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Gender Pay Gap Widens Due to COVID-19

In recent years, employers and industry leaders have begun to take note of wage disparity between men and women in the workplace. Great attention has been focused on addressing gender-based wage gaps, garnering political and media attention to bring this issue to the forefront. 

Though there has been focus on this issue, the gap proves pervasive and employers must continue efforts to resolve this issue, affirming their commitment to equal valuation of employees and diversity in the workplace. Unfortunately, new studies indicate the recent COVID-19 pandemic’s effect on the economy and payroll budgets may be reversing some of the progress seen over the past few years.

Women See Greater Loss of Income Due to Pandemic

While a normal recession tends to close the gender wage gap by 2%, a pandemic recession actually widens the gap by 5%. One major factor causing this is the larger female representation in “high-contact” service sectors such as travel, restaurants, and other hospitality industries where social-distancing requirements have capsized, according to the National Bureau of Economic Research in research authored by the University of San Diego, Northwestern University, and the University of Mannheim. 

Scarce childcare also presents an issue for women. Due to “a lopsided division of labor” present in most households, women are taking on additional childcare duties due to daycare and school closures because women are “more likely to have to take time off work, or even resign their positions, in order to care for children who are no longer in school as well as other family members,” according to The State of the Gender Pay Gap 2020, a report from PayScale, a provider of on-demand compensation data and software.

Pandemic Unemployment Rates Drastically Differ for Men and Women

During previous recessions, men were affected more severely by job losses than women. During the 2008 downturn, nicknamed the “man-cession” by many, men saw unemployment rates nearly 3% higher than women. But the COVID-19 recession has completely flipped the script, causing many to dub this the “she-cession” with the average unemployment rate for women reaching 12.8% while men are seeing a 9.9% rate from February to April 2020.

“As a result of the COVID-19 pandemic, countries around the world, including the United States, have entered the sharpest economic downturn since the Great Depression,” wrote the authors, using a quantitative macroeconomic model in their analysis. “[W]e argue that the central economic distinction between this downturn and other recent recessions, aside from its severity, lies in its impact on women’s employment.

Under normal recession conditions, gender wage disparity is moderately decreased since the typical recession tends to have a greater impact on men, according to the NBER study. “In the short and medium term, a pandemic recession erodes women’s position in the labor market, first through direct employment losses, and later through the loss in labor market experience brought about by low employment during the recession,” they said. 

A Bigger Hurdle for Women of Color

Black and Latina women are hit harder by the pandemic recession according to a survey commissioned by the Time’s Up Foundation, conducted by PerryUndem. The study found that 51% of Latinas and 48% of Black women currently do not have enough money to pay for basic food and housing needs. Further findings indicate that 60% of Latinas and 55% of Black women lack a financial cushion to fall back on, having less than $200 in savings.

“We’ve known for a very long time that women, especially women of color, are breadwinners,” says Jennifer Klein, chief strategy and policy officer at Time’s Up. Klein also indicated that these women typically take on countless duties at home. “We also know, sadly, that we don’t have sufficient public policies and private sector practices to support these two roles that they play, and I think the pandemic has only magnified and made this situation worse.”

Already drastically affected by the gender wage gap, Latinas and Black women on average make 54 cents and 62 cents, respectively for every dollar earned by a white man, are seeing even more challenges due to COVID-19 disproportionately impacting the physical and financial health of people of color. 72% of Latinas indicated they have lost a job, hours, or pay due to the pandemic. Of those who are still working, 61% stated their job has required them to leave home in the midst of a health crisis, the largest representation of any demographic. Nearly 6 in 10 Latinas also indicated they have not felt safe at their job during the pandemic. 

Added to the pressures of job loss and pay reduction, 29% of Latinas are also caring for an ill or elderly family member, more than any other demographic in the United States. Among the side effects of this pressure is the effects on mental health. 54% of Latinas said they feel panic or anxiety once a week because of the compounded responsibility with loss of income. 

Despite July’s drop in the overall unemployment rate to 10.2%, Latinas and Black women continue to be hit hard by the current economic crisis. Currently the unemployment rate for Latinas sits at 14%, and 13.5% for Black women. 

Stay Vigilant to Address Pay Disparity 

A slowed economy is not a reason to lose focus on this critical issue. Many employers continue to make strides to address the gender wage gap. In 2020, 56% of employers have conducted a gender-based pay equality analysis – a rise from 35% in 2016 according to the Let’s Get Real About Equality report by Mercer. 

Findings of this report indicate that 84% of businesses that found an employee wage needed to increase to level the gender pay gap in their workplace, said adjustment addressed both base and variable pay. Unfortunately, the study also found that only 44% of businesses had a process specifically designed to address pay inequities. 

Further findings indicated that “it is difficult to implement pay increases to correct for inequities when, for many, pay increases of any kind are off the table” due to the economic challenges presented by the pandemic, according to the report’s analysis of findings. In these circumstances, employers are advised to take three important steps:

  1. Continue assessing risks. When companies are serious about addressing pay inequity with strict review processes in place to address the issue, they tend to have equitable employment practices in all areas from hiring to promotion, and ultimately better retention rates. “Lowering the review standard, even for a year, can lead managers to question the organization’s continued commitment and create longer-term, broader challenges,” the report stated. “A resurgence of inequities could result.”
  2. Provide a scaled response when budgets are limited. At a time like this, your company may not be able to completely address any discovered pay disparities that exist due to budget constraints. Employers can recognize where adjustments need to be made, and phase them in over time. Performing an annual pay-equity analysis will help employers continue to rectify any wage gaps that exist so they may allocate budget dollars when they are available.
  3. Use economically-necessary pay cuts to address gaps. With the economic downturn many employers face today,  a reduction in pay is a reality for many employees. One solution is to achieve these reductions through salary and bonus cuts for employees who are already overpaid. 

A Turning Point in Sight

Despite the numerous issues the pandemic has raised for many Americans, 83% of those surveyed stated that equal pay for women remains just as, or more critical an issue, even during this economic crisis. Women were particularly clear about what was needed to address the pay gap and other inequities: child care, more flexible work schedules, and paid sick leave. 

There is a long-term positive change in sight, as the National Bureau of Economic Research indicated, with a pandemic recession ultimately affecting a decrease in labor-market gender gaps. This comes in the form of a rise in husbands serving as primary childcare providers, as well as an increase in the time fathers spend on childcare duties during a pandemic recession. The suggestion is that these changes will “erode social norms that underlie the unequal distribution of childcare between women and men, thus increasing the share of ‘modern’ couples with egalitarian social norms.”

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Disclaimer: The information and resources provided herein are not a substitute for experienced legal counsel and does not constitute legal advice or attempt to address the numerous factual issues that inevitably arise in any employment-related dispute. Although this information attempts to cover some major recent developments, it is not all-inclusive, and any recommendations are based upon HR best practices and procedures. We recommend you consult an attorney for legal guidance.

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