What is the LGBTQ+ Wage Gap and why does it exist?

With ever increasing inclusivity and recognition of the LGBTQ+ community, a number of new situations and new complications have come to light. From a financial perspective, one of the most significant and pressing is the LGBTQ+ wage gap. Thus, this article will endeavour to explore the causes and scale of the wage gap, and will analyse various proposals to close it.

What is the wage gap

The LGBTQ+ wage gap is the difference in average pay for LGBTQ+ people compared to heterosexual, cisgender (cis-het) people. It can be analysed in a number of different ways, taking various factors into account, including discrimination, education levels, career choices, and whether or not the individual have publicly disclosed their identity. According to the LGBTQ+ advocacy group HRC Foundation, as of early 2022, LGBTQ+ workers in the US earned around 90 cents for every dollar earned by an average cis-het worker. Adding, to this, college-educated LGBTQ+ individuals in the US were earning 22% less than non-LGBTQ+ workers a decade after graduating.

Thus, there is still a clear gap between the LGBTQ+ pay and cis-het pay. The reasons for this, just like with the gender pay gap, are incredibly complex, being created as a consequence of many overlapping factors.

Why does it exist

First of all, one major factor is discrimination. An estimate shows that due to the cumulative effects of anti-LGBTQ+ bias, STEM industries have lost up to 120,000 possible candidates. Adding to this, in the UK, gay or lesbian applicants are 5% less likely to be invited for a job interview. This shows that there is still deep-rooted prejudice in the UK, which influences how the capabilities of LGBTQ+ individuals are judged and perceived. This is similarly systemic in the US where 9% of individuals reported that they were denied a job or laid off on the basis of their identity.

Another critical factor in the wage gap is simply the fear of discrimination. This is most apparent in the career choices individuals make, with many LGBTQ+ persons basing these on the levels of discrimination they expect to face. There is a high concentration of gay and lesbian individuals working in psychology, law, social work, and the arts, while the opposite can be said for STEM subjects. Around 29% of LGBTQ+ individuals between 13 and 23 chose to avoid a STEM career for fear of discrimination, while according to research published in 2018, heterosexual undergrad students in the US were 7% more likely to still be enrolled in a STEM major in their fourth year of university. This presents a large disparity in representation in STEM professions. This has a large effect on the wage gap, especially since STEM jobs tend to be higher-paying than many of the career options that LGBTQ+ individuals are more inclined to follow.

Many studies show that LGBTQ+ workers tend to shy away from workplaces where they feel they won’t be welcome, for example, there is a clear trend of LGBTQ+ men choosing to work in female-dominated professions, trying to avoid professions that appear “overly masculine”. This in turn adds to the wage gap seeing as, due to the gender pay gap, female-dominated professions are not paid as well. Thus, the fear of discrimination induces inclinations, whether conscious or unconscious, that highly influence the size and extent of the LGBTQ+ wage gap.

A fascinating point of enquiry is how the wage gap affects female same sex relationships. On the one hand, one would assume that a female same sex couple would suffer due to a double penalty from the gender pay gap as well as the impacts of the other mentioned factors. On the other hand, research suggests that LGBTQ+ women actually tend to have more wealth than cis-het women on average, with a possible reason being lower rates of motherhood (and as such less income lost through maternity leave).

Finally, another factor is the impact that disclosing their identity has on their salary. In the US around 46% of LGBTQ+ individuals in the workforce are still “in the closet”. While this does help avoid discrimination, it increases stress . According to research, hiding your identity is connected to lower job satisfaction, and a stunted career, with closeted graduates earning an 18% lower income and being 14% more likely to have mental health issues. Thus, in areas where discrimination is rife, the wage gap tends to widen due to the mental toll that “staying in the closet” can have.

How do different life events impact this

Aside from the wage gap, there is also a significant wealth gap to consider. One of the biggest factors creating this are the added costs associated with parenting. As LGBTQ+ couples often don’t have the ability to have children in the same way as cis-het couples, they are forced to turn to newer, more expensive alternatives. These can include the following:

• IVF treatments
• Surrogacy
• Adoption

These options are generally quite expensive, with one round of private IVF treatment in the UK for example costing a minimum of £5,000 (this also normally has a low success rate, circa. 25%), while in the US, surrogacy costs can start at $100,000. These are added costs which are much more prevalent among LGBTQ+ parents than around cis-het parents, already causing a significant wealth divide.

