Pay transparency win in US, just in time for Equal Pay Day

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In a landmark decision earlier this month, a US federal Judge has reinstated an Equal Employment Opportunity Commission initiative to collect employee pay data broken down by gender, race and ethnicity.

For decades, the US Equal Employment Opportunity Commission (EEOC) has collected job titles broken down by sex and race each year from companies with 100 or more employees. The new expanded requirement includes pay data and hours worked across 12 salary bands. Advocates argue pay data collection is necessary to identify and combat wage gaps caused by discrimination.

The decision comes at a time when global pressure for organisations to demonstrate fair pay practices is at an all-time high.

Maya Raghu, senior counsel and director of workplace equality at the National Women’s Law Center, said she hopes the data collection will motivate employers to correct pay disparities and end practices such as basing employees’ salaries on what they made in previous jobs.

Vast racial and gender wage gaps persist in the United States. All gender, racial and ethnic groups, with the exception of Asian men, lag behind white men in median hourly earnings. According to a Pew analysis, in 2018, women earned 89 percent of what men earned.

According to the EEOC, human resource practices that involve managers, increase market transparency, and are underpinned by external regulatory or market uncertainty reinforce goals. Here are three recommendations from the EEOC:

  • Increase representation of protected groups in senior roles. This will lead to stronger implementation of equal opportunity policies and higher employment of protected groups.

  • Make manager’s hiring decisions accountable and transparent. This will increase representation and influence more equal pay for protected groups.

  • Offer mentoring programs with senior managers. They are often effective in increasing representation of protected groups.

Identifying Systemic Bias

When the EEOC was founded in 1965, most discrimination and segregation was explicit and easy to identify. Today, discrimination can be more subtle, produced by implicit bias and often not clearly apparent to either the perpetrators or targets. Consequently, efforts to stop and remedy discriminatory practices today cannot rely on identifying biased employers or discreet acts of discrimination.

Inclusive Mentorship

Part of closing the gender pay gap is making hiring and compensation decision-making processes more transparent, through initiatives like wage reporting. Making workplace processes more transparent raises the visibility of underrepresented groups and the work they do.

WERKIN supports more equitable and diverse workplaces through inclusive career development and mentorship programs. WERKIN changes who managers see, and how they manage by helping managers identify employees for projects based on skill and professional interests, not just who they see right in front of them.

Shedding some sunlight on Equal Pay Day

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Equal Pay Day, which was April 4 in the US, has heightened public attention towards the discrepancy between women and men in the workplace. It considers how many extra days women have to work in order to match the salaries of their male counterparts the previous year. In other words, with a pay gap of approximately 85%, women in the US must work more than three months to make as much money as men did throughout 2018.

While the pay gap shows ongoing gender inequities in the workplace, it is but a symptom of more complex problems. One of them is the kinds of jobs women available to women, based on a number of factors including preference, care responsibilities and education. They might be crowded into specific lower-paid industries or positions, like the care economy or part-time jobs. On the other hand, higher-paying sectors, including engineering, remain male-dominated. This distribution of women among a restricted number of sectors, which tend to be less socially and economically valued, is considered “horizontal segregation”.

Another problem concerns “vertical segregation”, which refers to women’s difficulties in advancing to higher-level positions. Even though they might receive the same salaries in entry-level jobs, after as early as five years of work experience they begin to “lag behind”. The more advanced a position is in the job market, the wider the gender gap within it. As a result of both types of segregation, the disparity varies in accordance to the sector. For example, American full-time female pharmacists make $0.97, on average, for every dollar earned by their male colleagues. In finance, the findings are more striking: among finance managers, women earn 64.9% of their male counterparts’ earnings.

However, what is usually described as the gender pay gap, the main topic of Equal Pay Day, refers to a diagnosis of the overall economy. In order to calculate it, the average hourly earnings of women are compared to the average hourly earnings of men. In the United States, they gain an average of 79% of what their male colleagues do.

Observing the rate more carefully reveals other types of disparity. There are consistent differences among women themselves, depending on factors like race and educational qualifications. A report published by the Joint Economic Committee in the United States’ Congress points out that women are “often out-earned by men with less education”. Those who have a graduate degree can expect to gain, on average, $5,000 less than men who have earned a bachelor’s degree. For women of color, the findings also reveal a wider gap. African-American women receive $0.60 on the dollar, if compared to white men. Latinas also have consistently lower values in their paychecks: $0.55 on the dollar.

If the principle of equal pay for equal work has been a guaranteed right by legislation, what could explain the numbers? Even though US law has prohibited wage discrimination since 1963, the official prediction is that it would take up to 2059 to close the gender pay gap. The explanation for such a phenomenon might be found in women’s trajectories in the workplace.

