Gender Pay Gap: Changing The Narrative

In 2019, the U.S. women’s soccer team secured their 4th title win after dominating the Netherlands in the World Cup. They then took their battle off the field by exposing an undercurrent of pay inequality between themselves and the men’s U.S. soccer team. By their calculations, they were making .38 cents to every dollar than the men were making.

 

There is an argument that the reason the women’s team are paid less is because they bring in less revenue. That seems like a fair point. However, a breakdown of how both the men and the women player’s are compensated, proves otherwise.

 

 According to their collective bargaining agreements, women made about 89 percent of the compensation of a similarly situated men’s team player. Even the women’s prize money is still only 14% of the men’s, which is absurd given that the women have 21 FIFA World Cup tournaments and 4 World Cup wins and the men’s team had half the tournaments, and only placed 3rd once back in 1930.

 

When the Wall Street Journal audited the federation’s financial reports, it found that the U.S. women’s soccer games earned more than the men’s games, in total, during three years after the women’s team won the World Cup in 2015. Specifically, from 2016-18, the women’s team brought in $50.8 million in revenue, while the men’s team brought in $49.9 million. That’s a difference of less than 2% in the women’s favor.


This negates the argument that pay is based on revenue-driven; the discrepancy in pay is clear.

Common Myths about why women are paid less

 Myth: It is believed that women accept lower paying jobs and men are more likely to pick higher paying careers.

Fact: Women are becoming more educated and earn college degrees at a higher rate than men. The problem is that they have difficulty obtaining that first or subsequent job that actually pays well.

  Myth: Women act less assertively in negotiations for fear of upsetting the relationship with their boss or colleagues.

 Fact: New research suggests that women do negotiate for raises and promotions as often as men, but they are less likely to get them. Men get a raise 20% of the time when they ask — women get a raise 10% of the time. And often, they are penalized for asking. (Negotiating gender roles: gender differences in assertive negotiating are mediated by women’s fear of  backlash and attenuated when negotiating on behalf of others).

 Myth: Women make less money because they take time off from their work to raise kids.

Fact: Right out of college, women make 93% of what men make (Graduating to a Pay Gap). These are men and women with the same GPA upon graduation and in the same career fields. So from the very start, before even having children, women are still disadvantaged.

Here is the reality

According to a 2019 study conducted by Payscale, women still only make .79 cents for every dollar men made in 2019.

Women of color (American Indian, Alaska Native, Black and Hispanic)  are further disadvantaged and make only .74 cents for every dollar a white man earns.

Not only is there a pay gap in base pay, women also earn less in bonus pay compared to their male counterparts.

 A 2018 study conducted by ADP, analyzed base and incentive pay fluctuations of over 11,000 employees in the U.S. between 2010 and 2016. The study concluded that bonuses play an instrumental role in determining who does or does not close the pay gap between genders and that bonuses exacerbated existing inequality.

The report found that the average bonus for women was less than two-thirds what was paid to men, even when controlling for base pay, age, and tenure. The gap was also observed across different demographics such as age, salary, and industry groups.

In addition to the pay gap and bonus gap, the third  contributing factor to pay inequality is called the Opportunity Gap. Women tend to move up the career ladder at a slower pace than men. This is apparent in the amount of C-Level positions held by women.

 In 1995, none of the Fortune 500 companies had female CEOs; in 2018, there were 24 women who worked as chief executives in those companies. That means out of the top 500 companies, only 4.8% of CEO positions are held by women.

So what are women doing about it?

Kelly Ellis started with Google in 2010 and was given a salary of $106,000 a year, a standard salary Google offered to new college graduates, even though Ellis had years of experience working in back-end software engineering, qualifying her for a salary of $124,000 a year.

A few weeks later, a male software engineer with less relevant job experience joined Ellis’s team. The new male software engineer was hired at a level above hers, even though he graduated the same year as her and had less experience. Ellis then filed a lawsuit in December of 2017 with the San Francisco Superior court on the premise that Google systematically underpays women.

The Result: The US Department of Labor’s 2017 audit of Google found “systemic compensation disparities against women” across the entire company. Ellis also learned of a spreadsheet that Google employees had created for men and women to share their salaries. Though it reflected only 2 percent of the workforce, it showed women made less at almost every level.

