Equal Pay Day symbolizes the continued fight against wage disparities based on gender, race, and ethnicity. Despite legislative efforts, the wage gap persists, impacting women and minorities across various sectors.
Wage Gap Is an Annoyingly Persistent Issue
Women, especially those belonging to minority groups, earn significantly less than their male counterparts. In the United States, women earn only 82% of what white men earn. This disparity is even more pronounced among part-time workers, where women earn $0.78 for every dollar earned by white men. The situation is similar across various demographics, with different Equal Pay Days throughout the year reflecting these disparities.
We have made some progress in 2023 as women's pay has reached comparable levels to pre-pandemic times and yet we have a long way to go. The 2024 Equal Pay Days are as follows (with 2023 Pay Days):
All Women: March 14th (March 15th)
Asian-American Women: April 3rd (May 3rd)
LGBTQ+: June 13th (June 15th)
African American Women: July 9th (September 21st)
Moms: August 15th (September 8th)
Latina: October 3rd (December 8th)
Native American Women: November 21st (November 30th)
Pay Gaps Are Baffling
One might think that with women making up close to 50% of the working-age population, we should have the same rights and opportunities as men, but simple demographics aren’t a compelling argument. In the United States, we still hold dear the concept that this is the “land of opportunity” and those who work hard will rise to the top. The concept of meritocracy is embraced by the majority of American businesses that embrace a “pay for performance” philosophy. If we paid based on merit, it is clear that women should get paid MORE than men. Let's look at a few facts:
Education: Women hold 21% and 48% more undergraduate and graduate degrees respectively than men, and the relationship between education and economic growth is well-documented;
Loyalty: Women tend to have longer tenure with organizations than men, at 4.3 years, compared with men at 3.8 years;
Results: Women are leading their companies to economic results. When one or more women are on a board, these companies significantly out-perform their competitors: 26% better share price performance, 33% higher price-to-book value ratios, and 4% better average growth rates ROI performance globally. Hypathia Capital - an investment firm that invests in women-led organization - consistently out-performs the stock market indices; and
Leadership: Women are better bosses than men. A Pew Foundation report revealed that Americans believe women are better negotiators, more trustworthy, honest and ethical, and better able to provide a fair environment for employees in terms of opportunities and pay. The vast majority of those surveyed preferred to work for a woman than a man.
So, why do gender pay gaps persist in a meritocratic culture? What do we need to do to get equitable pay?
What’s Legal, What’s Not
Equity and equality are not the same. Pay equity means adjusting pay based on things including location, tenure, performance, and qualification including education and/or certifications. Pay equality means that all people in similar jobs are paid the same, regardless of characteristics that would drive higher or lower pay. Pay equity is fair and allowed by law because it rewards people for their skills and effort. We live in a society that reflects merit, so pay should reflect what people bring to the table, how they perform, and the contributions they make. Reflecting these legally defensible pay differences is good for the company too! However, differentiating pay based on race, ethnicity, or gender, (or any ADA-protected class) is illegal and frankly, unethical. It also creates a disincentive for higher levels of performance and may create a climate of resentment in organizations.
The Legal and Business Implications
Pay inequity isn't just a social issue; it has significant legal and business ramifications. According to the EEOC, employers face millions in legal fees and settlements due to lawsuits related to pay discrimination. Various research studies confirm that companies without gender, racial, or ethnic bias in their pay practices outperform companies that have discriminatory pay practices. Companies that focus on pay equity are better able to manage remuneration costs-to-budget while also enhancing their brand image. Pay transparency and equity are not only morally imperative but also crucial for sustainable organizational success.
The Role of Legislation and Transparency
Legislation like Title VII of the Civil Rights Act, The Equal Pay Act, The Lilly Ledbetter Fair Pay Act, The Age Discrimination in Employment Act, Executive Order 11246, The Pregnancy Discrimination Act, and/or the Americans with Disabilities Act aimed to address wage discrimination. However, these laws haven't completely eliminated the wage gap because there are no penalties associated with pay discrimination. The introduction of the EEO-1 Component 2 pay report by the EEOC marked a significant step towards transparency, revealing the necessity of such measures in fighting pay inequities. It is anticipated that organizations will have to comply with these disclosure requirements sometime in 2025.
Global Perspectives and Shareholder Influence
Globally, countries like the UK have made strides in addressing pay gaps. Since 2017, the UK has mandated companies to disclose median and mean gender pay levels, leading to a decrease in these gaps over time. The UK is in good company with most of the countries in Europe requiring gender pay gap disclosure. Canada, Australia, Chile, Israel, Japan, and South Korea require disclosures, and Iceland has legislated pay equity.
Shareholders play a critical role in pushing companies towards transparency and equity. The Racial & Gender Pay Scorecard, for instance, ranks companies based on their pay equity disclosures and practices, highlighting the increasing demand from investors for corporate accountability in this area. Recent research suggests that the most efficient way to address pay gaps is through transparency. A 2023 article in Harvard Business Review showed that when salary ranges were transparent, the gender wage gap went from 82% to 2.5%! The fastest and easiest way to eliminate the gender wage gap is to post salary ranges for all positions.
Proactive Steps for Organizations
You should now be convinced that addressing gender/racial pay gaps is not just the ethical and right thing to do, it’s smart business. To address pay equity, organizations should:
Conduct pay equity audits based on legally defensible criteria. Identify areas where pay gaps are based on race, gender, ethnicity or any protected class.
Address pay inequities promptly and transparently.
Continuously monitor and report on pay equity progress.
Ensure equitable pay practices are incorporated in your hiring processes.
These steps align with the increasing demand for pay transparency from various stakeholders, including investors, management boards, employees, and customers, and are consistent with ISO standards and the ESRS standards recently introduced in Europe.
Equal Pay Day is more than just a date; it's a reminder of the ongoing journey toward pay equity. It highlights the need for concerted efforts from all sectors of society, including businesses, legislators, and individuals. As we commemorate this day, let's renew our commitment to achieving a world where pay equity is not just an aspiration but a reality.