Workplace Barriers

A first explanation for the differences in salaries concerns how wages are set. A report by the consulting firm Korn Ferry exposes that companies often establish the value based on candidates’ pay histories. As a consequence, this accentuates and perpetuates the salary divide, as it assumes that previous salaries were established fairly. A report by the American Association of University Women (AAUW) recommends the use of market research, instead of salary history, to determine “what the position is worth”. For a fairer workplace, businesses should have a predetermined payment for each level, regardless of the candidates’ history.

However, the barriers do not stop at the selection or hiring process. Lack of transparency, for instance, allows for wage discrepancy, as women might not be fully aware of their colleagues’ earnings. A national survey conducted by the Institute for Women’s Policy Research exposed that, in the private sector, discussions about wages and salaries are discouraged by half of American employers. The pathway to higher-level positions also creates obstacles for women, as research shows that promotions are a determinant factor in the pay gap. Women end up restricted to lower positions. For instance, women make up to 66% of junior managerial positions, while men tend to advance to more senior roles in the UK.

Among managers, directors and executives, the difference in salaries is still high. One of the explanations offered by Lydia Frank, at the Harvard Business Review, regards negotiations. Men are four times more likely to attempt negotiations for promotions and pay raises. Her research with PayScale, a compensation data and software company, also found that, whenever women reported prioritizing family over work, the gap expanded. On the other hand, men who reported similar preferences were not penalized in their payslips.

This enlightens yet another aspect of the pay gap: women’s caring responsibilities. A study from the National Bureau of Economic Research illuminates how the problem plays out. It shows the changes in the gender gap throughout the 20 years after college. For college-educated women, the period when they are likely to get married and have children impacts the earnings significantly. While among recent graduates the gap is close to zero, it increases by 55% between the ages of 25 and 45. In the end, the childbearing years are determinant in the trajectory of women in the workplace and have lasting impacts in wages.

Taking breaks and asking for flexibility, in order to accommodate caring responsibilities, seem to be a bad deal for women. Businesses tend to value long hours in the office, instead of a flexible scale and remote work, even when the outcomes are the same. Top-level positions, which prioritize a more strict schedule, also end up being farther away from women. A scientific-proven response to the problem is the elaboration of family-friendly policies, including paid childcare and expanded parental leave.

Workplace allies

 Given these institutional barriers blocking women from advancing in their careers, new policies are needed to break them down. Offering more flexible schedules - associated with initiatives to remove the stigma surrounding it - can serve as a starting point. However, to help women achieve higher positions, they also need allies. For 44% of American CEOs surveyed by the Millennium Group, mentoring was considered one of the three most effective tools for promoting more women to management positions.

Mentoring programmes encourage more experienced employees to help their younger colleagues’ development. Even though it is often focused on the mentees advancement, it serves as a two-way road, where an exchange of skills and knowledge takes place. It is considered an important factor for development by executives and an attractive asset by college and graduate students, as shown in a report by Deloitte.

However, there is yet another gap to be addressed: the mentoring gap among women. They are less likely to seek out mentors, and often have less mentors throughout their careers. This translates to the lack of access to an important tool in one’s career. Mentoring produces more subjective effects, such as an increase in confidence. Additionally, it helps mentees obtain promotions and foster “meaningful connections” inside organizations.

Bridging the gap means promoting more inclusive mentorship, with both male and female mentors. In areas where the gender gap is wider, such as financial services, senior-level women are more likely to cite forms of sponsorship as an “important contributor” for their career achievements. In the same sector, formal programs for mentorship exist in only 58% of the businesses, while formal sponsorship is offered in less than half of the companies.

Just as important as having mentors, who can inspire and coach, sponsors are needed. Sponsors advocate on behalf of their sponsees, raising their visibility and career opportunities within an organization, and also building connections outside the company. As Sylvia Ann Hewlett observes in the Harvard Business Review, women’s advancement is not only a matter of merit and effort. It also depends on their ability to connect to senior leaders who can endorse and advocate for their progress.

Counting on a sponsor can make a difference even in the most ordinary moments, like asking for a pay raise. This becomes a key strategy in particular within sectors which are male-dominated and have few women in C-suite executive positions. In a recent McKinsey report focused on the financial sector, it is noted that both men and women need to be involved actively in sponsorship initiatives. After all, women are still a minority in higher-level positions, and cannot carry the whole burden of solving this issue. It is also necessary to monitor the quality and the need for expansion in such programs inside organizations.

As women access these opportunities, companies need to pay careful attention to the quality of sponsorship. Preventing biases in the kind of orientation offered to women is part of the package. The content needs to be provided equitably, allowing for the development of compatible skills. In the sake of monitoring quality and access of initiatives, technology can play a role in promoting similar goals and resources within organizations. Addressing the gender pay gap is a complex project, which requires tackling a range of workplace inequities. One area of work will be opening up access for women to have the endorsement and support they need to advance their careers. How can organizations provide this kind of endorsement and support? WERKIN’s inclusive mentorship and career development programs encourage more diverse and equitable workplaces, helping underrepresented employees like women feel more visible and supported.