Closing the LGBTQ+ pay gap

This year, the 15th of June is when we acknowledge US LGBTQ+ Equal Pay Day. In the US, equal pay days are basically the day that the average person in a disadvantaged group would have to work into the year in order to earn the amount the average member of the advantaged group earned in the previous year. The problem is that, in the US, there are no official pay statistics on gender identity and sexual orientation, so the actual day is not known. So, it falls in the middle of Pride month instead. Hopefully, that is about to change as there is increasingly more data now available on the pay experiences of members of the LGBTQ+ community. 

In January, researchers at the Human Rights Campaign released an analysis of nearly 7,000 US LGBTQ+ workers and found that they earned 90 cents for every dollar that the average worker earns. As with the gender pay gap, intersectionality plays a major part, with white LGBTQ+ workers earning 97 cents, Latinx LGBTQ+ workers 90 cents and Black LGBTQ+ workers 80 cents. Gender identity also impacts the gap, with men in the LGBTQ+ community earning 96 cents for every dollar, women 87 cents and non-binary, genderqueer, genderfluid and two-spirit workers 70 cents.  

Additional data can be found in a pre-print article from the University of Chicago that looked at graduates ten years after entering the workforce. It found that LGBTQ+ graduates experienced 22 percent lower earnings than non-LGBTQ+ graduates, with the penalty being similar for both LGBTQ+ graduates identifying as male and female. The report found that about half of the gap can be attributed to what major was studied in college and the occupation of the graduate, with the remaining 10 percent pay gap unexplained.  

What drives the pay gap? 

As with other pay gaps, occupational segregation is one of the main drivers. A 2020 study found that gay men were more likely to avoid occupations that are more male-dominated, which tend to include the best paid jobs, while lesbian women are more likely to avoid female-dominated occupations. Of course, this ‘choice’ might be driven by discrimination. Although sexual orientation and gender identity have no relationship to workplace performance, during the past four decades a large body of research using a variety of methodologies has consistently documented high levels of discrimination against the LGBTQ+ community at work. The above University of Chicago report found that 48 percent of LGBTQ+ respondents reported having experienced workplace discrimination. 

Another driver of pay gaps is vertical segregation, or lack of senior representation. A McKinsey study looking at how the LGBTQ+ community fare in the workplace found that LGBTQ+ women are underrepresented at every stage of the management pipeline. LGBTQ+ men were more represented at senior levels than LGBTQ+ women but were still underrepresented in relation to wider society. They also found that three in 20 LGBTQ+ women believe that their sexual orientation will negatively affect their career advancement at work. For LGBTQ+ men, this number is even higher, at six in 20. Also, compared with straight women, LGBTQ+ women are more likely to report that their gender has played a role in missing out on a raise, promotion, or a chance to get ahead. Despite these challenges, LGBTQ+ employees are just as likely as their straight counterparts to aspire to be top executives.  

The transgender experience 

The transgender experience of the workplace is distinct from that of cisgender people who identify as LGBTQ+. Another McKinsey study found that people who identify as transgender are more likely to be unemployed, and those who are working are more likely to be in entry-level roles rather than managers or senior leaders. They were 2.4 times more likely to work in the food or retail industries, in which a large proportion of entry-level jobs pay the minimum wage. The report found that cisgender employees earned 32 percent more than transgender employees, even with the same or higher education levels. The Human Rights Campaign report also reveals that transgender pay gaps are the largest gaps, with trans men earning 70 cents for every dollar the average worker earns, and trans women earning 60 cents.  

The barriers for transgender employees include a lack of support in the workplace, both from an organizational standpoint and from their colleagues. The McKinsey study found that more than half of transgender employees said that they were not comfortable being out at work. As they do not feel able to ask questions related to their specific circumstances, this makes it harder for them to understand the company’s culture and benefits during the application process.  

