Women outpace men in education around the world. They graduate at higher rates and have higher average GPAs. However, despite these successes, women lose their advantage when entering the workforce. For every 100 men who are promoted to the first step up to manager, only 81 women get the same opportunity. This phenomenon causes women to fall behind early on, making it difficult to ever catch up. We refer to this often missed or delayed first promotion as the “broken rung.” The actions that women can take to leap over the “broken rung” is the subject of the book of the same title I co-authored that will be published on March 11.
If the “broken rung” is the issue, the solution is for women to build more experience capital and proactively steer their careers in different ways. Experience capital is the skills, expertise, and wisdom that employees gain on the job. Over time, experience capital increases an employee’s value to the organization and accounts for roughly 50% of an employee’s lifetime earnings on average.
In the U.S., women have a 27-cent pay gap for every dollar than men earn, and 80% of that gap is explainable. Of the portion that is explainable, one-third is due to different hours worked and experienced gained, and the other two-thirds is due to different career choices that women make—for more flexible jobs, less competitive jobs (e.g., sales), or jobs that are more closely aligned to what they would enjoy.
The first third is because women accumulate less time on the job than men. Women average 8.6 years at work for every ten years by men because, on average women work fewer hours, take longer breaks between jobs, and occupy more part-time roles than men, according to McKinsey Global Institute research. The remaining two-thirds is because even when men and women start out in the same occupation, women are more likely to stay in the same income quintile or move down an income quintile, while men are more likely to move up. This is due to occupation selection and how men and women move jobs over time, with women more often selecting jobs that have flexible hours or geography, and jobs that are less overtly competitive (with transparent success metrics like sales roles).
Cultural, systemic, and organizational change will be critical to achieving women’s parity in the workplace. However, while organizations play a critical role, individuals can also take actions to build more experience capital and increase their lifetime earnings. Here are three ways to start building experience capital that apply to both women and men.
Seek a company, not just a job
When looking for your next role, it’s wise to prioritize the company over the actual role or the boss. Companies that can have the most impact on your learning and growth do three main things well: They support employee continuous learning and development, they encourage rotational roles across a career, and they have a clear and successful strategy. Effective organizations provide ample chances for employees to grow through training and expectations of mutual feedback, which has a lasting impact on their experience capital.
In fact, individuals with exposure to a company that shows these three traits, ideally within the first five years of a career, see 50% higher lifetime earnings. How do you seek out these effective organizations? Assess if they have a strong learning culture, a high degree of internal mobility, and a clear strategy that is winning in the market. You can do this by reading their publicly available materials and having conversations with their current employees.
Make big, bold moves
The moves you make throughout your career, whether between roles, organizations, occupations or industries, significantly shape your career trajectory and the growth of your experience capital. Our data highlights two types of moves that have the greatest impact: big, early moves within the first five years of your career; and bold moves, which involve switching to a job that requires a significant share of new skills.
Interestingly, women and men make these bold moves at the same rate across a career, and those who do experience higher lifetime earnings. Making big, bold moves early in one’s career grows experience capital to account for 60 to 80% of one’s lifetime earnings, much higher than the average of 50%.
To find the right opportunities, you can activate connections by networking and clearly communicating your career goals. Demonstrate how you’ve built both soft and hard skills through your unique set of experiences, quantifying their impact to demonstrate your potential in new contexts.
Invest in your mental, physical, and financial health
Regardless of what tactics you use to rise in your career and build your experience capital, it will be impossible to reach your full earning potential or achieve your ambitions without taking care of your mental, physical, and financial health. Around the world, on average, women spend eleven years in debilitating health, compared to the 8 years for men. Women are also 1.6 times more likely than men to experience a mental illness. To set yourself up for long-term health and ensure you can be healthy across a career and a lifetime; you need to focus on the basics of a healthy lifestyle. This includes eating healthy, exercise, good sleep, regular health screenings, and advocating for yourself in terms of your health.
On top of mental and physical health, your financial health is critical to maximizing your experience capital. In the United States, 62% of working women have less than they should in retirement savings based on calculations of how much is required to comfortably retire, compared with just 48% of men. Women live longer and spend more time in poor health than men, and spend more money on healthcare across a lifetime.
Given women’s lower earnings and lower retirement savings, all these health expenses are a challenge. It is key to be involved in your financial decisions and knowledgeable. In fact, the benefits in improving from poor financial knowledge to good financial knowledge are the greatest—the incremental benefits of being deeply knowledgeable are not as great. Some early steps you can take to boost your financial health by setting savings goals, getting a high yield savings account, strategically building credit and opening a retirement account as early as possible.
Maximizing your experience capital may sound like a big undertaking, but applying strategic tactics to your career path will accelerate your growth and multiply your lifetime earnings.