What Causes Pay Gaps in Today’s Workforce, and Why Do They Still Persist?

Pay gaps aren’t just an HR headline, they’re the result of many structural forces (occupational sorting, bias, policy, pay secrecy) that reinforce one another. This article breaks down the main causes, shows the latest evidence, and gives HRTech-savvy fixes that actually move the needle.

Pay gaps, differences in earnings between groups defined by gender, race, age or other characteristics, remain stubbornly persistent even as more organizations say they care about equity. In the U.S., for example, women earned about 85% of what men earned in 2024, a modest improvement but far from parity.

Below I unpack the root causes, why they compound, and what HR teams (and HRTech) can do right now.

Occupational segregation and role-level concentration

A major driver is where people work and the jobs they hold. Women and many racialized groups are overrepresented in lower-paid occupations (care, retail, administrative roles) and underrepresented in higher-paid technical and leadership roles. That “sorting” explains a substantial share of raw pay gaps because industry and role differences often come with large pay differentials. Structural barriers, hiring networks, credential assumptions, and biased job design—feed this sorting over time.

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Evidence: multiple analyses show occupational distribution remains a leading explanatory factor for the gender and racial wage gaps.

Discrimination (conscious & unconscious) and biased pay decisions

Even after accounting for role, experience, and education, meaningful gaps remain. Studies that control for these factors still find women and racial minorities earn less, evidence consistent with direct bias in hiring, promotion, performance evaluation, and pay-setting. Biased performance metrics, subjective promotion panels, and sponsorship networks that favor majority groups all produce lower pay outcomes for underrepresented employees.

Adjusted analyses show persistent gaps: one labor-economics study found women were paid about 18% less on an hourly basis even after controlling for many observables, which points to discrimination and structural disadvantage.

Pay secrecy, negotiation dynamics, and initial offers

Pay transparency (or lack of it) has outsized effects. When salaries are secret, information asymmetry empowers managers and initial offer bias to set compensation that favors insiders. Research also documents that women and some minority groups are less likely to be perceived positively when they negotiate aggressively, so negotiation-centered pay models widen gaps. Employers that publish ranges and standardize offers reduce variance and slow pay leakage.

Industry trend: organizations preparing for expanding pay-transparency laws are revising job-level pay bands and offer authorizations, Aon’s 2024 readiness study shows many HR teams are updating tools and policies to comply.

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Caregiving and time-out penalties

Career interruptions for caregiving (often taken disproportionately by women) hit long-term earnings via lost promotion windows, shorter tenure, and fewer leadership experiences. These interruptions compound with lower access to high-visibility projects after return—creating a “lost trajectory” effect. Policies that protect career momentum (structured re-entry programs, part-time senior roles, formal sponsorship) mitigate this, but uptake is uneven.

Devaluation of work dominated by women or marginalized groups

Jobs historically performed by women (nursing, teaching, caregiving) have been systemically undervalued in compensation structures. This is not only cultural—it’s embedded in public policy, procurement, and how organizations set pay scales. Correcting it often requires sector-level bargaining, public investment, or intentional market-adjusted pay strategies.

Intersectionality: compounding disadvantages

Race, gender, immigration status and education interact. For example, Black and Latina women face larger penalties than white women or Black men, showing that single-axis analyses understate real disparities. The Institute for Women’s Policy Research and similar studies document large gaps for women of color even at equal education levels.

Why these causes persist (the system dynamics)

1. Multiple reinforcing mechanisms. Occupational sorting, bias, secrecy and caregiving penalties work together, fixing one point (e.g., pay bands) without addressing others (e.g., promotion pipelines) yields only partial change.
2. Slow institutional incentives. Market demand for short-term cost control and weak enforcement of equal-pay rules mean many firms prioritize flexibility over rigorous equity audits.
3. Policy gaps and uneven law adoption. Some countries and regions have strong pay-transparency and reporting regimes; others do not. Where laws are weak, employers have less external pressure.
4. Political and social backlash. Recent pullbacks from formal DEI linkages in executive compensation in some markets demonstrate that progress can be reversed without durable accountability mechanisms.
   

HRTech and practical fixes that work (evidence-based)

If you’re in HR or run HRTech, prioritize these concrete moves:

1. Build standardized, role-based pay bands. Map compensation to job families and market median; automate offer approvals to remove ad-hoc salary inflation or deflation.
2. Publish salary ranges for postings and internal roles. Transparency reduces negotiation bias and compresses unjust variance. Aon’s readiness work shows firms that plan these disclosures early have smoother rollouts.
3. Run periodic pay-equity audits with intersectional lenses. Use analytics to control for job, location, performance, and tenure, then flag unexplained gaps for remediation. Integrate audit triggers into payroll and HRIS.
4. Standardize promotion criteria and project rotations. Use objective scoring rubrics and track high-visibility assignment distribution by demographic group.
5. Protect career trajectories around caregiving. Offer formal returnships, keep people on promotion tracks during leaves, and convert critical project experience into documented credits.
6. Tie compensation governance to accountability. Instead of vague DEI goals, set measurable targets (percentage of pay gaps closed, number of underrepresented leaders promoted) and link them to leadership KPIs.

The business case, why closing gaps matters

Beyond fairness, closing pay gaps boosts talent retention, broadens the leadership pipeline, and, at scale, moves macroeconomic growth. The World Bank has modeled that closing barriers to women’s full participation could lift global GDP by more than 20% over time. That’s not just social policy; it’s economic strategy.

Short checklist for HR leaders (next 90 days)

• Publish role salary ranges for new hires and internal moves.
• Run a basic pay-equity scan (pay vs. role/tenure/performance) and document unexplained differences.
• Lock offer approvals behind standardized bands in your ATS/HRIS.
• Launch a pilot returnship program for employees returning from caregiving leave.
• Create a quarterly dashboard for pay equity and promotion parity for the leadership team.

Bottom line

Pay gaps persist because multiple, reinforcing systems, occupational sorting, bias in decisions, pay secrecy, caregiving penalties, and policy gaps, operate together. The good news: targeted, data-driven HR policies coupled with HRTech (transparent ranges, audit automation, standardized offers) deliver measurable improvement. Closing the gap is both an ethical imperative and a strategic advantage.

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