Equal Pay for Equal Work. That concept, and the intrinsic sense of fairness it implies, is self-evident to most people in the United States. It’s supported by both sides of the political spectrum and embraced by innovative businesses everywhere: They know that to attract and retain the best female employees, they need to offer compensation that is commensurate with that of their male counterparts.
But being self-evident in theory does not necessarily make for reality in the workplace. According to a recent study by the American Association of University Women, women working full time earn, on average, about 80 percent of what men make. And while there are a host of reasons for individual discrepancies—including some that might have nothing to do with gender—that figure should trouble any business that hopes to succeed in today’s globally competitive environment.
For today’s human resources departments—which are increasingly concerned with strategic talent management, and not simply “personnel” issues—eliminating the wage gap is a challenge, said employment attorney William C. Martucci, an instructor in the master’s in Human Resources Management program at Georgetown University’s School of Continuing Studies.
“The best ones can do it,” said Martucci, who has been recognized by Global 100 as the Lawyer of the Year (Employment) for the United States. “They can understand one’s pay practices, and the basis for one’s pay practices, and from that analysis put together an appropriate approach to achieve greater pay equity.”
Addressing Pay Imbalances
Pay equity—or, at the very least, a concerted effort to achieve it—is a critical prerequisite for having a diverse workplace. And an increasing number of studies show that diversity in gender, race, and other areas is not simply the right thing to do; it’s good for business as well.
For example, a study at the University of Illinois found that racially diverse groups of students “significantly outperformed the groups with no racial diversity” in doing a murder mystery exercise, according to Scientific American. “Being with similar others leads us to think that we all hold the same information and share the same perspective,” the magazine said. “This perspective, which stopped the all-white groups from effectively processing the information, is what hinders creativity and innovation.”
Similar results have been found for gender diversity. In 2014, Gallup showed that diverse business units performed significantly better in the retail and hospitality sectors.
“Diverse workplaces are more reflective of the customer base being served,” Martucci said. “They’re more creative and dynamic, and they have a greater influence on the bottom line.”
Advocating for Transparency
But national studies show female employees are not faring as well overall as their male counterparts. A report last year by McKinsey & Company called Women in the Workplace found that women are underrepresented at every level of the corporate pipeline, and that the higher they go in an organization, the more they are outnumbered by men. At the entry level, women represent 46 percent of the workforce, at the managerial level they are 37 percent, and at the vice president level they represent 29 percent.
Ensuring that women are paid equitably is a critical step businesses must take to stop the attrition of talented female employees, Martucci said. Companies should be as transparent as possible about their pay policies, he said, and they should conduct regular audits to ensure that those policies are being followed.
The issue is complicated by the fact that employees join the company at different entry points in their careers, and it is often difficult to isolate the possible effects of gender, Martucci said. Salary discussions are also private, which makes getting the data hard, but not prohibitive.
Unfortunately, federal law is not particularly helpful in this area, Martucci said. The Equal Pay Act of 1963 prohibits paying women less for doing the same job as men. But with all the variables that go into salary, it is often difficult to prove that any pay discrepancies are because of gender. A proposed federal law called the Paycheck Fairness Act would put the burden on the employer to show why a woman is paid less for doing the same job. Introduced several times since 1997, the bill has never gained traction and most recently stalled in the Senate in 2010.
“We talk about ‘pay equity,’” Martucci said. “But there is not a strong, clear, legal tool that those who would want to enhance women’s pay could rely on.”
Some states have responded with measures that go beyond federal law. For example, last year California passed a law called the Fair Play Act, which, like the proposed federal law, would put the burden on management in instances where women are paid less for doing “substantially similar” work. Also in 2016, Massachusetts passed a law prohibiting employers from asking about a job candidate’s salary history. This law helps women because they often start lower on the pay scale than men doing similar work and have trouble closing this gap as their careers advance.
“The traditional approach is to ask about one’s past pay, and Massachusetts is unusual in the United States for trying to take on this issue.” Martucci said. “This may be one innovative approach of various future legislative efforts.”