LGBTQ+ pay gaps around the world 

The above findings are also mirrored around the world. The LGBTQ+ pay gap in the UK is estimated to be 16 percent, with a quarter not comfortable revealing their sexuality at work. In Canada, researchers compared members of the LGBTQ+ community against heterosexual men and found the pay gap to be 9 percent for gay men, 20 percent for lesbian women, 43 percent for bisexual men, and 55 percent for bisexual women. They were unable to measure the experiences of gender minority individuals due to the lack of data. Europe and Australia follow similar trends, although it is hard to find up-to-date data as they are more likely to come from academic papers than from national statistic organizations. There are also many countries where there are no anti-discrimination laws for people identifying as LGBTQ+, or worse, where it is criminalized. 

LGBTQ+ pay gaps in the workplace 

It’s clear that we need more data and studies to understand how these LGBTQ+ pay gap trends play out across the workplace. But therein lies a key issue. While many employers collect data on gender and ethnicity, this does not extend to other protected category groups. We commonly hear the objection that HR departments feel the data is just too sensitive to ask employees to disclose. However, some UK companies are showing this is not the case. 

Expanding their disclosure under the gender pay gap legislation, leading UK employers are now voluntarily reporting their ethnicity, LGBTQ+ and disability data. These firms have had effective declaration campaigns which have allowed them to reach strong declaration rates. Clifford Chance collects diversity information on a voluntary basis through a self-identification portal among its employees, and 81 percent provided their identity for their latest report. Similarly, Zurich Insurance confirmed in their latest LGBTQ+ pay gap report that 75 percent of their people shared their sexual orientation and 51 percent their gender identity.  

The very useful Stonewall ‘Do Ask, Do Tell’ guide provides key advice for employers on capturing data on sexual orientation and gender identity globally. They point out that asking workers to self-disclose through their HR systems is not the same as encouraging LGBTQ+ employees to be open about their sexual orientation or gender identity. However, LGBTQ+ employees may be concerned about disclosing their sexual orientation or gender identity for fear of having this shared with colleagues. The concern understandably increases in countries where legislation negatively affects LGBTQ+ people, or where cultural or social norms have a negative impact on them. 

As with all data declaration campaigns, communication is key. You need to explain why you are collecting the data and how this links to your organization’s values, along with how the data will be used and stored.  

Creating an inclusive culture 

Along with collecting the data, it is clear that the safer the workplace is for employees to be their full selves, the more likely they are to disclose their identity information. The Human Rights Campaign and McKinsey end their reports with suggestions for employers:  

  • Ensure that your policies and programs are inclusive to the full LGBTQ+ community. 
  • Stamp out inappropriate behavior and ensure that you have an employment nondiscrimination policy that includes both “sexual orientation” and “gender identity” across all operations. 
  • Offer benefits packages that are trans-affirming and are inclusive of both legal spouses and domestic partners, to prevent inequalities. 
  • Do an annual assessment of the collected pay data by sexual orientation, gender, and gender identity to ensure that your company is using the data to drive decision-making (e.g., formulation of leadership development programs and other policy development to combat the wage gap).  
  • Institute transparency policies on pay, which are a pathway to identification of pay inequalities. 
  • Be intentional in recruiting. 

The most important action is to take concrete steps to publicly show that there is an inclusive culture, such as normalizing the use of pronouns when employees are introducing themselves, using ‘preferred name’ on forms, and getting involved in initiatives such as Stonewall’s Top 100 Employers or the Human Rights Campaign’s Corporate Equity Index percentage. 

Not having data can no longer be an excuse. This is a pay gap that we can, and should, be calculating and closing by understanding the root causes. It’s clear that LGBTQ+ employees face unique challenges, so it is crucial that workplaces become more inclusive and build a relationship of trust with their employees. This starts with being open about ambitions, collecting data and then using it to continuously monitor and understand the lived experience of their employees. But, reporting needs to go hand in hand with cultural change. Only then will it translate to a meaningful impact on the quality of life for all workers.  

Join our webinar on closing the LGBTQ+ pay gap

On June 24, 2022, hear from the researchers of HRC pay gap report and learn how to use Payscale Pay Equity to do a holistic LGBTQ+ pay gap analysis

Register Now