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US Pay Equity: Lingering Gap Despite Progress

Pay equity, or the principle that people should receive equal pay for equal work regardless of their gender, race, or other demographic characteristics, has been a longstanding issue in the United States.

Despite the passage of the Equal Pay Act in 1963 and the Lilly Ledbetter Fair Pay Act in 2009, which were aimed at addressing pay disparities based on gender and other protected characteristics, significant pay gaps still exist. According to data from the U.S. Census Bureau, women in the U.S. earn approximately 82 cents for every dollar earned by men, while women of color face even wider pay disparities.

According to an analysis from Forbes, women earned 17% less than men on average. Men in the legal profession earn 59% more than women in the same field and women of color are among the lowest-paid workers in rural areas, with rural Black and Hispanic women making just 56 cents for every dollar that rural white, non-Hispanic men make.

The full picture of the impact this has for Black and Hispanic women became clearer last March when Department of Labor (DOL) estimates released on Equal Pay Day showed Black women lost $39.3 billion and Hispanic women lost $46.7 billion in wages in 2019 compared with their white male counterparts due to their participation in low-wage sectors of the economy, such as caregiving and hospitality.

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In recent years, there have been efforts at both the state and federal levels to address pay equity. Some states have passed their own pay equity laws, which go beyond the federal standards, and some employers have taken steps to conduct pay equity audits and address any disparities that are uncovered. In addition, the Biden administration has signaled its commitment to advancing pay equity through proposed legislation and executive orders.

Pay Equity Varies by Industry

While pay equity has become a priority for some companies, each industry as a whole has a pay gap to address. According to Payscale’s 2022 Gender Pay Gap Report, these five industries performed the worst when it came to pay equity:

  1. Finance & Insurance (77 cents for every dollar a man earns)
  2. Agencies & Consultancies (83 cents)
  3. Healthcare (86 cents)
  4. Transportation & Warehousing (87 cents)
  5. Non-profits (88 cents)

Healthcare may come as a surprise to some given the number of women in nursing roles, however, the pay gap in nursing persists and has widened in the last few years. The 2022 Nurse Salary Research report shows that the median salary for a male RN is $14,000 higher than the median salary for a female RN, up from a difference of $7,297 in 2020.

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Strides were made in the technology sector with more women entering STEM careers in recent years and pay equity being examined by the most prevalent players in the space. However, many of those gains are being offset by the number of women losing their jobs as part of layoffs amid concerns about the economy.

What’s Being Done to Address Pay Equity

According to Census Bureau data, the gender pay gap has narrowed over time. In 1980, women earned just 64% of what men earned, while in 2019, women earned 82% of what men earned. While this progress is significant, there is still a sizable gender pay gap that needs to be addressed and which has leveled off in in the last few years.

WEBINAR: Mind the Gap – Pay Equity

Efforts to address pay equity must take on both private and public forms. For its part, the Biden Administration celebrated the March 15 observation of Equal Pay Day last year by announcing more details of its Agenda for Women.

Among the targeted goals was banning the use of salary history when setting wages during the hiring process. Thus far, 21 states have instituted salary history bans or prohibitions.

Private sector efforts to address pay equity include things like pay equity audits which some employers have started to conduct. Many signed the Obama Administration’s Equal Pay Pledge, which requires that they conduct such audits. This typically involves conducting some form of multiple regression analyses which first control for variables that are known predictors of pay such as job level, job family/role, location, and experience.

When examining data from DiversityInc’s Top 50 survey, we see that 100% of companies in the Top 50 & Hall of Fame answer yes when asked whether they have methods in place to detect and correct pay inequity.

Corporate disclosures are another encouraging sign as some companies have started to disclose their pay equity data publicly, which can help to increase transparency and accountability around pay equity.

The Business Case for Pay Equity

The business case for pay equity is multifaceted and includes both financial and non-financial benefits. Here are some of the key reasons why pay equity is a smart business decision:

  • Attract and retain top talent: Offering fair and equitable pay can help attract high-quality talent to your organization and improve employee retention rates.
  • Boost employee morale and productivity: When employees feel they are being paid fairly, they are more likely to be motivated and engaged in their work, which can lead to increased productivity and better business outcomes.
  • Reduce legal and reputational risks: Unequal pay practices can lead to lawsuits, negative publicity and damage to your brand reputation. Ensuring pay equity can help mitigate these risks.
  • Increase customer loyalty: Companies that demonstrate a commitment to fair pay practices may also appeal to socially conscious consumers who are looking to support businesses that align with their values.
  • Improve diversity, equity and inclusion: Pay equity is an important aspect of creating a more diverse, equitable and inclusive workplace. By ensuring equal pay for all employees regardless of their gender, race, or other factors, organizations can create a more welcoming and supportive environment for all.

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