Let’s Talk Pay Equity
Every worker has the right to expect equal pay for equal work regardless of their gender, race, religion, national origin, age or physical/mental abilities – whether they work full time or are part time workers. In addition, a lot of attention has been given to pay equity in recent years thanks to recent laws enacted at the state level as well as greater enforcement of legislation at the federal level (e.g. The Equal Pay Act of 1963, Title VII of The Civil Rights Act of 1964,The Lilly Ledbetter Fair Pay Act of 2009).
Employers engage in pay equity analysis to ensure equal pay between employees in similar roles. The objective is to determine that pay inequities are justified by compensable factors, like location and tenure, and not by unjustified factors, like gender or race. According to the PayScale Compensation Best Practices Report, 38 percent plan to conduct some type of pay equity analysis in 2020.
Even with all this activity and attention, wage gaps persist. Part of the issue is that pay equity is often misunderstood. Additionally, the solution takes time and investment and a willingness to acknowledge and correct past practices that may have been unfair. No organization can do one thing – say a pay equity analysis – and expect that the work is done. Pay equity is an ongoing commitment that requires a high degree of integrity.
The Numbers: A Tale of Two Gaps
At PayScale, we’ve been fortunate over the years to be able to get a high-level view of pay equity due to the compensation data we see from both employees via our free salary survey and employers via our compensation management software for businesses. We have published research on the gender pay gap for years and recently have been able to dig into race as well.
There are two important gaps to talk about — the uncontrolled wage gap, which doesn’t control for any compensable factors like job level or experience, and the controlled wage gap, which controls for as many factors as possible, including job title, industry, location, years of experience, education, etc.
For example, the uncontrolled gender wage gap is currently 81 cents on the dollar when comparing all working women to all working men regardless of job occupation, industry, education, geography, etc. This metric is useful in analyzing the opportunities of women compared to men holistically, as women are more often funneled into lower paying positions or incur a wage gap penalty for having children or being capable of having children.
The controlled gender wage gap is much narrower, but it’s not zero. PayScale’s latest numbers place it at 98 cents on the dollar. This number is what is meant when the term “equal pay for equal work” is used. This number has also not changed for many years.
Pay equity advocates sometimes conflate these two gaps. They’ll use the uncontrolled wage gap of 81 cents on the dollar and say that women aren’t getting “equal pay for equal work”. As we just explained, this isn’t correct and can undermine the fight for pay equity. The uncontrolled gender pay gap is still important, though. It is evidence of inequality when talking about the representation of women in higher paying occupations, such as STEM-related fields or executive leadership, and the barriers that inhibit women from achieving more advanced careers compared to men.
True Pay Equity: Equal Access to Higher Earning Potential
To put it simply, women, people of color and other historically marginalized populations experience barriers to many of the best-paying jobs in the labor market. The jobs with the highest compensation include STEM jobs and executive leadership roles. According to Catalyst, women make up 35.5 percent of all STEM fields in the United States, with underrepresentation particularly in engineering and computer or information sciences. Despite constituting 50 percent of the population, women also make up only 5 percent of Fortune 500 CEOs.
This is why it is important to look at both the uncontrolled and controlled pay gaps and consider representation of historically underrepresented people on executive teams, boardrooms, and high-paying job families as part of pay equity analysis. Pay equity isn’t just about equal pay for equal work. It is also about equal opportunity, economic empowerment, and wealth distribution, and the systemic issues, unconscious biases, and social norms that constrain people from achieving all that they might.
Solving for pay equity holistically is a tall order, but there is plenty that organizations can do to cultivate an environment that leads to more equitable outcomes for all employees.
Let’s talk about a few of them.
There is robust evidence that diverse teams produce better outcomes. When an organization builds diversity into its DNA, it’s more likely to ask more and better questions. Diverse teams are also less likely to be assumptive and more likely to rely on factual evidence for answers, ultimately resulting in higher returns on equity and higher net income growth.
If your organization lacks diversity, don’t assume you can solve that issue without significantly disrupting the recruiting process. Many organizations fall into patterns — e.g. recruiting from the same set of schools or relying heavily on employee referrals. But patterns result in more of the same, even with the best of intentions.
PayScale published a study examining employee referrals and found that they disproportionately benefit white men. That’s not to say you can’t hire candidates referred by employees, but you should still take measures to expand your candidate pool and implement processes, like blind resumes, that ensure all candidates are evaluated fairly.
Competitive Job Offers for All Employees
At PayScale we have a mantra: “Price the job, not the person.”” Before you even talk to candidates about a job opening, the work of determining the salary range for the open role should have already been done.
For years, it has been standard practice to ask job candidates about their salary history during the recruiting process to set the stage for negotiation. However, recent legislation prohibits employers from asking about salary history in a number of states. Whether you are in a location that has passed legislation on pay history or not, it would be wise to avoid this tactic. What someone has made historically isn’t necessary relevant to the open position under discussion and basing compensation on salary history has been shown to disadvantage women and people of color.
If you focus on pricing the job rather than the person, bias is removed from the equation. Instead, an offer is determined based on qualifications and where a candidate falls into a pay range based on compensable factors like education, years of experience and geography. If it’s lower in the range due to inexperience, consider how you’ll plan to move them through the range over time. If it’s higher in the range, consider how the employee might progress or be promoted within the company.