#SWAAYthenarrative
BETA
Close

How Supporting Younger Women And Minorities Can Change The Pay Gap

News

We are all very familiar with the fact that women make less than men do. As women, the fight for progress and equality in the workplace is a daily occurrence. So the recent study by Payscale on the gender pay gap reporting that women make on average 76 cents to the dollar of men is not surprising to any of us. This may seem like an unsurmountable statistic in our lifetime, but if you dig in further, there are some key insights worth addressing that are actionable today.


1

Why the pay gap exists

If you take the average of all women vs. the average of all men, women make 76 cents to the dollar of the average man. The gap is obvious given that men dominate the executive ranks and our boardrooms. Job titles and seniority have a direct correlation to salaries. And since women aren’t holding as many senior roles in corporations as men do, that explains a large part of the gap. In addition, men hold the majority of jobs in some of the highest paying fields (e.g. STEM). Therefore, it’s pretty clear why the average women makes less than the average man.

2

Women are being paid less than men for doing the same job, but not as much as we think

According to the study, when women are in the same roles and have the same background and education, women are making about 98 cents to the dollar of men. So yes, the disparity is about 2 cents on average. It’s not as large as we think. We’ve improved this figure greatly through the years and we are continuing to close this gap through some of the amazing efforts out there, but there is still more work to do. There are still biases and prejudices that happen daily.

3

The widening of the gender pay gap starts at 25 years old

The payscale research is extremely valuable because it tells us that while men and women might start off as equals in the workforce after college, as they move along in their careers, they progress into senior roles at different rates. This is a key driver in the gender pay gap. Since the gap only get’s larger as women get older.

The study shows the gap begins around 25 years old, when most people start experiencing their first opportunity to move up and get promoted.

The gap between men and women just gets larger and larger after that, by mid-career, “Men are 85% more likely than women to be VP’s or C-Suite Execs and 171% more likely to hold those positions late in their career”. These results are echoed in the recent Women in the Workplace study conducted by McKinsey & Lean In.

4

There are three actionable ways to help close this gap

Getting more women into STEM roles:

The industries with the largest pay gap are in STEM related industries. Even before entering the workforce, in high school and in college, we can create awareness and education around STEM roles. According to the NGC (National Girls Collaborative Project), while women make up 50 percent of the college educated workforce, they only represent 29 percent of the STEM workforce.

According to the Smithsonian Science Education Center, between 2000–2010, STEM related jobs grew 3 times the rate of non-STEM jobs. It is projected that by 2018, 2.4 million STEM jobs will go unfilled. In addition STEM salaries on average are 25 percent higher than non-STEM salaries.

Addressing Ambition & Confidence:

This research confirms a lot of what I see with young women in the workforce. According to a recent Bain study, women enter the workforce with higher ambitions than men, but after two years in the workforce (experience employee in the chart below), their ambition plummets 60 percent, while men’s ambitions stay the same, and only grows thereafter.

This tells us that something is happening in the workplace for women during this early years. Both the Women in the Workplace and the Bain study attribute the corporation’s role as critical in creating a workplace that can better encourage and support a woman’s ambition.

In addition, a Wall Street Journal article sheds light on female professional ambitions and the desire to attract a mate. The article is based on a recent Harvard study, called “Acting Wife: Marriage Market Incentives and Labor Market Investments”. The report is based on two field experiments in an elite MBA program. Results show that single women play down their ambitions when their is a presence of men, because of their desire to attract a mate. Some of the most young and ambitious women in the United States feel like they need to sacrifice their ambition because they feel that makes them less desirable in the marriage market. This is not the case for men.

Lastly, we cannot talk about the gender pay gap without addressing race. According to a recent Pew research study on Views of Race and Inequality, Black and Hispanic women earn significantly less than Asian and White women. Our investment in this area is critical to the success of all women. It is projected that by 2050, Hispanic and Latino women will make up nearly 39% of the total female population.

The Opportunity for Employers to Create Opportunities for all Women:

I have worked with and hired many bright and talented women early in their career. I have found that this is the most critical time in their careers as well. If they don’t receive the proper encouragement, management, and mentorship there is high likelihood that their ambitions and confidence will decrease dramatically. In order to even the playing field, here are my takeaways and suggestions:

Encourage, mentor and promote young women. This sounds very straightforward but hard in practice. We need to train our middle management teams, they are on the frontline here.

