The pay transparency laws popping up around the U.S. are creating a sense of momentum. At the first of the year, new laws took effect in California, Rhode Island and Washington, requiring employers to include salary ranges in job posts. These states joined a growing list of other locales with similar, and in most cases recent, requirements.
The energy surrounding pay transparency makes the topic feel fresh, but advocates have been pushing fair pay practices for a long while. These advocates include Noreen Farrell, who currently serves as the executive director for Equal Rights Advocates, the organization that co-sponsored the California Fair Pay Act of 2015.
In a recent conversation with HR Dive, Farrell reflected on the modern movement for fair pay and discussed how employers might best prepare for the laws spreading across the country.
This interview has been edited for length and clarity.
HR DIVE: Pay equity is having a moment. We're seeing the passage of more laws pushing pay transparency and promoting pay fairness, and we're seeing more workers, leaders, and companies devote attention and effort to the subject, too. Why now?
NOREEN FARRELL: Pay equity momentum is building across the country for a lot of exciting reasons. We’ve seen a powerful cultural shift driven by a younger generation of workers sharing salary information at work and online and expecting employer transparency when it comes to pay scales.
According to a new survey of recent and upcoming US postsecondary and recent graduates, 85% reported they are “less likely to apply for a job if the company does not disclose the salary range in the job posting.” The law is out in front of this cultural shift with dozens of new state and city laws on the books requiring employer posting of salary scales in states and municipalities across the country — including a bill co-sponsored by Equal Rights Advocates.
These cultural and legal shifts combined with the #MeToo movement’s demands for improved conditions for women, greater employer attention to racial justice, and pandemic workplace strain to center the importance of pay equity.
Another important factor has been the growing power of employees in the workplace as employers scramble to attract and retain top talent. All of these forces have contributed to the attention and energy around pay equity we’re seeing now.
From your perspective, what has been the response to this moment? How has the business community, in particular, reacted to the attention devoted toward pay equity?
Some smart employers have positioned themselves ahead of these trends, voluntarily posting salary ranges and abandoning reliance on prior salary. These fared better in the bid to attract and retain top talent during the “great resignation” period of mass employee job changes. Others are now being compelled to do so through new laws transforming pay equity requirements.
The demand for corporate leaders to listen and do better has created an opportunity to push for more progressive workplace policies, norms, and culture. Progressive leaders and advocates must keep pushing, and get more leaders on board, so this moment can lead to real, lasting change for a stronger and more inclusive economy.
Business leaders and HR professionals may think of pay equity from a compliance perspective first and foremost. Is there another perspective to consider? In other words, outside of compliance, why should leaders devote their attention to this issue?
Compliance is an important perspective, and we need HR professionals to be dedicated to compliance to put these policies to work. However, pay equity provides many more benefits not only to employers but to our economy overall.
First of all, committing to fair and equal pay can help employers attract and retain more competitive and diverse talent. Companies with diverse teams perform better financially. Being a leader in equal pay efforts can also boost employer brand affinity.
On a broader scale, equal pay increases the spending power of women and people of color. The average woman loses over $400,000 over a 40-year career due to the wage gap. For Latinas, the gap loses them over a million dollars, and Black women lose about $964,000. Closing this gap would boost the economic security of women, families and communities of color.
What factors create pay gaps within organizations?
There are many factors that contribute to the pay gap, and many of these can be addressed directly by employers at their organizations. One major factor is simply ignoring or not measuring the problem. Organizations that are not analyzing salary discrepancies across all employees, and not dedicating the proper resources to address the discrepancies, are bound to have pay gaps.
Another major factor is a lack of pay transparency. Pay secrecy keeps workers in the dark about pay disparities and prevents them from asking for the wages they deserve. Having access to this information is important because it not only makes workers aware of the data but also gives them a tool to negotiate for better pay. It’s also important that employees feel comfortable discussing their wages with each other. Rules or norms that prohibit discussion of compensation often create pay gaps.
Further, employers basing compensation on an employee’s earning history can perpetuate discriminatory compensation practices. Salary history may reflect discrimination by past employers, and there are other factors that can and should be used instead to determine compensation.
Another factor that impacts women especially is pregnancy and caregiving responsibility discrimination. In fact, mothers across race and ethnicity experience a wage gap of approximately 58 cents compared to fathers. This is largely due to inadequate family and medical leave policies and a refusal to accommodate workers with caregiver responsibilities, which can result in mothers needing to quit their jobs or even being let go.
Finally, pay gaps can come about because of occupational segregation. Women and people of color are overrepresented in lower-paying roles and industries because their work is not valued as highly. These kinds of roles are often subject to wage theft, which exacerbates the problem.
How can employers leverage the energy around pay equity to make progress?
Employers have a central role to play in closing the pay gap. They can and should visibly promote pay equity, regularly measure and analyze pay data by race, sex, and ethnicity, and prioritize closing gaps. They should evaluate their managers on pay equity practices. They should aim to lead in their industries by implementing progressive pay policies and sharing their lessons learned and best practices.
Employers should make pay equity part of a broader commitment to employer policies demonstrating that diversity, equity, and inclusion are a priority. These include policies ensuring the hiring and promotion of underrepresented groups in the highest-paid jobs, job-protected paid leave, ending bias against mothers and caregivers and robust protection of reproductive healthcare access.
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