Written by
Ruth Thomas
Senior Consultant and Co-Founder, CURO

29 June 2021

As we come to the end of Pride Month, we thought it was perfect timing to shed some light on the LGBTQ+ pay gap, which has received less attention than other notable pay gaps. 

A number of studies have indicated that pay gaps exist for LGBTQ+ communities. A 2019 survey of 4,000 UK based staff by YouGov for LinkedIn, found a pay gap of 16%, with LGBTQ+ employees taking home an average £6,703 less per year than their straight colleagues.  

Elsewhere, studies have shown a wage hierarchy exists where heterosexual men earn more than gay men, followed by lesbians and heterosexual women. One analysis of 32 studies from several countries found that, on average, gay men earned 11% less than heterosexual men, while lesbian women earned 9% more than heterosexual women. Studies and surveys have also shown a negative wage gap for bisexual and transgender people, though the evidence is much more limited - particularly for transgender people.

A 2015 study in Canada revealed a similar wage hierarchy exists, but what’s interesting is that they used Oaxaca-Blinder decompositions in an attempt to identify what factors influenced pay variation. The analysis indicated that industry of employment, rather than occupation, disadvantages gay men, lesbians, and heterosexual women. High levels of educational attainment lead to employment in lucrative occupations, but sexual minorities earn significantly less than heterosexual men within these occupations. 

A similar wage pattern was thought to exist in the US until a 2017 report by Carpenter and Eppink linked self-reported sexual orientation with earnings for employed US adults in the 2013-15 National Health Interview Surveys. They found that gay, full-time employed men made, on average, 10% more than similarly employed straight men. The difference in pay persisted even when they controlled for a variety of factors: presence of a partner, the sexual orientation of a partner, race, age, ethnicity, and the size of one’s firm and family. Their analysis showed a lesbian pay premium of about 9% - similar to earlier studies. Bisexual men and women, however, were not so lucky, earning less than both their gay and straight counterparts.

Lack of data hinders LGBTQ+ pay gap progress

It’s clear that we need more data and studies to understand how these LGBTQ+ pay gap trends play out across the workplace. But therein lies a key issue. While many employers collect data on gender and ethnicity, this does not extend to other protected category groups. We commonly hear the objection that HR departments feel the data is just too sensitive to disclose. However, some UK companies are showing this is not the case.

Expanding their reporting under the Gender Pay Gap reporting regime, leading UK employers are now voluntarily reporting their ethnicity, LGBTQ+ and disability data. These firms have had effective declaration campaigns which has allowed them to reach strong declaration rates. Clifford Chance collects diversity information on a voluntary basis through a self-identification portal; among its employees, 81.2% chose to report their ethnicity, 65.2% listed their sexuality, and 70.2% reported disability data. Similarly, Zurich Insurance confirmed in their latest LGBTQ+ pay gap report that 65% of their people shared their sexual orientation. 

The very useful Stonewall 'Do Ask, Do Tell Guide' provides key advice for employers on capturing data on sexual orientation and gender identity globally. They point out that asking staff to self-disclose through their HR systems is not the same as encouraging LGBTQ+ employees to be open about their sexual orientation or gender identity. However, LGBTQ+ employees may be concerned about disclosing their sexual orientation or gender identity for fear of having this disclosed among colleagues. The concern understandably increases in countries where legislation negatively affects LGBTQ+ people, or where cultural or social norms have a negative impact on them.

As with all data declaration campaigns, communication is key. You need to explain why you are collecting the data, how this links to your organization values, along with how the data will be used and stored. 

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Issues that drive the LGBTQ+ pay gap 

We’ve discussed previously the issues that drive gender and ethnicity pay gaps, and their complexities. The same applies when looking at the LGBTQ+ pay gap. 

One explanation which we mentioned above is that work choices impact LGBTQ+ pay gaps and lead to “Rainbow-Collar” jobs. Studies have shown gay men are more likely to avoid occupations that are more male-dominated than other men (which includes the best paid jobs), while lesbian women are more likely to avoid female-dominated occupations than other women (which are typically worse paid). Lesbians may also earn more because they tend to work longer hours. So this may go some way to explaining the wage hierarchy. 

Of course, this ‘choice’ might be driven by discrimination. Although sexual orientation and gender identity have no relationship to workplace performance, during the past four decades a large body of research using a variety of methodologies has consistently documented high levels of discrimination against lesbians, gay men, bisexuals and transgender people at work.

One key driver of pay gaps is vertical segregation (lack of senior representation). A McKinsey study looking at how the LGBTQ+ community fare in the workplace found that three in 20 LGBTQ+ women believe that their sexual orientation will negatively affect their career advancement at work. For LGBTQ+ men, this number is even higher, at six in 20. Also, compared with straight women, LGBTQ+ women are more likely to report that their gender has played a role in missing out on a raise, promotion, or a chance to get ahead. Despite these challenges, LGBTQ+ employees are just as likely as their straight counterparts to aspire to be top executives. 

It’s clear that LGBTQ+ employees face unique challenges, so it is crucial that workplaces become more inclusive and build a relationship of trust with their employees. This starts with being open about ambitions, collecting data and then using this to continuously monitor and understand the lived experience. But, reporting needs to come hand in hand with cultural change. Only then will it translate into a meaningful impact on the quality of life for all employees. 


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