Another consequential question is that of housing. There is a large trend of LGBTQ+ people moving to more urban areas with higher housing prices, with bigger communities in order to avoid discrimination in more rural areas. A knock-on effect from this can be a reluctance to downsize during retirement due to fears of discrimination in more rural areas.

A factor which affects trans and non-binary people specifically is the cost of transitioning and gender-affirming care. Due to NHS waiting lists for gender-affirming surgeries often being in the region of a couple of years, many find themselves turning to private facilities. This is expensive, however, as the average cost of gender-reassignment surgery through a private provider is £20,000. Nevertheless, the bigger income drain is gender-affirming care. For example, HRT (Hormone Replacement Therapy) can cost between £5-£40 a month, while puberty blockers can cost around £100 a month, which when calculated over the number of years that they are taken, and set someone back a considerable sum. Thus, trans, and non-binary people have substantial costs to contend with, which don’t apply to cis people, leaving them with less savings and thus, less wealth overall.

As evidenced, there are many costs associated with the LGBTQ+ community that aren’t applicable to cishet people, further increasing the wealth gap. The fact that LGBTQ+ people on the whole have less disposable income on hand can have significant financial implications down the road, affecting their pension and career prospects.

How can we try to change this

Changing these policies will be a long and arduous process. Nevertheless, there are things that can be done on legislative, company, and educational levels that will have a significant impact.

On a legislative level, passing pro-LGBTQ+ laws promotes a positive response in terms of LGBTQ+ participation in the labour force, as well as considerably narrowing the pay gap. Research in the US showed that passing anti-discrimination laws reduced the hourly wage gaps between straight and gay men by 11%. Thus, this shows that as changes in LGBTQ+ rights and laws come into place, social norms\ follow, and opportunities open up.

On a company level, the most critical venture is eliminating discrimination and prejudices in the workplace. This is one of the primary factors preventing LGBTQ+ individuals from entering the labour force, and taking up specific jobs. As such, implementing zero-tolerance policies, and educating employees on the specific issues involved would be policies that would go a long way in promoting equal opportunities in the labour market. The other side of it is making sure that the general framework of the company is inclusive, ensuring equal hiring, employment, and promotion opportunities, and making sure that all company policies and packages are equally available to same-sex couples as they are to heterosexual couples.

Moreover, many of the career choices made by LGBTQ+ people that can lead to the inequality in the labour market are made at a young age, and are borne out of the expectations and experiences that are gained in that environment. As such, educating children on LGBTQ+ issues and normalising the community from an early age will do a lot to make LGBTQ+ children feel comfortable and safe in their day to day lives and not be worried about the impact events such as coming out will have on their lives. It will also reduce any alienation in a school environment, meaning that a fear of discrimination is no longer a factor in their future choices.

A final point which could have a huge impact would be reducing costs for LGBTQ+ specific needs. A good example would be making gender affirming care a part of NHS care. As mentioned previously, hormones, surgery etc. are a vital part of helping trans people navigate their lives. It is crucial for ensuring that the trans way of life is as normalised as a cis-het one. As well as this, making IVF treatment, surrogacy, and adoption services more widely available and more affordable would reduce mental and financial stress for LGBTQ+ parents.

Conclusion

Thus to conclude, from a financial and social perspective, the LGBTQ+ community face a number of challenges not faced by cis-het people, which have a significant impact on their earnings, expenditure, and savings. There are a number of measures, however, that can be taken in order to solve this. On a legislative level, passing pro-LGBTQ+ laws will promote greater inclusivity and reduce prejudice, closing the discrimination-related factors causing the wage gap. Furthermore, on a company and school level, introducing measures and policies to eliminate disinformation, and educate people on these issues, will help reduce discrimination as well as create a more pleasant and comfortable environment to help LGBTQ+ people thrive in the workplace. There is still a long way to go, however, bit by bit, we can work to create a more inclusive and productive overall community.