this year, which is the same day as US, was the same day as US Equal Pay Day. And what's interesting about our report is the fact that we have over a long period been measuring both the controlled and the uncontrolled pay gaps based on our compensation data. And Amy's going to talk to you a little bit more about what that data is.

[00:01:41] Now, just for those who may not be familiar with the terms, uncontrolled pay gap is also known as the unadjusted pay gap, sometimes also known as the opportunity gap. So that is the average pay gap of whatever group you're looking at. And that's what we often see quoted in the press as the gender pay gap. So in our report this year, that was showing that women earn just 83 cents on the dollar compared to every dollar a man makes,

[00:02:10] highlighting kind of the persistent barriers that women face, particularly in access to higher paying roles. The other pay gap that we, which we are able to monitor is the controlled pay gap. This is also known as the adjusted pay gap, also known as the equal pay gap. So this is where you are looking at individuals who are in like work or similar work or, or maybe in the same job and have the same knowledge, skills and experience.

[00:02:37] And there you're doing a much closer comparison where you would expect those people to be paid the same. In our data this year hadn't changed from last year. We saw obviously that gap is a lot narrower than the uncontrolled pay gap. It was 99 cents women earn for every dollar a man makes, accounting for job title experience and location in our research. So those were the two key headline figures this year.

[00:03:03] Now, Amy, do you want to talk some more about what makes our gender pay gap report unique? Absolutely. Yes. Pay scale methodology is really interesting. To determine the pay gap, we use our employee reported data set, at least for now, and a proprietary compensation model to estimate pay based on all the compensable factors we gather for an individual. So, for example, we can take a nurse.

[00:03:29] A principal factor for a nurse might be whether they work in a school or a pharmacy or a hospital, number of beds in that location. Whereas for a sales worker, it might be how the size of their sales territory, whether they manage one branch or many, the size of the region or which region it is. And for other occupations, we need to know the type of security clearance that they have or whether it is still active. So that list can get considerable and we are, and it's based on a lot of detailed questions that we ask in our online salary survey.

[00:03:59] We then use all of that data in aggregate to provide an estimate. The pay is affected by all of the unique compensable factors for that job. Most often, and in the case that we're looking at, we're looking at job title, we're looking at location, years of experience and education. Then we evaluate men and women's actual pay to the model based estimate to find the difference. The pay estimate acts as a controlled baseline for pay regardless of gender, where all other compensable factors are controlled for. That's the controlled gap.

[00:04:28] When we take the difference, we consistently find that men earn more relative to the modeled baseline that women do on average. This average percent difference is the controlled gap. It is presented as cents on the dollar, which you just mentioned, Ruth, is 83 cents in 2025. This is not just true holistically, but also over time.

[00:04:52] Until very recently, when I've been doing this report, we saw this pay gap between men and women in every industry, every occupation and every level of education. We saw the pay gap widen for women with color and as women ascended the career ladder. In recent years, very, very recently, we have started to see the pay gap close somewhat in some industries, occupations and location only when data are controlled. We'll talk a little bit about what may be influencing that.

[00:05:21] However, we've also seen the pay gap stagnant and widen in some areas. There are just kind of conflicting things happening when it comes to equality in pay between men and women. Now, what did we see in the report this year that was different from last year? Were there any new findings this year that kind of stood out in terms of the data that we saw? Yes. Every year we hope to say that the pay gap has closed, but that was not the case in 2025.

[00:05:48] So this year, Equal Pay Day falls on March 25th, 2025. We released the report one day early on the 24th in honor of Equal Pay Day. Equal Pay Day is calculated not by pay scale as calculated this year by the American Association of University Women, the AAUW. We published our report to correspond with the national recognition, even if our data set shows something different.

[00:06:14] This year, Equal Pay Day is later than it was in previous years, which has showed that the gender pay gap has widened according to these other studies. Some reports have seen this widening since 2023. Our reporting hasn't shown a widening of the pay gap, but it has shown that the pay gap has stagnated over the same period. We also do see widening of the pay gap in some segments of our data.

[00:06:39] Some fluctuation is normal, but we don't like seeing the pay gap widen, especially for women of color, which it did this year. This year, American Indian women experienced the widest pay gap when data is uncontrolled, and Pacific Islander women experienced the widest pay gap when data are controlled. Between 2024 and 2025, we have seen the uncontrolled pay gap widen for Asian women, Black women, Hispanic women, and white women. We've also seen the gender pay gap widen in some industries with the largest widening of the pay gap seen in construction.

[00:07:09] We also calculated the bank gap for parents by remote work status, by job seeking status, all of which show that women are more disadvantaged when it comes to men in terms of how they are paid. Yeah, so I mean, the best way to take a deeper dive into this is to get access to the report, which you can do through payscale.com through our research center.

