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Canada's stalled progress on gender pay gap: Women have 'hit a brick wall' Add to ...

In June, an unusual letter landed in Karen Bird’s mailbox. It was from her employer, informing her of a salary bump of $3,515.

It wasn’t a bonus or a clerical error. Her employer, McMaster University, gave its entire female faculty a raise in base pay after a study uncovered a salary gap between male and female faculty members. These discrepancies remained even after accounting for differences in rank, department and experience.

“It’s had an effect. I feel like they have my back,” said the associate professor of political science. “It’s very reassuring to know the administration is aware [of gender disparities] and is taking steps to adjust them.” The increase has had a direct impact on Prof. Bird’s family, at a time when her husband is on extended sick leave, and they have a young child in day care. “It was a nice relief to some financial worries we were having,” she said.

McMaster’s candid approach remains rare among Canadian employers, even as the gender pay gap persists in the workplace. After decades of narrowing differences in pay and labour-force participation rates, momentum has stalled, with some measures deteriorating in recent years. Canadian women still take home on average 73 cents for every dollar men earn, even as educational attainment has surpassed their male counterparts. The gap remains when controlled for measures such as occupations and hourly wages. Advances could buoy Canada’s economy in an era of otherwise slow growth – and are critical if Canada is to compete internationally. “Canada is in a global talent war; as a country with a modest population we can’t win unless all our players are on the field,” said Ilse Treurnicht, head of the innovation hub MaRS Discovery District.

Women’s march into the labour market has been a boon to the economy, in Canada and around the world. Increases in female labour-force participation over the past three decades have recently added $130-billion to annual Canadian economic activity, according to RBC economists.

In the coming years, McKinsey Global Institute calculates that full gender equality in the labour market could boost global GDP by $28-trillion by 2025 – an amount equivalent to the size of the Chinese and U.S. economies combined. “We believe that the world, including the private sector, would benefit by focusing on the large economic opportunity of improving parity between men and women,” it said. In Canada, RBC estimates that closing the gap in participation rates over the next two decades would boost GDP by 4 per cent in 2032.

Yet Canada is flagging compared with international peers. This country’s gender wage gap is well above the OECD average. The last World Economic Forum gender-gap ranking put Canada in 19th place, behind Latvia and Burundi, while the UN’s measure shows Canada slid 11 spots between 1995 and 2013.

The federal election campaign has focused little attention on women and work. A planned leaders debate on “women’s” issues such as pay equity, child care and violence against women had to be modified after Conservative Leader Stephen Harper, and then NDP Leader Tom Mulcair, declined to take part.

Yet there are troubling signs, according to the federal government’s own internal reporting.

Women have “hit a brick wall” when it comes to the salary gap, according to a Status of Women report this year. Its blunt assessment notes women aged 45 to 54 earn on average $23,600 less than men in the same cohort, a number “virtually unchanged” from five years ago. Gaps in hourly wages appear in all occupations analyzed, from science to trade, management and health care. The internal draft document says Canada is “falling behind” in key indicators such as the pay gap and gender equality in Parliament. It notes that Canadian men are paid 20 per cent more than their female colleagues.

A background paper released this week by the Ontario government noted that “progress is slowing” in closing the province’s pay gap, and that international comparisons show “Canada may be falling behind in terms of the overall gender gap.”

The gender wage gap “isn’t a women’s issue or a men’s issue. It’s a workplace and societal issue,” said Mary Turan, senior consultant at Gallagher McDowall Associates, a compensation consulting firm. Employers “need to view it as an opportunity.”

The challenge

Lindsay Patrick hesitates when asked what she forfeited in lost salary in the past five years since she left a job at Bank of America Merrill Lynch’s London derivatives desk to care for her four boys. It’s not something one typically puts a price tag on. “A million plus?” It was fulfilling work, though, and she has no regrets. She’s now ready to rejoin the work force, in a global investing role and wonders how employers will view that interruption.

“I hope employers start to realize you can be ambitious and committed to your career while working 80 per cent or on a flexible schedule,” she said. “That shouldn’t be a signal it’s a lack of ambition.”

Women are still more likely to be primary caregivers to children, their parents or to both, and they’re also still spending more time on housework – factors that affect both labour-force participation and income.

Part of the wage gap stems from observable reasons, such as differences in occupation. But half of the discrepancy comes from “unexplained” factors that may be tied to motherhood, a 2010 Toronto-Dominion Bank study found. It estimates a woman earning $60,000 in after-tax income who takes a three-year break from the labour force winds up with a cumulative earnings penalty of about $325,000, even after working continuously for 20 years upon her return.

