At Pequity, we create tools and systems to enable better pay decisions, and ultimately, de-complicate compensation. We spend a great deal of time exploring industry compensation themes and analyzing why some of the best pay systems in the world are still riddled with inequality.
Key takeaways (for those who prefer light reads):
- Companies lack accurate data, analytics, resources and systems to make equitable and consistent decisions needed for a robust pay system.
- Underpaying an entire demographic is a symptom of systemic inequality, including access to educational and economic opportunities.
- [In our experience] it’s rare to come across companies that purposefully, maliciously, and intentionally pay women less than men.
- There is no single solution for pay inequality, but we are actively researching and building tools to help. We’d love to hear from you if you have any feedback for us!
Most leaders ask the same question:
“How do I ensure our team members are paid fairly?”
When discussing pay inequality, people often frame the conversation as though there is someone behind the curtain sneakily pulling levers and intentionally denying women pay parity. On the contrary, here’s what we discovered: pay disparity is (1) often unintentionally caused by unconscious bias built into broken systems, and (2) equally perpetuated by men and women, against women. In fact, a recent UN study found 90% of all men and women have a bias against women.
This bias has historically been seen in the way markets value women. In the 1940-70s, computer science was a task-oriented “women’s job” (history.com); in 1969 the median salary for a woman computer specialist was $7,763. Meanwhile, a male computer specialist’s median salary was $11,193. As the tech-sector took off, more men entered computer science, and wages skyrocketed. At the same time, women transitioned to previously male dominated roles — including teaching and nursing — where wages then proceeded to plummet. Unfortunately, this isn’t a trend left to the history books.
Did you know HR, Design and Biology were all once male-dominated fields (hbr.org)? As more women and under-represented minorities (URM) entered said fields in recent years, average compensation fell as much as 34% nytimes.com! Before we chalk it off to supply and demand, let’s look at a case study. Software Engineering boasts the lowest pay inequality (techcrunch.com), and the most hiring difficulty/competition. Women are still paid $0.95 cents for every $1.00 men make. Talk about short-changed! Is this happening because women don’t negotiate? Recent studies show women do negotiate as much as men, they’re just less likely to get what they ask for (hbr.org).
We’re shining a massive spotlight on the lack of perceived value for women-dominated roles, since it’s intricately intertwined with pay equality.
So, what are companies doing about this? Most companies do in fact ask, “do we have equal pay for employees who perform ‘substantially similar work’, when viewed as a composite of skill, effort, and responsibility?”. This is defined in the California Equal Pay Act, which they can check using a pay equity test. A company will pass the test if they demonstrate that men and women in the same role & level, with similar performance, have similar cash-based compensation (equity is often omitted since market movements make it hard to keep constant year to year). While pay equity tests have immediate solutions (if women are paid less, bump them up to match peers), there is no test or solution for when an entire role or field is paid less in the market in response to becoming women-dominated.
Knowing how convoluted this issue is, many wonder, why isn’t it good enough for companies to just have similar pay for similar roles? When women and underrepresented minorities are systemically paid less in the market, it directly impacts their opportunities to compete for positions of power. Using the USA as an example, women today receive <5% of all investments as founders (news.crunchbase.com) and the Senate & House of Representatives has <25% female representation (catalyst.org). A level of financial security is typically needed to be either a founder (where you forgo steady pay) or a politician (where most are already independently wealthy), so it’s a logical hypothesis that if wages for women are significantly lower than the men they compete against as founders or representatives, it can create barriers to entry for these opportunities.
At Pequity, we believe that companies need the right data collected and delivered at the moment key pay decisions are being made to help solve these inequalities. We have focused on building a tool that not only provides those insights, but that also educates recruiters, HR professionals, and executives on how better pay decisions benefit their goals and bottom lines.
Interested in learning more about making informed, purposeful pay decisions? We’d love to hear from you. Click here to send us an email – we read every letter that comes our way, and love to geek out on compensation.
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