This week the Economic Policy Institute (EPI) reported that the gender pay gap is still going strong. In the U.S., women are taking home only 82.9 cents for every dollar earned by men, and the discrepancy is worse for minorities and for those at the high end of the pay scale. Globally, things aren't much better. The World Economic Forum released data today indicating it will take 118 years until the global pay gap between men and women is closed. Recommendations on how to reduce this problem are available, but many, like better child-care options, are difficult to implement and prohibitively costly. Fortunately, there are two fixes we could implement immediately that would help eliminate a big portion of the gender pay gap. And, they are free.
Pay transparency lets everyone know what their colleagues are earning and would make women aware if they are making less than their male counterparts. When the Sony hack revealed a gender pay gap among actors, Charlize Theron took action to correct a $10 million pay discrepancy between her and her male co-star, Chris Hemsworth, in The Huntsman. It’s a natural response. We all want to be treated fairly. It makes the gender gap problem self-correcting.
Yes, it would be a bit of a headache for managers, especially in the early days. But having to defend the pay of their employees would not necessarily be bad for the corporation. It may ultimately work as incentive for employees to increase their productivity. It would force organizations to establish a meritocracy. Those who are most productive get paid the most. The highest pay wouldn’t go to those who ask for it, to those who threaten to quit, or to those who are friends with the boss, but, instead it would go to those that actually deserve more pay.
Some tech companies are already implementing these strategies in order to reduce the gender pay gap. According to the Guardian, New York based analytics company, SumAll provides an online document so employees can view the salaries and pay histories of all their colleagues. Social sharing startup, Buffer also makes all their employees' salary information public. Ideally, more organizations who care about gender parity will follow suit, but it will probably require legislation to get the larger organizations on board.
A step in the right direction, Governor Brown signed into legislation an Equal Pay Act in California last month which prohibits retaliation against employees who ask about or discuss wages. It sadly stops short of requiring organizations to provide this data to their employees. In other words, employees are not penalized for asking about their coworkers’ pay, but organizations aren’t required to supply this information to employees.
2. Eliminate Negotiation
A second fix for the gender pay gap is to eliminate negotiation. Study after study show that women don’t perform as well as men in negotiations. Often women avoid negotiation altogether, accepting the first offer presented by a prospective employer. One study of graduating masters’ students examined who negotiated their first job offer. Despite urging from their university to negotiate, only 7% of the female graduates negotiated for a higher salary, but 57% of the men asked for more money. That’s more than 8 times as many men asking for more money. Sadly, many women report that they fear they will not be liked if they aggressively pursue a higher salary.
Researchers Linda Babcock and Sara Laschever explain how even one small negotiation can accumulate into a lifetime of disadvantage. Suppose an equally qualified man and woman each get job offers for $25,000 at age 22. The man negotiates and gets his starting salary raised to $30,000 and the woman accepts the $25,000 offer. They both get 3% raises every year until they’re sixty years old, and neither negotiates any more pay raises. By the time they reach 60, the gap between their salaries would have widened to more than $15,000. If he put his additional earnings in a savings account earning 3 percent interest, he’d have $568,834 more than his female counterpart at retirement - all because of that one negotiation. Some have argued that the entire gender pay gap can be explained by men’s advantage in negotiation.
It seems odd to favor men, just because they’re better negotiators – especially if negotiation is not a criteria for the job being offered. It may be difficult to completely eliminate negotiation when hiring senior employees with varying degrees of experience, but it would be trivial to apply when hiring entry-level employees.
Of course, transparency in pay and the elimination of negotiation do not solve all the problems facing women at work. Issues of childcare are still there. Biases that favor men in hiring and promotion would also not be addressed by these fixes. Neither would women’s problems networking and developing valuable mentor and sponsor relationships. But it would be a great start for organizations who want to be leaders in achieving gender parity in the workplace.
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