Occupations were once segregated by sex. There was a time when newspaper help-wanted ads, relics of the past, contained column headings: Help Wanted Men and Help Wanted Women. This practice was ultimately deemed illegal in 1968 by the Equal Employment Opportunity Commission (EEOC). It is very likely that this segregation contributed to the pay gap between men and women since women’s jobs were priced significantly lower in the marketplace.
Over time, the pay gap between men and women had steadily narrowed. With Title VII’s prohibition of discrimination in all aspects of hiring, women entered more fields and occupations that had been dominated by men, began working in the same jobs requiring equal skill, effort and responsibility, in the same facilities, under similar working conditions, and were paid the same as men performing the same jobs.
Dynamic shift
The pay gap between men and women has begun to widen again. In 2022, women were earning 84 cents for every dollar a man earned. According to the Census Bureau, the female-to-male earnings ratio in 2024 fell to 80.9 percent from 82.7 percent in 2023—the second consecutive annual decrease.
Meanwhile, among full-time, year-round workers, median income for men increased 3.7 percent but did not change significantly for women between 2023 and 2024.
The cause
What's driving this shift? It may be too soon to pinpoint the root causes of these changes or determine if this is a temporary shift. However, several factors may be contributing to this dynamic.
Post-pandemic, as more companies are requiring women to spend more time in the office, more women are leaving jobs with those companies and looking for other alternatives. A study by Baylor University found that firms mandating return to office policies (RTO) experience an average 13 to 14 percent increase in abnormal turnover rates, with women being more likely to leave than men.
The lack of flexibility arising from these mandates is one reason cited for women’s departure. Traditionally, women bear greater family responsibilities, including caregiving, and they are more likely to make tradeoffs to maintain flexibility. These tradeoffs can include taking a lower position with less pay elsewhere, moving to another industry with a demotion, or taking time away—temporarily leaving the workforce.
The Baylor University study found that in contrast to the traditional reasons for leaving a job—promotion or mobility—employees are sacrificing advancement and accepting lateral or lower-ranked positions for flexibility.
Closely related to the lack of flexibility is the lack of family-friendly policies, such as paid family and medical leave.
Child care also remains a persistent barrier and is a contributing cause to the pay gap, namely, rising costs and disappearing options, as we discussed in our previous article for HR Exchange Network, Child Care Insecurity—The Cause.
The effect
While some women may view willingness to take pay cuts as temporary solutions to immediate problems, there are long-term consequences.
Time away or stepping back from the workforce results in disadvantageous resume gaps, especially for women on a career trajectory. They risk having to return to lower-level positions from the ones in which they formerly worked just to break back in. Another consequence could be lost or delayed promotions, leading to lost wages.
Consider, also, requests to forego a salary increase in exchange for more flexible working arrangements. As appealing as this may sound to the requester—savings on commuting costs, lunches, etc.—there are negative consequences. Future earnings are impacted. Assume they forego an increase for two years. In year three, their base salary and subsequent increase will be lower than it would have been if increases had not been withheld in the prior two years.
Lower earnings today have a long-term effect on women’s overall earning capacity, not only while in the workforce, but in retirement. Social security and retirement benefits are affected. For example:
If an employer offers a retirement plan such as a 401k that includes a match or employer contribution, a lower salary means less money is being contributed by both the employees (who contribute a percentage of their salary) and the employer. In the long term, this means less money in the account (contributions and growth over time), and a negative impact on retirement income.
A lower salary will negatively impact an employee’s Social Security benefit at retirement since these benefits are based on earnings. These RTO mandates are having an unintended consequence for the employers who mandate them. The Baylor University study found that high-valued and underrepresented talent is the most likely to leave.
- Female turnover increases are nearly three times higher than that of males.
- Mid- and top- level managers leave in higher numbers than junior staff.
- High-skilled employees are more likely to leave compared to low-skilled ones.
Beyond increased turnover, which can be quantified, the hidden costs of RTO mandates include reduction in competitiveness, departure of employees who are the hardest and costliest to replace, and an adverse effect on DEI efforts by disproportionately impacting women and members of other underrepresented groups.
For organizations which are building and maintaining positive workplace cultures, RTO mandates can have the long-term effect of disengaging—rather than engaging—employees and creating a culture that is exclusive rather than inclusive.
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