Discrepancies of the narrowed gender pay gap in 2020

Liz Wilke, Gusto Principal Economist, joins Yahoo Finance to discuss the gender pay gap and women owned businesses amid the pandemic.

Video Transcript

JARED BLIKRE: More controversy over the gender pay gap. In September, the US Census Bureau released their 2020 income and poverty data, which found that gender pay gap shrank in 2020. However, one payroll provider dug into their micro data, finding that the Census Bureau's numbers don't tell the whole story. In fact, the gender pay gap narrowed for all the wrong reasons. And to discuss, as we are going to bring into the stream here, Liz Wilke, principal economist at Gusto. Liz, thanks for joining us, number one. And could you break down the numbers for us and reveal exactly where these discrepancies lie?

LIZ WILKE: Sure, Jared. Thanks so much for having me. The Census Bureau number is right. But as you said, it's for all the wrong reasons. The gender wage gap narrowed, but not because companies were paying women more, actually. So what really happened is that at the beginning of the pandemic and through 2020, women at the lower end of the wage spectrum, as we found, looking into our data, were terminated at rates that were disproportionately higher than men in the same category.

So what that effectively does is that it drops low wage women out of the sample that you would use to calculate this number, which artificially raises the wage rates for women, making the gender wage gap look like it's narrowed, but not because women are advancing in pay equity, but actually because vulnerable women are dropping out of the labor force during the pandemic.

ALEXIS CHRISTOFOROUS: Is there a particular industry or industries where the pay gap, the gender pay gap, is actually indeed very narrow or perhaps zero?

LIZ WILKE: So there are a few industries where the wage gap is small or narrow. They tend to be in salon and spa services. There are also-- there's a very slow gap-- or excuse me, small gap-- in retail services, as well as in sports and recreation. And what this really means is that it's not that women are paid so well in these industries. It means that their relative wage compared to men is roughly equal.

JARED BLIKRE: Well, and I want to bring up another report, another one of your surveys. One is on entrepreneurship. And let me just throw out one of the stats here. 49% of entrepreneurs in 2020 were women, compared to 27% in recent years. Can you share with us a little bit about that report and what you think the basis is for these findings?

LIZ WILKE: Yeah, we've been tracking the impact of the pandemic over the last 18 months. And this is one of the most fantastic and surprising results that we've seen. So, as you said, 49% of new business owners are women. And that is a almost two-fold jump in the last few years, based on US census data. So what that really means is that in an era of historically high entrepreneurship rates anyway that we've seen since the pandemic, we've just never seen in recent history this many businesses being formed, that so many of those businesses are being formed by women.

So, many of them in our survey reported that they had started a business because they lost their job or out of economic need. And what that provides us is a real opportunity to support this new generation of women-owned businesses, who are leaning in and engaging in entrepreneurship in ways that they really have not done before that we have seen.

And though the gender wage gap hasn't really narrowed for the right reasons and we think that's sort of a sad story, there is this really bright spot out of the pandemic, which is that there is an opportunity for all of these new women business owners if we can support them and help to create environments that increase the viability for their businesses.

ALEXIS CHRISTOFOROUS: And Liz, we know that women were disproportionately impacted by the pandemic, many of them being forced to leave the workforce to care for their children. Your survey also looked at the childcare crisis and its impact on women-owned businesses during the pandemic. Tell us about that.

LIZ WILKE: Yeah, we did a study in partnership with the National Association of Women Business Owners. And 20% of them said that their employees, their female employees, left because of childcare reasons. And an additional 40% of their female employees reduced their hours in order to have more flexible time to care for their families.

What we also found is that women-owned businesses are incredibly responsive to the challenges of women. 76% of those women-owned businesses instituted some kind of remote or flexible work or family friendly policy. 60% of them instituted remote and flexible work as a result after the onset of the pandemic in order to respond to their caregiving and childcare needs.

We know that caregiving falls disproportionately on women in this country, not just caregiving for children, but caregiving for elderly relatives, for people who have special needs. And we know from the data that we have in partnership with NAWBO that women-owned businesses create women-friendly work environments. And the more we can do to support the success of those businesses, the more we can do to support the success of their women employees.

JARED BLIKRE: Well, and the first step is getting the right data. And that is something you have done. Thank you for that, Liz Wilke, principal economist at Gusto.

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