Tina Huang, one of Twitter’s first hires, filed a class action lawsuit in San Francisco Superior Court in March 2015 against Twitter alleging that Twitter’s promotion process unfairly favors men.

Huang was brought on in 2009 as a software engineer to work on the mobile product, and by 2011 she was promoted to staff engineer. Then she tried to get a position as a senior staff engineer, a role that would have moved Tina from coding to leadership.

Huang’s manager made the case for her promotion in winter of 2013.

“She has been outstanding, truly better than anyone else on the team,” a manager wrote in one of her performance evaluations and,  “Her efforts have made a huge difference for growth at Twitter,” read another comment.

Despite all the praise, Huang was denied the promotion without any explanation. She later learned that seven people were moved into the leadership positions, and all were men. Huang than emailed Twitter’s then CEO, Dick Costolo, alerting him of the gender bias. This then led to an investigation, with Huang being placed on indefinite paid personal leave.

Twitter never communicated the result of its investigation to Huang, according to the complaint, and didn’t provide any meaningful options for moving forward.

The Result: In 2018, the judge overseeing the case denied her request for class action status, which would have allowed Huang to sue on behalf of another 135 female engineers at the company. She is currently appealing the decision.

According to documents made public as part of the court case, female Microsoft employees filed 118 internal complaints about gender bias between 2010 and 2016.

The Result:  The company only considered one of them to have any merit.

According to court documents, one senior manager in Disney’s music publishing division found out that she was making $25,000 less than the lowest-paid man at her level. She’s been working at Disney for 15 years. Similar to Huang, she also had glowing reviews with her manager stating, “Operating easily at director level, if not higher” and “Her contribution to Beauty and the Beast alone resulted in the most substantial music marketing campaign in recent years and yielded global success.” All together there are at least 10 women who filed a lawsuit , and potentially hundreds more. 

The Result: The lawsuit is still ongoing with Disney fearing and fighting a pay equity class action lawsuit.

A complaint was filed against Facebook in October 2019, for letting landlords and lenders discriminate by age, gender and zip code when placing job, housing and credit ads. The ads were targeted away from women and older people over the past three years.

The Result: Ongoing

For years women made reports to the human resources department about demeaning treatment and sexual harassment. Their complaints included; vulgar names and comments about their body, as well as gender and pay discrimination. One manager even sent an email commenting on a female employee’s breasts to that female employee.

Tired of no one doing anything about it, the women decided to take matters into their own hands by distributing a companywide survey to see if any women had experienced sexual harassment and other forms of gender discrimination.

One former brand marketing director, Kelly Cahill, said she was paid $20,000 less than the salary of a male colleague who did the same work.

Business systems analyst, Sarah Johnston said her career suffered after she rebuffed sexual advances from a male co-worker.

The results were so shocking, that an investigation was conducted into these allegations. At least 11 top male executives left or said they were planning on leaving the company after allegations were made public.

The Result: The women filed a lawsuit against Nike. In the meantime, the company  created a mandatory manager training that reinforces the role of respect, inclusion and accountability as well as reviewed all of their human resources practices and their internal complaint processes.

In 2010, A gender discrimination class action lawsuit was filed against Goldman Sachs. The lawsuit accuses Goldman Sachs of engaging in a pattern and practice of gender discrimination against its female associates, vice presidents, and managing directors. The women allege violations of federal and city laws, including Title VII of the Civil Rights Act of 1964 and the New York City Human Rights Law.

The Result: Goldman Sachs asked a federal judge to force more than 1,000 women from a gender discrimination class action to arbitrate their claims, but attorneys for the women say they shouldn’t be kept out of court. The women won class action status. The ruling cleared the way for 2,000 women to join the suit.

Hard to prove in court

Proving that there is gender discrimination in pay is hard to prove in court. There are really only  two ways women can challenge pay discrimination:

  1. Under the Equal Pay Act of 1963, which makes it illegal to underpay women for doing the same job as a man under the same conditions. The challenge is that it is difficult to show that two jobs are equal, and companies can easily come up with a reason, other than the woman’s gender, to explain the pay difference. Valid reasons include differences in employee performance, seniority, experience, and education.  
  2. The other way to challenge the pay gap is through Title VII of the Civil Rights Act, which outlaws job discrimination based on sex, race, religion, and nationality. Underpaying women because of their sex is a form of gender discrimination, and it’s generally easier to prove than discrimination under the Equal Pay Act. The employee doesn’t have to show that she was doing the same job as the men who were paid more. She does, however, have to prove that the reason she was paid less or treated differently was because of her gender or race, a requirement that doesn’t exist under the Equal Pay Act.

