Pay Equity: Facts and Questions

Last time around I wrote about pay equity because I was feeling optimistic again. I have to admit that I had gotten tired of the subject after listening to our profession talk about it for decades without any real fixes in mind. But WorldatWork's recent position statement seems like a real shake up, urging all of us to work to reduce and eliminate U.S. pay inequities with some real guidance included.

I brought up the position statement over boxed salads with a number of colleagues recently, eager to see whether it would get anyone stoked. And it did. Some were skeptical initially about the need to go public with the issue but that didn't hold up under group scrutiny. Then we kicked around the recent Massachusetts legislation (more on that in a minute) and once the professional refresh was over, settled into sharing personal experiences.

That's right. Put a group of Human Resource professionals together to talk about pay and we act like everyone else. We speed quickly through the legislative issues to talk about our own pay. We're not immune.

Once things got started, I tried to cheer everyone up by explaining that way back in the '80s, pay practices were such that I had been told by a hiring manager to accept a lower salary than I thought was competitive because I didn't have a family to support. I shared the story because I thought it would make everyone chuckle about how things had changed. The thing is, a young colleague told us she had the same experience -- with the same words communicated by a manager -- in the last couple of years.

Skeptical? Don't be. I bet that most women who are reading this have their own experiences of how an early underbid salary was explained in a startling way. But they know it goes beyond words. Start your career with an unnecessarily low salary and you will stay in the lower distribution of your pay opportunities for years, if not decades, to come. Don't forget to add lower bonuses, equity awards, retirement contributions and so on. And difficulties positioning yourself appropriately with future hiring managers who wonder why you warranted the salary you were saddled with.

There is no way that pay inequities are restricted to women. In fact, research shows that pay inequity is an equal opportunity experience for many employment categories. And, as I'm sure you've noticed and experienced, there is enough pay dissatisfaction to go around right now. But our profession is mainly women, so when the war stories start you have to expect some examples of unequal treatment.

"Anchoring" is a fundamental of behavioral economics. The concept is important to our compensation work because human beings use  ". . . initial exposure to a number as a reference point that influences subsequent judgments about value. [and] The process usually occurs without our awareness . . ."

Effective July 1, 2018, employers in Massachusetts will not be able to ask job candidates about their salary history until after a job offer is made. I don't know whether the legislators had behavioral economics in mind when they drew up the legislation, but having eliminated the anchoring bias they have also raised loud complaints across the Human Resource profession.

Are you planning on having a family? Is English your first language? Just because these questions are illegal doesn't mean they aren't asked -- we all know that.

We've been happy to legislate and work to rein in improper manager behaviors. Are we willing to ask the same of ourselves?

Margaret O'Hanlon, CCP brings deep expertise to discussions on employee pay, performance management, career development and communications at the Café. Her firm, re:Think Consulting, provides market pay information and designs base salary structures, incentive plans, career paths and their implementation plans. Earlier, she was a Principal at Willis Towers Watson. Margaret is a Board member of the Bay Area Compensation Association (BACA). She coauthored the popular eBook, Everything You Do (in Compensation) Is Communications, a toolkit that all practitioners can find at https://gumroad.com/l/everythingiscommunication.

Comments

[E. James (Jim) Brennan]

Bingo! Right on, Margaret.

While women will privately share their personal histories of systemic pay victimization, men in our profession rarely admit how often they have "negotiated" disproportionately discounted wages and salaries for protected classes. Saving money for their employers was (and probably still is) more important than pay equity. Female complaints, coming from biased sources, are dismissed. Guys who confirm those abuses tend to be ostracized. The more things change, the more they stay the same ... unless we all step up.

[Paul Weatherhead]

Speaking of WorldatWork's position statement, I wish they had advocated for better research on whether a gender pay gap really exists.

Advocates for more legislative control over the issue like to point at the 77 cent number as if it is irrefutable. The problem is that the number comes from the US Census using a methodology that any credible compensation professional would discard in a nanosecond.

