Salary transparency helps close the pay gap but there’s a catchMay 14, 2019
Are you being underpaid?
Sharing pay data is probably the easiest way to ensure every employee gets the same pay for the same job. But new research suggests that employers may claw back those gains made by underpaid staff over time. Economists from the University of Toronto, Princeton University and the Social Analysis and Modelling Division from Statistics Canada, the country’s national statistics agency, examined the impact of public-sector salary disclosure laws on university faculty salaries.
Using administrative data covering the universe of faculty in Canada, they came to three conclusions: Firstly, the laws reduced the gender-pay gap. That’s good news for a persistent problem that has dogged generations of workers. Secondly, the closure of the gender wage gap occurred primarily in universities where faculty are unionized. That’s a wrinkle in how widely this study may be applied. Thirdly, pay disclosures ultimately reduced all salaries on average.
In other words, increased transparency appeared to decrease the gender-pay gap in the short term by nudging employers to pay female employees more money so they would earn equal pay for equal work. Any gap in pay, regardless of gender, was used as leverage when they negotiated their salaries. But sharing information on salaries over the long term may have led employers to lower overall salaries rather than lifting women’s salaries to the level of their male co-workers, the study suggests.
The gender pay gap was around 15 percent in 1970 and reduced to four percent to five percent in 2017. The study looked at 101,103 individual university employees across Canada. Individuals were on average 48 years old and one quarter of them were women. The women in the sample were nearly 10 percent more likely to be unionized than men; this may be because they’re more likely to work at organizations where there are labor unions and/or the share of women increased in the workforce alongside the gradual increase in unionization in the 1970s.
The researchers said it’s possible that the gender wage gap is unaffected by transparency laws. “While learning about co-workers’ wages might reveal something about the nature of firm-specific rents, if men and women use this information in a symmetric fashion in bargaining, one should not expect to see any impact on the gender pay gap.” Put simply: “If men, but not women, use the information in bargaining, it could exacerbate the gap.”
Pay transparency is a big issue in the US. US companies with at least 100 employees have until the end of September to turn over worker salary information to federal regulators, a federal judge ruled last month. Companies are already required to give the US Equal Employment Opportunity Commission breakdowns of race, sex and ethnicity. These companies will have to supply the agency with information on how much they paid men and women in 2018 by Sept. 30.
Companies including Google, Disney and Nike have faced allegations recently of failing to pay women fairly. Google has previously said that it works hard to ensure there are no disparities and has installed an annual pay-parity review. Similarly, Nike defended itself against such complaints, saying that it’s “committed to competitive pay and benefits for our employees,” and Disney has called the allegations “without merit.”
Previous research on pay transparency found that people were more concerned with pay ranks than differences pay levels. Workers earning below the median for their pay unit and occupation reported lower pay and job satisfaction, while those earning above the median report no higher satisfaction, it found. “Workers with salaries below the median for their pay unit and occupation report lower pay and job satisfaction,” it added, “while those earning above the median report no higher satisfaction.”
Nationally, women earn 83 percent that of men, according to the Pew Research Center in Washington, DC. In the 1970s, women were paid closer to 58 percent the salary of men. Men and women acquire more experience the longer they work and, therefore, become more valuable and productive. After 50, however, they either slow down and learn fewer new skills, economists say, or they are competing with younger, less expensive but equally skilled, employees for the same jobs.
There are only two occupations where women’s median earnings are slightly higher than men’s, while there are 107 occupations in which women’s median earnings were 95 percent or less than men’s for the same jobs, according to the Institute for Women’s Policy Research. Women working as “dining room and cafeteria attendants and bartender helpers” and “wholesale and retail buyers,” slightly out-earned men, it found. That is, the lowest paid occupations had the smallest gaps.
And it doesn’t always get better when women climb up in the ranks. Female managers are not only under-represented in tech companies, they’re paid significantly less than men. In the Bay Area, they’re paid $172,585 per year, 10 percent less than men. In Seattle, they are paid an average of $158,858 per year, also 10 percent less than men. That pattern is similar across tech companies in Los Angeles, Boston and New York City, according to this analysis of 6.5 million employee profiles.
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