States take action

Several states have attempted to even out the playing field by passing laws that prohibit employers of asking applicants their salary history. For example, California passed the Salary History Ban, which  prohibits private and public employers from seeking a candidate’s pay history. This leaves the candidate with the choice to choose to disclose or choose not to disclose their previous pay. 

 A 2018 study conducted by Payscale, found that on average, women who chose not to offer their pay history, received lower offers than women who provided their pay history, whereas men who chose not to offer their pay history, received higher offers than men who provided their pay history.

This creates is a lose-lose situation. Choose to disclose pay history, which according to research and reports, will be on the lower percentile of the pay range for that position, or choose not to disclose pay history and receive a lower offer than had you provided pay history. 

Let's change the narrative. Tips on How to Become an Equitable pay employer

  1. Take complaints seriously the first time. Nike probably could have avoided a lawsuit had they listened to the women the first time a complaint was lodged. (Also, re-evaluate the employees in the human resources department. They should have been the first line of defense, having been informed of the sexual harassment complaints, and did nothing about it).
  2. Conduct your own internal audit and publicly disclose pay data voluntarily.
  3.  Be pay transparent. Create a culture where employees are not retaliated against for disclosing their pay to other employees. People who feel that they are being treated fairly, are more likely to talk about their work and their organization with passion and pride.
  4. Survey employees to gain understanding on how they perceive their pay equity.
  5. Publish statistics and other information regarding gender pay gaps in the workplace.
  6. Should you find out that your organization does in fact have a wage gap, create a plan and announce it to the organization. Apologize to your employees (not just women) and communicate the action plan you are going to take to correct the wage gap.

Communicating compensation to the company

 

Now that you have discovered a pay gap, how do you communicate your action plan to the company?

For Executives: Use quick and to-the-point messaging such as metrics, graphs, and charts to show your compensation strategy.

Ask your CFO or CHRO to provide a report that outlines all roles in the organization, broken down by tenure and compensation pay package. (Base salary plus bonus level, if the latter is applicable.)

The report should specifically detail where the same roles, when broken down by tenure and gender, demonstrate a gap. Highlight the gap by the percentage difference as well as the raw dollar amount, when mapped against tenure and gender. For example, assume Project Manager is the role. Those with ten years of experience are identified. Plot the female salaries versus male salaries. Highlight percentage and raw dollar amount differences. (Make sure all names are scrubbed to ensure anonymity.)

Once overall gaps get identified, start planning for the 2020 budget year to remedy the issue. As you are likely in 2020 budget planning mode right now, assess how by the end of 2020, the gaps will be fixed. (This may require you to amortize the wage increase over a period longer than the year 2020, either through credit or borrowing against future earnings.)

For Managers: encourage pay transparency with direct reports. Equip leaders with resources to communicate a consistent comp story across departments.

For Employees: make sure they understand where your comp strategy comes from and why. (Maybe you’re a startup paying below the 50th percentile but offering unparalleled benefits and culture. Be upfront and honest about where you’re investing your compensation resources.)

Source: Payfactors 

Bottom Line

While lawsuits are unavoidable, there are actions, you as an employer, can take to mitigate the risk of having a wage discrimination lawsuit. 

Having effective employee communication helps increase employees’ awareness that their employer is attempting to create internal equity, ensure competitiveness, and reward individual performance.

Any perceived inequality or unfairness, either internal or external, can result in low morale and loss of organizational effectiveness. If employees feel they are being compensated unfairly, they may reduce their efforts on the job or leave the organization, potentially damaging the organization’s overall performance and brand.

By auditing your current  pay practices, practicing pay transparency, and  communicating a strategic plan to rectify pay inequities to the organization, you will be improving efficiency and productivity, as it will help to attract the best employees, reduce staff turnover, increase commitment and reduce absenteeism. 

Creating fair pay practices not only benefits women, it benefits the organization as a whole.

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