Why Do Entry-Level Men Earn More than Women?

The HR director was proud of his company’s pay equity practices: same job, same pay, always. Then he looked at the data and saw that even a couple years into their careers entry-level women were earning less than men. He was stunned. How was that even possible?

New research is causing similarly surprised reactions nationwide. A study of 1.7 million college graduates with federal student loans found that just three years after graduation, women earn less than their male counterparts holding the same degrees. There’s at least a 10% pay gap for half of those surveyed, but the gap yawns as wide as 55% for some degree holders in fields like accounting and dentistry. This is bad news for companies down the line. “It’s troubling,” says Ben Frost, senior client partner in the Products practice at Korn Ferry. “If the track to senior leadership isn’t diverse, you risk not being able to serve your customers properly.”

To be sure, some companies with aggressive pay-tracking systems boast equitable gender pay. But most show gaps, and Frost points out that early-career inequity puts many women on a dead-end path. When couples become parents, typically one person’s career takes a back seat. “That’s probably the partner who is earning less,” he says. “It snowballs.” This results in mothers further trailing the promotions and pay of male counterparts, and ultimately reaching retirement with far less savings.

Data from Korn Ferry indicates that this early pay gap is most likely due to employees accepting different jobs in different fields with differing responsibilities. For example, men are more likely to take jobs in higher-paying fields like engineering and tech, while women choose careers in lower-paying fields like marketing and HR. Still, says Frost, “early career is usually when things are better, before parenthood upsets the apple cart.”

Tom McMullen, who oversees compensation equity in the US for Korn Ferry, says that the first step to addressing the early pay gap is figuring out whether a company has an issue, and if so, where. He says that roughly 60% of big companies—usually publicly owned, larger organizations—do formal statistical pay equity assessments. With that data in hand, firms can create more consistent frameworks around hiring offers. “When two lawyers with similar backgrounds apply for jobs, you want to make sure that one is not offered $130,000 and the other $145,000,” McMullen says.

Organizations also need to keep an eye on non-salary compensation. The key is to pay attention to what happens at the end of the year,” says Tanya van Biesen, managing partner in Board and CEO Succession at Korn Ferry, with bonuses, equity grants, and raises, which can be hotbeds of subjectivity in firms with otherwise equitable, consistent, and procedurally fair compensation practices. “Over time it can create two tiers,” she says.

Gender pay gaps have likely grown larger in the last year, with companies offering higher compensation and retention bonuses to job candidates or departing employees. “Throwing money around almost randomly in various directions risks undoing a lot of the work we’ve been doing to make sure things are fair,” says Frost.