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Money News Briefs

Companies Must Invest in Pay Equity or The Gender Pay Chasm Will Expand

PayScale, Inc. recently released its annual pay equity report, State of the Gender Pay Gap Report in recognition of Equal Pay Day. The date represents how long it takes women to earn what men earned by the end of 2020. The report provides data and analysis on the gender pay gap in addition to the intersectionality of race and gender.

Statistics include:

  • In 2021, women earn $0.82 for every $1 men earn when comparing all women to all men. Women earn $0.98 when controlling for job title, experience, location and other compensable factors.
  • As women face disproportionate levels of unemployment due to COVID-19, the overall average pay for women may be driven up. This caused the pay gap to superficially shrink. When women return to the workforce, the pay gap may widen due to wage penalties from unemployment.
  • Pay equity is an ongoing, essential component of diversity, equity and inclusion (DEI). With compliance laws around pay equity on the rise, pay equity is the future of strategic compensation management. Modern compensation technology measures and monitors pay equity.

Changes over the year

PayScale’s research shows that the gender pay gap decreased by one cent since last year. Due to the high unemployment of women during the pandemic, the gender pay gap could widen beyond previous levels when women return to the workforce. In 2021, women earn 82 cents for every one dollar that men earn. When controlling for compensable factors such as job title, years of experience, and location, PayScale finds that women only make 98 cents for every dollar that men earn. This controlled gap has changed only $0.01 since 2015. It suggests that systemic bias accounts for why women receive less pay for equal work.

“Businesses have a moral and legal responsibility to invest in ongoing pay equity analysis and monitoring to close pay gaps,” said Shelly Holt, chief people officer, PayScale. “Most companies do not have the formal compensation structures or resources to measure internal pay gaps. They are likely to make assumptions, but there are technology and services available today that makes data-driven pay equity achievable for every organization. Imagine the impact on talent acquisition, retention and engagement when a company’s compensation strategy is transparent and there are clear reasons for pay differences like management responsibilities, skills, location and years of experience.”

How COVID impacts the workforce

The shrink in the uncontrolled pay gap may be influenced by lower paid women disproportionately losing their jobs during COVID-19. This drives up average pay for women. This would include women who voluntarily left the workforce to care for children now attending school from home. As women return to the workforce, they can expect wage penalties that will widen the pay gap in subsequent years. PayScale found that the gender pay gap widens among workers who were laid off throughout the COVID-19 crisis. Women who were laid off earn $0.77 for every $1.00 earned by men who were laid off. This suggests that women see much higher unemployment penalties than men when returning to the workforce. This is consistent with previous research.

Women are also more highly represented in occupations that have been heavily impacted by COVID-19. Examples include healthcare practitioners, healthcare support workers, educators and people in the food preparation and services industries. These already have gender-based pay gaps. Women make up lower paid positions in these occupations. The uncontrolled gender pay gap is $0.94 for healthcare practitioners, $0.96 for healthcare support workers, $0.77 for people in education, library and training positions and $0.88 for people in the food preparation and related occupational group.

Jobs with the highest pay gap

Job titles with the highest controlled gender pay gaps in 2021 are representative of essential services or impacted professions that have been in the spotlight during 2020. These include waitresses ($0.78), bartenders ($0.87), media and communication workers ($0.87), police and sheriff patrol officers ($0.90), and surgeons ($0.90). PayScale’s full report includes the top 20 professions experiencing the largest gender pay gaps in 2021. These are positions where equal pay is not received for equal work.

Race and equity

In addition to compensation software, PayScale also offers professional services for pay equity analysis as well as external consulting through its partnership with the USC Race and Equity Center.

“Organizations tend to approach diversity, equity and inclusion as siloed efforts,” said Shaun Harper, Executive Director of the USC Race and Equity Center. “All three must work together, and compensation is a critical component. Through our partnership with PayScale, we provide pay equity analysis and monitoring to organizations lacking this expertise. We do not rely solely on numbers. We also blend in qualitative analyses, conducting focus groups with actual employees to understand how they perceive their organizations and how DEI efforts are understood and interpreted holistically.”

Women of racial minority or ethnic groups experience even wider wage gaps. American Indian and Native Alaskan women have the highest uncontrolled gender pay gap at $0.69 for every $1 men earn. Black and African American women have the highest controlled gender pay gap at $0.97. Most men of color also earn less than white men. American Indian and Native Alaskan men earn $0.86 for every $1 white men earn, based on uncontrolled data.

How to address the pay gap

The gender pay gap and the racial pay gap require commitment to pay equity with continuous analysis and monitoring. This includes alignment of compensation strategy to the organization’s business and talent strategies as well as diversity, equity and inclusion (DEI) programs that incorporate pay equity. This requires developing pay structures that account for all compensable factors as well as compensation technology to continuously monitor for gaps.

PayScale compensation research finds that most organizations believe that pay equity is important but define it in different ways. According to a special report on data from PayScale’s Compensation Best Practices survey, which is available as a downloadable addendum to the 2021 Gender Pay Gap Report, only 22 percent of organizations currently say that compensation is part of their DEI strategy.

Ultimately, forward-thinking companies will make pay equity the center of their compensation strategy in 2021, which will include a revitalized philosophy to account for an increasingly remote workforce, compensating for hot skills, and a focus on rewarding performance. To learn what your position is worth on the market, fill out a salary profile at PayScale.com. To view the full report and methodology, please see the 2021 Gender Pay Gap Report.

About PayScale

As the industry leader in compensation data and technology, PayScale helps organizations get pay right. PayScale is the only technology solution for managing compensation that provides multiple streams of fresh, transparently curated, and validated salary data. Combined with modeling engines that learn continuously and generate recommendations and insight, PayScale empowers HR to price jobs and adjust compensation to reflect near real-time changes in the market — all on one trusted data platform. With PayScale’s Adaptive Compensation Advantage, teams operate with efficiency, focused on outcomes rather than manual data management. In 2021, PayScale announced it merged with Payfactors to create a compensation technology and data powerhouse. Learn more at payscale.com.

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