[00:07:29] But you can find the way that we slice and dice the data in many ways just to try and look at how different groups of people are impacted and also the different causes of the gender pay gap. So you've just alluded to some of those there. So has the pay gap closed anywhere, Amy? I mean, we know we've got all this pay transparency legislation going on. Is that having an effect? Were we able to see that in the data this year? Yeah, so I think that there is a really exciting trend happening with pay transparency legislation.

[00:07:57] There is evidence that pay transparency does close pay gaps, and that is why this legislation has been passed in so many states. But the impact is difficult to ascertain because it takes time for the legislation to have an impact on the actual populace and how people are paid. But it may be having an effect. So over the last few years, we have seen the pay gap close completely, at least when data is controlled, for some locations where there are pay transparency laws.

[00:08:25] Six of 10 states, including Washington, D.C., which is not a state but is a location that we look at, have had pay transparency laws prior to 2025, and they have closed the pay gap when data are controlled. This includes California, New York, Rhode Island, Connecticut, Maryland, and Washington, D.C. But we have to note some states with pay transparency laws have not closed their pay gaps.

[00:08:50] In addition, there are also states that have closed gaps that don't have pay transparency laws. So it's not a clear one-to-one in the sense of a state passes a law and then two years later the pay gap closes. We are seeing fluctuations year over year. Washington State and Colorado have pay transparency laws, and they closed their gaps last year but not this year. So, again, some fluctuation is normal, and we are hopeful that this trend is evidence that pay transparency laws are working.

[00:09:20] It's going to take time for us to see that that is a consistent trend. It is interesting to look at the context of the pay gap widening by some reports, which we do see in some segments. So as we just talked about, we didn't look at this, but I did look at a similar report from JobSeeker that shows that pay is more equal in the West and Midwest and less equal in the Northeast and South. Maybe that's something we will look at in a future report to see if we can corroborate those findings.

[00:09:48] We also note that more liberal states have passed or are considering pay transparency legislation than conservative ones. So in 2025, 14 states and Washington, D.C. have active pay transparency laws, including Nevada, which is a conservative state, and another 10 are pending, which include Alaska, Florida, Georgia, Kentucky, Missouri, South Dakota, and West Virginia, all of which are conservative states.

[00:10:13] However, a bill in Montana failed, and no conservative state has passed pay transparency legislation yet. It's important to note that pay transparency could be closing pay gaps even in states without pay transparency laws because a lot of organizations employ people in multiple states. So if they have to advertise job ranges in California, they might go ahead and also do that in all of the other states where they have employees.

[00:10:40] So in addition, employees and job seekers are clamoring for pay transparency. They are asking about pay ranges more, and we've also seen that reflected in our compensation best practices report. So although some states may be waffling on this legislation or striking it down to support corporate interests like what we think happened in Montana and Virginia, we have not seen pushback from the public against the concept of fair and transparent pay. It does seem like that is something most workers want.

[00:11:10] And why do you think we would see resistance in pay transparency, like implementing pay transparency in order to close pay gaps? It seems like the right thing to do. So why would some states not want to do that? Yeah, when it comes to pay transparency legislation, the resistance we think is in the effort required of organizations to come in compliance with those laws. So most organizations don't strive to pay employees unfairly.

[00:11:37] They're not actively trying to disadvantage their workers, but proving that pay is equitable and fair takes effort. It requires that organizations have a compensation strategy. They have identified the compensable factors that impact pay for all of their jobs. They have a job architecture that they include critical information in their job descriptions to price jobs correctly.

[00:11:58] And that requires that they have processes for communicating their pay and answering manager and employee questions about it all the way to the top of the organization. So that is a mammoth effort for some organizations that may not have any of those processes in place and may not have the resources to build those processes. And for those that have just started using market pricing, there's a lot that they have to do before they can start publishing ranges confidently in job ads. And they may not know where to start.

[00:12:28] So for larger organizations, there is an administrative burden associated with pay transparency. And they may also not want to give up some of the power that they retain by keeping that pay process opaque. So this leads to lobbying against legislation that would be forcing them to comply with those laws. So the final reason is their legal concerns. A lot of organizations want to pay people fairly. They're not trying to pay women less than men. And that's true for all protected classes.

[00:12:55] But they are afraid to do the pay equity analysis because they don't know what they're going to find. And once they do the analysis and have that information, they are then obligated to do something about it. And so they want to make sure that they have all those ducks in a row before they take on that work. So pay transparency legislation requires them to do a lot of things they may not be ready to do. And for that reason, they may be hesitant to make that a law in their state. Yeah.