Here is a recent discussion on the gender pay gap on WorldatWork's discussion board. https://www.worldatwork.org/community/discussions/discuss.jsp?did=51787

[E. James (Jim) Brennan]

Even guys who support contentions that a pay gap continues to exist agree that the 77 cents claim is a garbage metric. The reality that the real gap is more like 10% +/- 5% remains true for "comparable" work. Considering the additional issues of occupational segregation whereby job titles are tweaked so as to concentrate protected classes in low-paid work categories, the income disparity remains serious.

The real pay discount is less than 23% but still improper and significant. Would you accept a 10% income cut? Let's continue to address the real issue rather than merely reject a simplified exaggerated one.

The last pay equity research of its own membership funded by the compensation association produced an embarrassing confirmation of gender pay discrimination. After all variable factors imaginable had been equalized, you had to subtract 14.3% if female. Don't wait for them to redo that study again!

[Karen Kervick]

In my experience, roles define the compensation first. Roles women choose therefore define their compensation levels first. Then there is the negotiation skill or lack thereof, non competitive spirit, and loyalty factors. Most of us know if we change jobs more frequently chances are compensation goes up more rapidly. Women are more content to stay with one employer, I think, and hope for the best. However, I see plenty of men who have loyally stayed with a company and fall behind the new hire.
Bottom line, the squeaky wheel gets the grease.

[Paul Weatherhead]

That 14.3% gender pay gap calculation is older than Rip Van Winkle.

I think it IS time to redo that study if people continue to leverage fake numbers to achieve greater government interference with organizational pay policies.

My main point is that WorldatWork could provide a greater service to the compensation community if they advocate (help fund?) better research into the real gender pay gap.

[Paul Weatherhead]

Karen, I fear that sometimes wheels get replaced if the grease doesn't stop the squeaking.

[E. James (Jim) Brennan]

... or they claim the squeaking is actually just background music that can continue to be ignored or even enjoyed.

Yes, we certainly do need an updated comprehensive credible study, but there is absolutely no commercial motive for such research. Fair pay is a vital economic issue affecting virtually every worker; but who will study it? Why spend millions trying to cure rare diseases while ignoring almost universal pay equity problems?

[Paul Weatherhead]

Jim,

I appreciate the further discussion.

How do you know there are "almost universal pay equity problems"? Because of a lot of anecdotal stories you have heard? Or because government bureaucrats keep citing a 77 cent gap (that you and I both know if a flawed number)?

Sorry, Jim, but I'm not convinced yet there are "almost universal pay equity problems". But I'm keeping my mind open to someone showing me statistically valid and measured proof.

[E. James (Jim) Brennan]

Naw, my recognition of the issue preceded emphasis of that vague metric by the NCWW and its successor NCPE. It was a 28 cent gap back then and has closed as slowly as I predicted many decades ago. Yes, the current 23 cent gap in SOC pay by gender is terribly imprecise, as silly as saying a truck driver is always worth more than a secretary ... when some executive secretaries and most secretaries of state clearly hold jobs with superior market values over drivers.

Long story short, I started in HR running "help wanted female" ads, obediently dropping the rates for women. After my professional childhood, I helped reverse engineer all the principal point factor job evaluation systems; we discovered that different pay formulae were required for n/e vs ex jobs to "accurately" reflect the lower pay for the same content required to maintain "free open competitive local market" rates due to systemic sexist/racist occupational segregation. Many decades of analyzing the internal pay records of hundreds of consulting client employers also resulted in consistent findings of double standards in pay 'twixt WASP guys and all other classes. It wasn't pretty. Not everyone has seen it, of course.

[E. James (Jim) Brennan]

P.S. More formal measured proof exists for my good friend Paul and all others interested in "valid" pay equity studies. Check out the historic 1981 NatnlAcadSci Women Work and Wages report by Dan Treiman & Heidi Hartmann and the later Description of Selected Nonfederal Job Evaluation Systems, GAO/GGD-85-57, July 31, 1985, available from either GAO or the Gov Printing Office. Political appointees dismissed the remedial concepts as "looney tunes", so neither well-documented scientific report was ever repeated. Truth is frequently unpopular.