Many core-aged women – in the prime of their earnings years – are exiting the work force. The labour-force participation rate for women aged 25 to 54 has stalled after decades of steady increases. It was 82 per cent in September, down from its 2012 peak of 83.2 per cent, and compared with 91.1 per cent among similarly aged men. For that age group, the participation rate is “looking like it’s topped out,” said Beata Caranci, TD’s chief economist, with little change in the past decade after rapid growth in prior ones. “Women happen to be one of the most educated portions of the population and it makes business sense to remain inclusive on that side,” she says.

Most are ducking out of the jobs market out of choice. But not all. Statistics Canada’s broadest measure of unemployment – which includes discouraged job seekers and involuntary part-timers – shows the jobless rate for core-aged women is 8.2 per cent, more than a percentage point higher than for men and a level little changed in recent years.

Those who do work tend to be paid less. Different measures of pay all point to a gap. As of 2012, women earned on average 67.3 cents for every dollar a man earned, Statscan data show. That doesn’t, however, take into account differences in hours worked. A comparison of strictly full-year, full-time workers still shows a difference: Women earned 73.1 cents for every dollar men earned, a level that hasn’t changed much in more than a decade. Hourly wage rates also show a gap, albeit smaller. Core-aged female employees earned 88 cents on average in that year for every dollar a male worker earned.

Women are lagging at both the bottom and the top of the pay scale. At the lower end, women are more likely to earn minimum wage, work part time and live on low income, particularly if they are aboriginal or a visible minority. Erratic scheduling and insecure work makes life more difficult, especially for single mothers.

At the other end, just one of the 60 largest companies listed on the Toronto Stock Exchange had a female CEO last year, Catalyst research shows, while one in five board seats were held by women. This despite a raft of evidence showing gender diversity improves decision-making and financial performance.

Even among the young, well-educated population, differences persist. Female MBA grads “fare worse than men from the start,” a 2013 Catalyst study of 1,574 “high-potential” employees in Canada found. The paper said women earn $8,167 less than men in their first post-grad job. They are not only likely to start out at a lower job level, they’re also offered fewer career-accelerating work experiences and fewer international postings, it said.

Economists list a string of reasons for the pay gap, among them that women are less likely to enter higher-paying fields such as STEM (science, technology, engineering and math) sectors, and that the jobs they do, such as personal support workers, tend to garner less than other jobs mostly held by men, such as oil-rig workers. Many women make flexibility a priority over long hours and lucrative salaries. Discrimination and unconscious bias are other factors. They are also less aggressive about negotiating salaries early on, which dents earnings over their entire career.

The global picture

Other countries are making aggressive efforts to close the gap. In Australia, recent legislation now requires employers with 100 or more workers to report on gender-equality indicators such as the composition of the work force and pay gaps. Its first results were released in November, showing a 19.9-per-cent gap in base remuneration, with a wider gap in total remuneration (which includes bonuses and merit pay) of 24.7 per cent.

It showed “there are decisions around performance and rewards where women don’t speak up or if they do, they’re punished. There’s a hidden gender bias,” said Louise McSorley, acting director of the federal workplace gender equality agency, the regulator that oversees efforts to improve equality. Now that annual reporting is required, she said, “from this year, we will be able to track trends over time. This provides a benchmark for employers.”

More employers are now conducting a gender pay analysis and taking steps to correct imbalances, the agency said this month. As well, more than 80 CEOs, from firms such as Mercer, Microsoft and American Express, have signed up to be “pay equity champions” – leaders who are willing to speak openly about their efforts and the challenges they encounter.

The United Kingdom is also pressing ahead. Prime Minister David Cameron said in July that large companies will have to publish the difference between the average pay of male and female employees. His aim is to end the gender pay gap within a generation. Forcing disclosure, he said, “will cast sunlight on the discrepancies and create the pressure we need for change.”

Some businesses have acted ahead of regulations. PricewaterhouseCoopers LLP’s U.K. division last year published its gender pay gap, at 15.1 per cent, saying improved transparency and accountability helps it determine “whether opportunities are equal for all across a work force and whether further action needs to be taken.”

In August, Deloitte in the U.K. revealed it pays women 17.8 per cent less on average than its male workers. That disparity narrows to 1.5 per cent when comparing people in the same job grade. It said that suggests it could narrow its gap by promoting more women into senior roles.

