But wait a minute. It’s 2017. Why is pay inequity still a thing? The Equal Pay Act of 1963 became law in, well, 1963, and the Lilly Ledbetter Fair Pay Act, which extends the time to file an equal-pay lawsuit, is eight years old. When we compare job title to job title (versus comparing the wages of all working men to the wages of all working women — from whence we get that infamous 76 cents on the dollar figure), women still earn 98 cents for every dollar earned by a man. What’s more, women are less likely to hold higher-level, higher-paying jobs than men. (A shame, since study after study has documented the effectiveness of female leaders.)
Employers have real incentive to get pay equity right. For one, it’s the law, but beyond that, the right compensation attracts, motivates, and retains the best talent.
And yet … still a thing. What makes pay equity so gosh-darn difficult for so many employers?
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How to Define “Equal”
What does it mean to say two jobs are “equal?” Many employers struggle with that question right out of the gate. Small to mid-sized companies, in particular, might be tempted to focus on company job titles and determine that if most every job title differs from most every other job title, this mandate is moot. (Um … no.) Employers also may rely too heavily on seniority, degrees or education unrelated to job duties, and subjective performance criteria when authorizing pay differences. Good old-fashioned bias undoubtedly plays a part in these calculations, too. For example, Danielle hones her administrative skills while running a busy household for years, but Don’s brand-new and shiny business degree is simply more impressive.
To be fair, it can be hard to evaluate whether John in Marketing and Linda in Accounting perform work that requires equal skill, effort, and responsibility under similar working conditions. I’m guessing that a good many employers just cross their fingers and move on.
Don’t be that employer. Despite the difficulty, make it a point to annually audit your job functions for educational and skills requirements, decision-making authority, accountability expectations, working conditions, and so on, and adjust job descriptions and pay grades as needed. And please don’t hesitate to bring in expert help. The stakes are too great to wing it.
How Pay Inequity Affects the Workplace
Make no mistake: pay inequity hurts the bottom line. It’s ironic, because underpaying some employees should, theoretically, help the bottom line, right? Well, perhaps in the short term. In the long term, however, the negative consequences are considerable.
Let us count the ways:
- Pay inequity reduces diversity, and diversity is good. Companies that put effort into addressing pay inequity attract more and different types of workers, and that’s important because diverse teams perform better. It’s a fact.
- Pay inequity negatively affects employee morale and engagement. When folks begin to realize they’re not being paid fairly, bad feelings and disengage naturally follow. The fallout is not inconsequential. One study suggests that disengagement costs companies more than $500 billion annually.
- Pay inequity hurts retention. No one is irreplaceable, true, but it’s also true that business growth is dependent on workforce stability. A survey by PayScale found that both men and women are more likely to leave their jobs if their employers aren’t addressing gender inequality.
Pay inequity is a seemingly simple concept that’s anything but. Hiring, compensation, and employee development processes are inherently subjective and therefore subject to personal bias. Then too, studies have shown that minorities and women are less likely to negotiate salary. Add to all this the difficulty (mentioned earlier) of evaluating jobs against each other, and you’re starting to see the scope of the problem.
Being proactive around equity (e.g., reviewing pay practices and access to opportunity/advancement) is key. Without it, things can get out of whack. However, commitment to ongoing practices is a must. Unfortunately, there are no one-time fixes.
Tell Us What You Think
How does your organization address gender pay inequity? We want to hear from you. Tell us your thoughts in the comments.