[00:13:20] And it's a good call out, Amy, because it's something we've obviously been working with our customers, with our clients over the period of time that this legislation has been emerging. And we can see what they've been doing as it plays out in the trend data that we look at in our compensation best practice report as well. So as you say, we know there's been a huge amount of effort for organizations to try and mature their compensation processes

[00:13:48] to make sure that they're able to, at the very basic, understand what a pay range should be to put on a job posting. But the next very critical stage, as you say, in that is the relativity of that to how everybody else is paid within the organization, because otherwise you're going to end up with employees who are going to be unhappy because they don't feel that their pay is evenly matched against, for example, that public pay range that you're posting potentially in a job advert.

[00:14:17] So, yeah, I do think, you know, a lot of organizations have done that work. You know, when we talk to organizations and when we interact with them on the webinars that I do with Lulisite-Clee, our employment council, so we do pay legislation updates quarterly, listening to what we hear through the polls, listening to what we hear through the questions about what their challenges are. Yeah. 2025 is really the year of pay communication, and that's the part of the journey they've got to.

[00:14:45] So, a lot of them we know have done the hard work in terms of building pay ranges and making sure that people are, you know, they've remedied internal pay inequity. And now they're trying to train people to be able to talk about pay. So, hopefully, you know, we will see this journey continue. But let's get back to the gender pay gap. One of the things we dive into in the report, and we're very lucky to be able to do that with the data that we have,

[00:15:11] is start to think about what are some of the causes of the gender pay gap, and we can evidence that. So, talk me through some of the stuff that we saw in the gender pay gap research in terms of what's driving these pay gaps. Yeah. So, I think understanding the causes of the gender pay gap, it helps to look at the history of where we were and where we are now. And to the point that you just made, a lot of organizations are just starting to get to the point where they are confident enough to publish those pay ranges.

[00:15:38] And a lot of that was because of the great resignation and the economy that we had during that time, which created this impetus to improve pay communications and to improve pay equity because a lot of organizations were bleeding talent over the perception of unfair pay. So, you have to really go back and look at everything that has led to that moment. So, you know, historically, women were not able to work.

[00:16:03] And when they were, the work that they were doing was relegated to service jobs, childcare, nursing, jobs that served the community. And those jobs pay less. In the United States, during World War II, women took on the job on the jobs that men had. And they found that they enjoyed that work and they were good at it. But they were paid half of what men were paid at that time in the 1940s. When the men came home, the women were dismissed from those jobs. And civil rights followed in the March on Washington for Jobs and Freedom, which included the demand for equal pay.

[00:16:32] Equal Pay Act was passed in 1963. And civil rights followed it in 1964. But that didn't automatically change centuries of bias and discrimination. That fight is still ongoing. So, while the gender pay gap has been slowly closing year over year to align with our values as a nation, our research shows that women are still being paid less than men, even if just a little bit less. And they're occupying lower paying jobs. And they are sometimes paid less in the same job, doing the same work, despite that being illegal.

[00:17:03] Yeah, it's really interesting because we talk about all the time about systemic issues driving this. And then we're like, well, what are those systemic issues? And actually, I find it fascinating. It's definitely a pet topic of mine. It's like the social economic history of how we got to where we are and how even how the whole construct of work has become what it is. And I did a bit of research going back further than the period that you talked about there, like around World War II,

[00:17:32] even back to pre-industrial revolution, where you see the concept of that in an agricultural based economies, that everybody was equal and everybody worked together as families in the fields. And then as industrialization started to happen, we started to see everybody go and work in factories or like use machinery. Then it got to the point that it was too dangerous to have children in the factories.

[00:17:57] And so the women left the factories with the children to care for them and the men were left working in the factories. And you kind of carry on from there. So it's a really I find it fascinating in terms of understanding how we got to the place that we are today and how that impacts pay gaps. Because people often kind of just really wonder, like, what is it that's systemic here? I don't understand that what is systemic.

[00:18:22] Now, one thing that we know is a big driver of the pay gap is related to motherhood. And that is often known as the motherhood penalty. So for those who may not be familiar with that term, do you want to explain what that means and how we saw that show up in our study?

[00:18:39] Yeah. So the largest contributor to the gender pay gap is this expectation that women are destined to be mothers and will leave the workforce at some point to raise children or be less dedicated to their jobs, despite men also being parents. According to our report, women earn just 75 cents for every dollar earned by men when they have children.

[00:19:02] Women are also presumed to be less capable than men due to biological differences, whether real or imagined, which can impact what women study in school, what jobs women apply for, whether and how women are mentored, the tasks they are given to do, whether they are considered seriously for promotion and whether they are penalized for negotiating their pay. We do not study all of that in our report, but we do know that women are paid less when they are mothers, while men earn a 2% pay premium when they are fathers.