Create programs that support minority women in the workplace. When you invest in diversity, we all win.

Teach women to better negotiate promotions and salaries. Women aren’t confident asking for what they want, but this can be a learned skill.

Provide women the opportunity to take leadership roles on projects, letting them own something provides them the opportunity to demonstrate their abilities, create visibility for themselves, learn and develop new skills, generate confidence and also be considered for promotions.

Understanding a woman’s desire to progress up the corporate ladder. This may not always be clear once a woman starts her career, but if we better understand what her greatest strengths are, we can help show her paths towards success.

Creating an open discussion around childbirth and maternity leave and returning to workplace. Companies are ongoing a huge change right now to address issues related to mothers in the workplace. Companies need to address and understand the concerns of maternity leave for women and create programs in place that could allow working moms to succeed.

Our newsletter that womansplains the week
7 Min Read
Business

Dear VCs: Making Pledges Won't Close The Funding Gap

Amid the mainstream conversation about inclusion and justice in the workplace, otherwise known as #MeToo, a Silicon Valley venture capital fund considered how they can be more inclusive of the women, minority, and LGBTQ entrepreneurial communities.

Their solution? Ask the CEOs they currently fund to promise to hire senior-level employees from diverse backgrounds.


Lightspeed Venture Partners, a venture capital fund that has investments with blockbuster startups such as The Honest Company, Affirm, and HQ Trivia, has asked its portfolio company CEOs to sign a “side letter" affirming their commitment to consider women and other underrepresented groups for senior jobs and new spots on their board of directors.

Can making pledges— or even hiring a C-Suite level employee to manage diversity efforts— really make an impact on the funding gap for multicultural women-led companies?

Many experts say it's going to take systemic change, not letters of intent.

It is well reported that the amount of investment going to multicultural women-led companies is incongruous to the entrepreneurial landscape and the performance of their businesses. Between 2007 and 2016, there was an increase of 2.8 million companies owned by women of color. Nearly eight out of every 10 new women-owned firms launched since 2007 has been started by a woman of color yet, these businesses receive an abysmal 0.2 percent of all funding. Amanda Johnson and KJ Miller, founders of Mented cosmetics, were just the 15th and 16th Black women in history to raise $1M in the fall of 2017.

The multicultural women who do defeat the odds to get funded receive significantly less than male founders. The average startup founded by a Black woman raises only $36,000 in venture funding, while the average failed startup founded by a White man raises $1.3M before going out of business.

The implicit and explicit bias not only impacts individual multicultural female founders, it could be stifling innovation. For example, companies with above-average diversity on their management teams reported innovation revenue as 45 percent of total revenue compared to just 26 percent of total revenue at companies with below-average management diversity. That means nearly half the revenue of companies with more diverse leadership comes from products and services launched in the past three years.

In our economy today, venture capital is responsible for funding the work of our most innovative companies. Venture capital-backed U.S. companies include some of the most innovative companies in the world. In 2013, VC-backed companies account for a 42 percent of the R&D spending by U.S. public companies.

With a wealth of multicultural women entrepreneurs and evidence to support the performance of diverse companies, why does this funding gap persist?

According to Kristin Hull, founder of Oakland-based Nia Impact Capital and Nia Community, many traditional investors consider women or minority-led businesses as a category in their portfolio, like gaming tech or consumer packaged good. Hull, who focuses on building portfolios where financial returns and social impact work hand-in-hand, argues gender and ethnicity are not a business category and investors who dedicate a specific percent of their portfolio to diverse companies are the ones missing out.

“We are doing this backwards," says Hull. “Adding diverse, women-run companies actually de-risks an investment portfolio."

Hull points to research that has found women are more likely to seek outside help when a company is headed for trouble and operate businesses with less debt on average. What's more, a study conducted by First Round Capital concluded that founding teams including a woman outperform their all-male peers by 63 percent.

Ximena Hardstock, a 43-year-old immigrant from Chile experienced this bias first hand before she raised $5.1M for her tech startup. “How do you get an investor to notice you and take you seriously?" says Hardstock. “White men from Harvard have a track record and investors are all looking for entrepreneurs that fit the Zuckerberg mold. But a woman from Chile with an accent who started a technology company? There is no track record for that and this is a problem so many women of color face."

