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Being transgender at work: Insights from McKinsey’s DEI report

In 2016, a study from the UCLA School of Law’s Williams Institute made headlines. The study tallied the number of people who identify as transgender in the United States. While the numbers fluctuated by state, the total was double that of just a decade prior: an estimated 1.4 million people in the US identify as transgender. Today, the Human Rights Campaign estimates that the number of transgender people in the US has increased to more than 2 million.  

Despite the growing visibility of the transgender community, the transgender experience in the United States is still rife with serious challenges—including stigma, increasing threats to safety and existence, and the higher-than-typical likelihood of encountering employment or housing discrimination. The challenges of being transgender extend to the workplace as well. McKinsey & Company released a report covering the experiences of transgender employees, detailing the systemic barriers many face when it comes to employment, work performance, and career progression. These insights serve as an important reminder that employers cannot continue to ignore a significant population of the American workforce, and that there are steps companies can take now to explore policy options that explicitly focus on employees across the gender spectrum. 

What does “transgender” mean?  

The Human Rights Campaign defines transgender as an umbrella term for people whose gender identity or expression is different from the cultural expectations of their birth sex. The trans community itself does not have total agreement on exactly who is covered by the term transgender. To some, it is anyone who doesn't fit the cultural expectations. To others, the term specifically refers to someone that is transitioning to live as the gender they align with. For the purposes of their report, McKinsey used the broader usage of the term. Cisgender is a term used to describe those who are not transgender. 

About McKinsey’s report on the transgender experience 

McKinsey’s research builds on the firm’s 2020 article about how the LGBTQ+ community fares in the workplace and on the 2020 Harvard Business Review study on creating a trans-inclusive workplace by examining data on multifaceted transgender representation in the workforce, the transgender experience at work, and stories from the lived experience of transgender-identifying employees. 

The analysis draws on both primary and secondary sources—including McKinsey’s 2019 global survey Understanding organizational barriers to a more inclusive workplace, its 2021 Women in the Workplace survey, and its 2021 Workplace Inclusion Across the Gender Spectrum survey. The firm also analyzed the 2020 Behavioral Risk Factor Surveillance System (BRFSS) data from the Centers for Disease Control and Prevention (CDC). 

Transgender people are underrepresented, underemployed, and underpaid 

Compared to cisgender people, the employment status of transgender people can be precarious. In addition to not being well represented in the full-time workplace, transgender employees are more likely to work in jobs that offer lower pay relative to cisgender employees. Some of the statistics laid out in the McKinsey report highlight these disparities: 

  • Transgender adults are nearly twice as likely as cisgender adults to be recently out of work. 
  • 42% more transgender people than cisgender people work part-time only, making it more likely that they do not receive important benefits packages such as comprehensive healthcare. 
  • Trans employees are 2.4 times more likely to work in minimum-wage industries, such as food or retail. 
  • Safety was the most cited concern for trans people (59%) in their decisions not to pursue certain industries.  
  • Even when educational backgrounds are similar, cisgender employees make 32% more money than transgender employees. 

People who identify as transgender feel less supported at work  

McKinsey’s report found that more than half of transgender people said they didn't feel comfortable being open about their gender identity at work. Outside of their own companies, that number only grew. Two-thirds of respondents said they remain in the closet for professional interactions that take place outside their place of employment.  

Fear of being open about their gender identity can prevent many transgender employees from asking important questions about a company's culture or benefits, such as the presence of gender-neutral bathrooms or whether hormone replacement therapy is covered in a benefits package. This is an especially difficult challenge when applying to jobs; half of transgender employees felt they couldn't be themselves during the application process, compared to only 33% of cisgender respondents.  

The report also found that transgender people often experience greater barriers to advancement in their workplace. According to McKinsey: 

  • 36% of trans people believe their gender identity would affect their ability to get promoted, compared to 21% of cisgender people. 
  • 37% of trans employees believed specifically that their sex, gender, or sexual orientation would impede their promotion. That number was only 19% among cisgender employees. 
  • 27% of trans employees are in entry-level jobs, compared to 12% of cisgender people. 
  • 32% of cisgender people were managers or other senior members of staff. Only 19% of trans people were. 
  • 86% of trans employees said they don't see leaders in higher positions at work who look or seem like them and are carving a path forward for the transgender workplace experience. 

4 ways organizations can help transgender employees  

The report concludes with a series of actions for companies who want to better embrace their transgender colleagues and make it easier for members of the transgender community to enter the workforce in a meaningful way. Here are their four key recommendations: 

  • Be intentional in recruiting. One of the problems with workplace representation is that marginalized communities don't have the skillsets required. Outreach is required to help alleviate this problem. Sponsoring seminars to help transgender community groups learn important skills is one way businesses can help.  
  • Offer trans-affirming benefits. The apprehension trans people have about asking about benefits can be entirely alleviated by companies who choose to directly craft benefits packages that are trans-friendly and be open about such benefits from the start of the employment process. 
  • Craft trans-inclusive policies and programs. Many policies that companies adopt are very gender-oriented. For example, dress codes might prevent an employee from feeling comfortable dressing to match their gender identity. Removing such barriers can make trans people feel more comfortable. 
  • Signal an inclusive culture. In order to make any closeted employees at the company feel comfortable enough to come out, companies should signal their support for the LGBTQ+ community. This can come in the form of asking for preferred names in addition to legal names on job applications, creating a gender-neutral bathroom, and displaying transgender pride flags during Transgender Awareness Week. 

Why greater transgender inclusion in the workforce benefits everyone  

In addition to being the ethical thing to do, helping transgender employees succeed in the workplace brings with it several benefits to the company in question and society at large. To start, creating a more inclusive, ethical culture benefits individual and organizational performance. According to the LRN Benchmark of Ethical Culture, companies that have a more ethical culture outperform those who don't by up to 40% across all aspects of business—including employee loyalty, customer satisfaction, growth and adaptability.  

A concerted effort to increase employment and wage equity for transgender people could also be an economic boon for the US. Increasing the representation of transgender people in the workplace—and providing them with more opportunities to develop and grow within the company—would increase the annual household income of transgender people by nearly $15 billion. That increase in annual income for the transgender workforce is enough to add nearly $12 billion to annual consumer spending totals. 

The key takeaway  

We know from the 2022 Ethics & Compliance Program Effectiveness Report that 76% of high-impact ethics and compliance programs will be prioritizing diversity, equity, and inclusion initiatives in the coming year. As demand for DEI training in the E&C space continues to grow, ensuring your organization includes information about the transgender workplace experience is a key step towards building a culture of belonging. By making a conscious effort to take the steps outlined in the McKinsey report, your company can be a leader in a much needed social change. 

LRN’s DEI program features a growing library of DEI courses—including topics like LGBTQ+ allyship, microaggressions, and gender equality—that you can sample for free. The program also features ready-to-deploy learning assets that accompany each course—such as conversation guides and templates for employee communications—and are grounded in deepening employees’ understanding of these issues, so organizations can create workplaces that are more inclusive and equitable. For more insight into building a culture where everyone belongs, check out our new DEI collection of resources as well as our DEI page at LRN.com.