PAY EQUITY

What is the state of pay equity at your organization or for you as an employee? We’ve compiled all of the relevant information for you here so you can stay informed on all of the latest in pay equity, gender equity, transparency and much more.

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. A lot of attention has been given to the concept of paying equitably for people doing the same job. Legislation has been passed to prevent wage discrimination (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 analyses by gender, race or both to ensure internal pay equity between employees in similar roles (38 percent plan to conduct some type of pay equity analysis in 2009, according to the PayScale Compensation Best Practices Report.) The media and advocates for closing the gender pay gap acknowledge Equal Pay Day every year — the day to which all working women have to work into the current year to receive the same compensation as men received the previous year.

Even with all this activity, including progress with discrimination laws, the wage gaps persist — gender wage gaps, racial wage gaps, etc. Part of the issue is that pay equity itself is complicated and often misunderstood. Additionally, the solutions are many, varied and necessarily ongoing. No organization can do one thing — say a pay equity analysis — and expect that the work is done. It’s, unfortunately, not that simple.

The Numbers: A Tale of Two Gaps

Let’s start with the numbers that get thrown around when we talk about pay 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 platform for businesses. We have published research on the gender pay gap for years and just recently have been able to dig into race as well. What we know is that there are two important gaps to talk about, not just one, no matter what demographics you’re examining. Those two gaps are an uncontrolled wage gap (not controlling for any factors) and a controlled wage gap (controlling for as many factors as possible, including job title, industry, location, years of experience, education, etc.). For example, the uncontrolled gender wage gap is typically cited as ~80 cents on the dollar, depending on the data source, but that’s comparing all women working to all men working no matter what jobs, industries, cities, etc. they may be working in. The controlled gender wage gap is much more narrow. PayScale’s latest numbers place it at 98 cents on the dollar, and it is controlling for a number of factors so that the only differentiation between workers is their gender. That’s what is meant when the term “equal pay for equal work” is used. If men and women (or any two groups of workers) are doing the same job, they should be paid equitably.

Even pay equity advocates conflate these two gaps. They’ll use the larger wage gap of 80 cents on the dollar when comparing men and women but then say “equal pay for equal work” in the same breath. As we just determined above, those aren’t synonymous. However, that larger gap is critically important but requires different solutions. None of us will solve large wage gaps by focusing solely on pay equity analyses that concentrate on pay inequities between workers doing the same jobs.

There are two important gaps to talk about; an uncontrolled wage gap (not controlling for any factors) and a controlled wage gap (controlling for as many factors as possible, including job title, industry, experience, etc).

True Pay Equity: Equal Access to Higher Earning Potential

To put it simply, women, people of color and other historically marginalized populations are experiencing compensation discrimination when it comes to access to the best-paying jobs in the labor market as their peers who hold more privilege due to their identities. The jobs with the highest compensation include STEM jobs and leadership roles, which is why ensuring that executive teams, boardrooms, startup founding teams and certain job families are more reflective of the demographics of the labor market overall is key to closing the largest wage gaps. This is about economic empowerment and wealth distribution, and there are a lot of systemic issues at play.

While individual people and organizations can’t solve pay equity all up, there is plenty you can do to cultivate a work environment that will lead to more equitable outcomes for the people within your organization. Let’s talk about a few of them.

Intentional Recruiting

There is robust evidence that diverse teams produce better outcomes, and when an organization builds diversity into its DNA, it’s more likely that you’ll have people asking the right sorts of questions to ensure that the work environment leans toward equity. If your organization is already lacking diversity, then assuming you can solve that issue without significantly disrupting the recruiting process is harboring false hope. Many organizations fall into patterns — e.g., recruiting from the same set of schools or relying heavily on employee referrals — but it’s those patterns that are generating the outcomes you may be looking to change. For example, PayScale published a study examining employee referrals and found that they disproportionately benefit white men. That’s not to say you can’t ever hire candidates referred by an employee, but what can you do to ensure that your employees are thinking more broadly about who they refer or that referred candidates don’t receive special treatment?

Competitive Job Offers for All Employees

It has been standard practice for quite some time to ask job candidates about their salary history during the recruiting or interview process at some point. There has been an ongoing debate about whether this practice has led to lower pay for women, people of color and other groups of employees who may have already been making less in previous jobs due to either overt or unconscious bias. It has led to the passage of legislation banning employers from asking about salary history in a number of cities and states across the U.S. Whether you are in a location that has passed legislation on pay history or not, it would be wise for all organizations to consider how learning someone’s compensation history might impact the offer. We have a mantra we often repeat at PayScale and that is, “Price the job, not the person.”” Before you’re ever talking to candidates, the work of determining the range for the open role should have been done. Then it’s a matter of, fairly, determining where that candidate falls into the range. If it’s lower in the range due to needed ramp time or some other reason, consider how you’ll plan to move them through the range over time. Once an employee’s pay is set upon their hire, it can be a challenge to advance them rapidly through their pay range unless they’re in a highly competitive role. Planning ahead can ensure you’re not going to run into a pay equity issue further into your new hire’s tenure with the organization.

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To put it simply, women, people of color and other historically marginalized populations aren’t gaining the same access to the best-paying jobs in the labor market as their peers who hold more privilege due to their identities.

Equitable Employee Experience Start to Finish

Inclusion is a concept that’s received a lot of focus in the last few years, but few organizations are getting it right across all of their employee populations. Diversity and inclusion expert Verna Myers provided some helpful framing around diversity and inclusion when she said, “Diversity is being invited to the party; inclusion is being asked to dance.” Representation is not involvement. If employees don’t feel they belong and have a path to advance within the organization, they’re unlikely to stay. You know you have a problem if the progress you’ve been making in terms of diverse hiring is all within junior positions. If everyone doesn’t have the same ability to advance within the organization, then pay equity is still out of reach, even if people within the same jobs are being paid equitably. Another aspect we’ve examined at PayScale is how employees are treated when they ask for a raise. It turns out that women of color are 19 percent less likely to receive a raise than their white male peers (after controlling for job, industry, experience, etc.) and men of color are 25 percent less likely. Those numbers feel startling (and they should), but to be human is to have biases. We all have them. Currently, the people with the most decision-making power in most workplaces are white men. That’s just a fact. So, everyone else is subject to whatever biases that demographic is most likely to hold. Think about how to standardize that raise request process within your organization to help mitigate the human bias factor.

Benefits to Support Equitable Participation at Work

Modern day workplaces have evolved over time certainly, but the majority of organizations still operate with the expectation that the bulk of their workforce will do their job surrounded by other employees at a place of work for at least 40 hours per week. It’s a shared, societal expectation that most of us default to, but more and more, questions are being asked about whether that one model limits who can fully participate in the labor market. If flexibility was a default or more widely embraced, what could that do for employees who struggle with the cost of a long commute or maybe a medical condition that makes the standard work environment challenging? Another benefit that’s been experimented with by a number of employers is paid parental leave or family leave. Women in the U.S. are more likely to take career breaks or reduce their work hours to care for family, whether it be children or aging parents. Even when family leave is available for men as well as women, it’s most often significantly less than what is provided for women who are having children. That, alone, is signaling that in a household with a mother and a father that the mother’s career is less important and that she should be the one to take more time off. Even well-meaning organizations may not have examined the unintended consequences of different benefits or the lack thereof.

All this is to say that there is more work to do, and no organization is infallible when it comes to pay equity. It’s something that needs to be actively managed, because there are too many variables at play to leave it to chance.

PayScale on Pay Equity

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