What is Pay Equity and How Can It Help Close the Wage Gap?
Updated: Oct 30, 2021
In the wake of the Coronavirus pandemic, America has witnessed a phenomenon dubbed “The Great Resignation”. In August of 2021 alone, 2.9% of the workforce (4.3 million workers) quit their jobs. Furthermore, workers across the nation are striking for better workplace conditions.
Among the cited reasons for the mass striking are mandatory overtime (Deere & Co.), seven-day workweeks (Kellogg Co.), and so-called “suicide shifts” that only provide eight hours of off time between shifts (Frito-Lay Inc.).
While the motivations behind “The Great Resignation” and widespread strikes are varied, there are many signs that point to workers not getting paid enough to endure whatever hardships, stress, and/or unfair working conditions. Many are leaving their jobs to seek positions with better conditions and better pay, and since there were 10.4 million job openings in late August, these workers have the leverage to do so.
Generally raising wages is not a panacea and pay equity would surely not be enough to satisfy every disgruntled worker. But it would be a start.
What Exactly is Pay Equity and Why is it Important?
The term “pay equity” is a hot-button topic that has regained popularity in recent years due to the rise in social, racial, and gender movements. But what exactly does pay equity mean?
Depending on whom you ask, the definition of pay equity is loosely referred to as equal pay for equal work. This concept came about when the Equal Pay Act of 1963 was signed into law by John F. Kennedy. The primary purpose of the Equal Pay Act was to protect against wage discrimination based on sex. However, the idea of equal pay has outgrown its original conception and transformed into what we now call pay equity.
Although the most fundamental definition of pay equity means compensating employees with equal pay for equal work, companies now must consider race, gender, sexual orientation, education, job experience, and other valuable factors in order to avoid payroll discrimination. When these factors are overlooked, not only is pay equity at risk, but the looming effects of the wage gap continue to threaten our economy, working-class families, women, and people of color.
According to payequity.org, pay equity is a “means of eliminating sex and wage discrimination in the wage-setting system.” However, a more comprehensive definition suggests that “pay equity is fairness of compensation paid by employers to their employees for performing comparable work, without regard to gender or race or other categories protected by law. . . it includes fairness both in terms of base pay and in total compensation, including bonuses, overtime, employee benefits, and opportunities for advancement.”
Essentially, at a foundational level, pay equity encompasses crucial aspects of all the following items:
Fair pay regardless of gender, race, and sexual orientation.
Employees doing the same type of work get paid the same wage.
Employees with similar education complete similar work and get paid the same wage.
The total absence of discrimination and unconscious bias when determining an employee’s wage.
An equal opportunity for employees to receive promotions and raises to increase their hourly wage.
Any wage differences among employees can be legally and legitimately explained by a company regarding education, qualifications, work responsibilities, etc.
Society is beyond the simplicity of “equal work for equal pay”. While the past 60+ years have shown improvement, there are still glaring wage discrepancies in the labor market that affects the desired outcome of total pay equity.
What’s the Difference Between Pay Equity and Pay Equality?
Simply put, pay equality is equal pay for equal work while pay equity is equal pay for equal work of equal value.
A misconception regarding pay equity is that all employees should be paid the same regardless of experience, position, or education. The real goal is not to pay all employees the same, rather, it’s to compensate employees the same wage for the same type of work.
For example, the Academy to Innovate HR states that “if a company employs male warehouse operatives and female clerical assistants, then both should be paid the same–unless there is a good reason for a difference. Good reasons for differences in pay could include ability, tenure, qualifications, etc.”
It’s through this concept that the system shows its crack. Time and time again we see that women and people of color are paid fewer wages for the same work as their white, male counterparts. This discrepancy is often referred to as the wage gap.
By understanding the wage gap, it’s easy to see the value behind pay equity and how the two are related. For an in-depth overview of the Wage Gap, check out our E-Book: The Wage Gap: Addressing a Systemic Issue Through Organization Change.
How Pay Equity Can Help Close the Wage Gap
At the root of pay equity disparities is a systemic wage gap issue that can only be fixed when companies recognized the problem and commit to doing their part to provide fair pay for all their employees. However, some employers fail to recognize internal and external wage gap discrepancies further aiding the gap.
According to the Harvard Business Review, research shows that “organizations still pay women and people of color less than white men for the same work — and this earnings gap compounds over time. It’s estimated that Black and Latina women experience lifetime earnings losses of up to $1 million or more over a 40-year career.”
Therefore, the only way to truly acknowledge and determine pay discrepancies within a company is to conduct a Pay Equity Audit.
The purpose of a Pay Equity Audit is to identify wage inconsistencies for employees completing the same type of work. An audit also seeks to identify discrimination and unconscious bias issues within the workplace.
Companies that conduct pay equity audits have a higher chance of better employee retention, happier employees, better performance, more successful recruiting efforts, and higher Diversity, Equity, and Inclusion standards.
For assistance with wage audits or wage reviews, contact Intelligent Partnerships.
How to Help Regulate Pay Equity and Close the Wage Gap
At the root of the problem, pay equity is meant to level the workforce playing field so that all employees—regardless of race, gender, orientation, and education—have a fair opportunity to earn the same wage as someone else in their position. There is a way to fix this systemic problem, but it takes a conscious effort to acknowledge the issue and implement fair pay practices.
Here are some ways that you and your company can help irradiate this historical problem:
Conduct a pay equity audit using a professional company specializing in audits.
Provide employees with up-to-date training to help them promote within your company.
Establish mentorship programs.
Join apprenticeship programs such as the government organization apprenticeship.gov.
Provide a fair starting wage for employees who are just hired or promoted.
When deciding on hourly wages, take into consideration minimum wage for the state your company is in as well as the cost of living.
Prioritize employee retention through low- to no-cost programs that supplement the employee experience such as paid time off, flexible schedules, virtual workdays, tuition assistance, and wellness benefits.
Establish a system to review employee wages to ensure that policies and objectives are fair and unbiased.
Provide pay equity education to all employees in order to show transparency and gain trust.
When employees seek to achieve pay equity, the entire company thrives. Not only is pay equity backed by various laws, but it’s also a basic human right to pay employees hourly wages that highlight the value of their work without regard to their race, gender, or other biased factors.
When more companies place pay equity at the forefront of their objectives, only then can society see the wage gap start to close. The systemic pay discrimination that the wage gap has caused negatively affects families, women, and people of color, which in turn affects our local, state, and national economy.
The system can’t be fixed overnight, but it can be fixed, and it begins with you.