[00:19:31] We also see the pay gap widens as women age and as they ascend the career ladder. For example, women start off on their careers behind and never catch up. By 30, the gap widens. By 45, it drops to 72 cents on the dollar. The gap is the worst for women who are in leadership. Women who reach the executive level make only 72 cents for every $1 that male executives earn. And we see that education does not close that gap.

[00:19:56] At no higher level of education beyond a bachelor's degree does the pay gap close more. It's worse for women who have MBAs who earn just 77 cents compared to every $1 that men with MBAs earn. I mean, that's an interesting fact on its own. And I think we've looked into that, isn't it? It comes down to the subjects that women study that can lead to some of those educational gaps. But it doesn't really necessarily explain it with MBAs because surely they're kind of studying the same type of work. So, yeah.

[00:20:26] So, there's definitely something happening within the workplace that's impacting that. So, we understand from the report lots of information about the gender pay gaps. What can organizations do? Do you suggest, Amy, to close the gender pay gap or to close the pay gaps? Yeah. So, the easiest thing to do is to understand that – sorry, I had to repart that. Okay. I'll ask the question. Stop. And I'll ask the question again.

[00:20:59] So, Amy, we understand from the report lots of different ways of looking at the gender pay gap and some of the causes that drive it. But more importantly, what can organizations do to close the gender pay gap? The easiest thing to do is to understand what your pay gaps are. And the results of that analysis may be surprising. Organizations need to develop a compensation strategy with compensable factors explicit and baked into a formal job architecture that is based on trusted market data.

[00:21:29] You need a job architecture with job leveling to consider consistency when it comes to career growth. They need to conduct pay equity analysis and actually measure the pay gaps in their organization, not just for gender, but for all of the protected classes, as well as specific jobs and families. Software makes this easier, which is, you know, why we talk about it. But it's also just about the administration process and all of the other things that impact, like systemically, how women are paid and promoted within the organization.

[00:21:57] So, what's important to think about is not just the impact that you're having on the numbers, but the impact that you're having on people's lives by ensuring that pay is fair for both men and women and for all the other employees at your organization. Yeah. And that kind of is a nice segue to some of the next piece of research that we're going to be focusing on within the Insights team. Isn't it, Amy?

[00:22:21] We're going to be redoing our fair pay impact report, which is a very popular report. I think the last time we updated that was 2022. Do you want to give us – I'll put you on the spot here, but do you want to give us a quick summary of what that report is so people can maybe look forward to that one? Yeah. I think the first time we did it was in 2018. That was before my time at Payscale. And then I think it was 2021 that we updated it, although I would have to go back and look to make sure.

[00:22:50] But, yes, the Fair Pay Impact Report asked the question, what do employees think when it comes to whether or not their pay is fair? So do they think they are paid at market, below market, or above market? And then we take what they are paid and we compare it to the averages of those jobs for their peer group. And we evaluate whether or not they are accurately understanding whether or not their pay is fair. And it's always off. And the percentages that it's off are always interesting.

[00:23:19] So the takeaway of this report is that it's less about the work that you do on the back end to make sure that employees are paid fair and more about how you communicate it. Because there can be rampant reasons why people might misunderstand that their pay is fair.

[00:23:34] And if they don't know all the work that you're doing to ensure fair pay, they may come up with an idea that their pay is unfair and leave your organization when they ought to be celebrating how fairly they are paid and all the work that you are doing as a compensation professional to ensure that equality. So it's a very interesting report. We're excited to update it, especially after the tumultuous years that we've had over the past three or four years. So it'll be interesting to see if those perceptions have changed at all. Yeah.

[00:24:03] And for me, I think it's a fantastic report when I get so many people asked me, how can I justify the case for investing in pay transparency? How can I justify the case for investing in fair pay? Why is fair pay important? And this really kind of does draw a line between people's perceptions of pay and their intention to leave an organization.

[00:24:24] And we see a very clear link, which is why I think this is a report that ends up being one of the most quoted reports that we have by other people when they're talking about the whole story of fair pay. So, OK, Amy, thank you for joining me today and for taking us through those valuable insights from the 2025 Gender Pay Gap Report. As I said earlier, if you want to access that, go to payscale.com and head to our research section and you'll be able to access the report. It's all online there, that report.

[00:24:53] And then there's a downloadable asset this year, I think, isn't there? There's a summary asset that you can download to get some further insights. So, thank you very much, as always, for listening. If you have any other topics you'd like us to explore, please feel free to reach out to us at coffee at payscale.com. Thank you, as always, for tuning in and we'll see you next time for another hot take on all things compensation. Thank you very much, Amy, for joining me today.