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Pay Gap Formula:
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The pay gap measures the difference in earnings between two groups, typically expressed as a percentage of the higher-earning group's pay. It's commonly used to analyze wage disparities between genders, races, or other demographic groups.
The calculator uses the pay gap formula:
Where:
Explanation: The formula calculates what percentage less Group 2 earns compared to Group 1. A positive result indicates Group 2 earns less, while a negative result would indicate Group 2 earns more.
Details: Calculating pay gaps helps identify wage disparities, measure progress toward pay equity, and inform policy decisions. Regular monitoring can reveal patterns of inequality that might otherwise go unnoticed.
Tips: Enter the average or median earnings for both groups in the same currency. Group 1 should typically be the higher-earning group you're comparing against. Both values must be positive numbers.
Q1: What's considered a significant pay gap?
A: While any gap may be significant, gaps of 5% or more typically warrant investigation. The threshold depends on context and industry standards.
Q2: Should we use median or average earnings?
A: Median is generally preferred as it's less affected by extreme high earners, but average can be used if specifically comparing mean wages.
Q3: How often should pay gaps be calculated?
A: Annually is common, but more frequent calculations may be needed when implementing equity initiatives.
Q4: Does this account for different roles/experience?
A: No, this is a raw gap. For adjusted gaps that account for factors like experience, use multiple regression analysis.
Q5: What's a good target for reducing pay gaps?
A: The ultimate goal is typically 0% gap, but realistic targets depend on baseline measurements and timeframes.