No country has reached parity in wage equality for similar work, according to the World Economic Forum (WEF). But it’s increasingly a goal. In the European Union, gender equality is embedded into long-term economic plans, such as its “Europe 2020” strategy.

Northern European countries tend to be leaders in equality. Iceland tops the WEF’s global gender gap list, followed by Finland, Norway (where everyone’s income is publicly available for viewing), Sweden and Denmark.

In the United States, the city of Boston is vying to become “the premier place for working women in America.” A new campaign has prompted more than 50 employers to sign a voluntary pledge committing to closing the gender wage gap.

In San Francisco, cloud software provider Salesforce has begun a huge undertaking: analyzing the salaries of all 17,000 of its staff (including 1,000 in Canada) after a smaller sample this year revealed – to its surprise – that women were paid less. It has already adjusted some pay and intends to raise the salaries of all underpaid women, as well as some men.

In Canada

In Canada, the issue of boosting women’s opportunity lacks urgency, says Mary Cornish, a labour lawyer and senior partner at Cavalluzzo Shilton McIntyre Cornish LLP. “There is a stagnation in terms of addressing the gender pay gap – at a time when you would think it would be decreasing much more rapidly.”

One place to start could be greater clarity on pay. One effort to boost transparency is under way at Ryerson University. Each spring, faculty members are now shown a graph of how their pay compares with the university average and their own department, broken down by gender, years of service and age. If a member feels their pay is not in line with where it should be, he or she can appeal to a “salary anomaly” committee that decides whether to award a raise in base pay. “You can see where you fit in relation to others,” said professor Gerald Hunt, director at the university’s centre for labour management relations.

Even though the university is unionized and has a standard salary grade, “men are more likely to negotiate higher wages when they get hired, and that affects everything in the years ahead.”

At McMaster, provost David Wilkinson lists some benefits of publicly levelling faculty pay. “This has allowed us to make a statement about the way we treat our employees,” he said. The decision “went viral,” generating responses from across Canada, the U.S. and the U.K., he added.

In Canada, Deloitte hasn’t published its pay gap. But it does use data analytics to monitor pay trends by gender. If a compensation gap is identified, managers are asked to explain the reasons for it and adjustments are made to level the playing field, says Shannon MacDonald, chief inclusion officer (a job that involves strengthening diversity).

“We’re very sensitive to the fact that there are biases sometimes in the system. So when we’re using data to test and retest, we’re just ensuring that inherent biases – towards one gender or the other, because you can see it one way or the other – aren’t affecting compensation levels.”

Efforts are also being made to end the motherhood gap and help ease women’s return to work after having children. A “back-to-work” program for professional women, run by the Rotman School of Management, has more than 200 applicants for 35 spaces. It teaches women returning to work after a multiple-year absence about hiring processes, networking, leadership skills and social media.

From employers willing to hire women re-entering the workplace, “we hear back that these are one of their best hires. If you give a woman a second chance to come back, you will have a superbly loyal and fully committed employee, and with the advantage of having experience,” said Beatrix Dart, professor and head of Rotman’s initiative for women in business.

Sue Jean Shin is one of the Rotman students. She left her financial services job in 2012 to care for her son – to give him a solid footing, she says, until he was kindergarten age. She’s ready to rejoin the work force now. She “absolutely” took a hit in missed salary and promotion opportunities and she’s concerned how employers will see her interruption.

She hopes her next employer will consider letting her work from home occasionally or adjust hours to allow for some school pickups. “I feel ready to go back,” said Ms. Shin, who has a Masters in finance and 16 years of work experience. “But I have witnessed that there is a cost to flexibility – in terms of compensation and the type of work that will be considered a fit. Looking for flexibility in finance is often synonymous with a lack of ambition. I am ambitious. If anything, time away from work has made me more ambitious than I was before.”

For many firms, that may mean valuing output over face time. Flexibility shouldn’t be synonymous with lower hourly rates, argues Harvard University economist Claudia Goldin. She says the gender gap in hourly wages could vanish if employers had less incentive to disproportionately reward people who work long hours. Workplaces need to reorganize so people aren’t penalized for choosing flexible schedules – changes she says will benefit both men and women.

“We need to work towards gender equality as an educated society, period – it’s just morally the right thing to do,” Prof. Dart said. “But there have been many economic-impact studies that companies with more women in senior management positions and on boards, financially perform better. You want to have a diversity of thinking, you want to have the best talent, you can’t afford to shut out 50 per cent of the population. You can’t be successful and not care about 50 per cent of the population.

“You have to be aware that having more women represented at every level is economically and financially beneficial.”

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