Hardstock came to the U.S. from the suburbs of Santiago when she was just 20-years-old. Alone with no family or connections in the U.S., Hardstock worked as a cleaning lady, a bartender, and a nanny before she began teaching and working in education. “I had a lot of ideas and Chile is still a very conservative country," she says. “Most women become housewives but I wanted to do something different. So, I moved to the U.S."

Hardstock went on to earn a Ph.D. in policy studies, served as vice president of Advocacy for National StudentsFirst and worked as a member of Washington DC mayor Adrian Fenty's cabinet. Her experience working in both education and government exposed her to a need to simplify the process of connecting lawmakers with their constituents. As a result, Hardstock founded Phone2Action, a digital advocacy company that enables organizations and individual citizens to connect with policymakers via email, Twitter, Alexa and Facebook using their mobile phones.

Because venture capital and private equity are not necessarily meritocracies, Hardstock initially struggled to get in an audience with the right investors despite her company's growth potential, her experience, and her education. In fact, it wasn't until she won a competition at SXSW in 2015 that she could get an audience with a serious venture capitalist.

While it may seem like symptoms of a bygone era, both Hardstock and Hull say the path to investor relationships is forged in places where many women of diverse backgrounds are not – ivy league organizations, golf courses and late night post-board meeting cocktails attended mostly by White men of means.

The history of venture capital has never been very balanced, according to Aubrey Blanche, global head of diversity at Atlassian software development company and co-founder of Sycamore, an organization aiming to fix the VC funding gap for underrepresented founders. “White and Asian men have built the venture system and for generations have been seeking out people like themselves to invest in."

Personal and professional networks are critical for founders to connect with investors, but many multicultural women don't have access to the networks their White peers have. According to a study conducted by PRRI, the average White person has one friend who is Black, Latino, Asian, mixed race, and other races. This common situation makes getting that all important warm introduction to established VCs very challenging for multicultural women founders.

“Is the ecosystem of your network equivalent to your net worth? Absolutely," says Hardstock. “For us, we have to build our own ecosystem and recreate what happens on the golf courses and at the Harvard reunions."

To Hardstock's point, most multicultural women with entrepreneurial aspirations lack that Ivy League network. According to reporting published in The New York Times, Black students make up just nine percent of the freshmen at Ivy League schools but 15 percent of college-age Americans. This gap has been largely unchanged since 1980.

While notable female investors such as Arlan Hamilton, Joanne Wilson, and Kathryn Finney are actively working to close the funding gap for women of color, only seven percent of current senior investing partners at the top 100 venture firms are women. Less than three percent of VC funds have Black and Latinx investment partners. Without an influential network, Hardstock and entrepreneurs like her are left screaming for a seat at the table.

When Black, Latina, and Asian women founders do get in the room with the right investors, they have to work harder to get the investors to relate to their products and services. “Entrepreneurs solve problems they understand," says Blanche. “When multicultural women entrepreneurs present their businesses to a homogenous group of male investors who may not be equipped to understand the idea, they may pass on an amazing business."

Take, for example, the founders of Haute Hijab or LOLA. Founders of both successful startups would have to explain the market for their services to a table occupied mostly by men who may never have considered that Muslim women want more convenient access to fashion and have never considered women might prefer to purchase organic tampons.

This lack of familiarity typically means reduced funding for women and a host of other consequences.

As one recent study pointed out, even the way investors frame questions to women can impact funding. According to the Harvard Business Review, female founders are often asked “prevention-oriented" questions focused on safety, responsibility, security, and vigilance. Male founders, on the other hand, are often asked questions focused on hopes, achievement, advancement, and ideals.

When all of these factors are considered, a side letter may not be enough to begin to close the funding gap.

Both Blanche and Hull say real change can be made by democratizing information and education on impact investing. Both women say educating investors and MBA candidates about impact investing is the best way to overcome current bias.

Blanche's organization, Sycamore, produces a newsletter for new angel investors who want to help close the funding gap while making money in the process. Hull's firm has an internship program for multicultural girls from Oakland to expose them to the worlds of investing, entrepreneurship, business leadership, and financial literacy.

“I'm excited about the changes I see," says Blanche. “I see more firm employing the Rooney Law on an institutional level, an increase in smaller firms looking at underserved communities, and the democratization of institutional funding."

Hull adds that as long as multi-cultural women-led firms continue to show returns and outperform or perform on par with companies founded by White men, the investor community will rethink their portfolio strategies.


This piece was originally published in 2018.