Diversity and Inclusion

Introduction to gender pay gaps and pay parity

You may have heard the terms “gender pay gap” and “pay parity” used interchangeably – but they really are not the same thing.

According to the consultancy firm Korn Ferry, the main problem today is not unequal pay for equal work, but the factors that lead minority groups to be in lower-ranking jobs at lower-paying organizations.

The gender pay gap refers to the difference between men’s and women’s average earnings across a business or in the labour market. It’s typically expressed as a percentage of men’s earnings.

In Britain, for example, the overall gender pay gap is 18.1%. (That means for every £1 a man earns, a woman earns a little more than 80p).

Pay parity, on the other hand, simply put, means equal pay for equal work.

It means that men and women in the same employment performing equal work must receive equal pay, as written into UK legislation under the Equality Act 2010.

The USA has similar legislation. However, even over half a century after the US passed the Equal Pay Act, American women still face a substantial gender wage gap across the spectrum.

So, even though it’s illegal to pay men and women different rates for the same work, how is it that there’s still a wage gap between men and women on average? How is that possible?

Discrepancies in pay between majority groups and underrepresented groups aren’t isolated to any specific period or point in time.

They’re the result of more than centuries of systemic inequality: inequalities that are perpetuated through a given society’s social, political, and economic institutions, generally by a dominant group against a minority one.

Discrimination against women, people of colour, and the disabled means that when it comes to employment, individuals belonging to those groups have a harder time accessing jobs – and as such, take whatever jobs they can, often for lower pay.

Historically, the contributing factors to systemic inequality in pay are:

• ⚓ Salary anchoring: By basing new salaries on previous ones, a compound effect is created wherein minority groups who are paid less to begin with get paid disproportionately less over time. (Oracle is in hot water for it now.)
• 🤝 Preferential promotions processes: In leadership teams of old boys networks, like begets like. If you don’t fit that mold or operate in that network, you typically get excluded from promotions and thus higher salaries.
• ❌ Women are penalised for negotiating: As Iris Bohnet writes in What Works, women are perceived as arrogant or cavalier when they negotiate, thus making them reticent to do so out of fear for the negative consequences.
• 👶 The motherhood penalty: According to the data, the gender pay gap in wages becomes most pronounced for women around the 40-age mark. As researched by Vox (above) and countless others, one compelling reason for this is motherhood which could arise because of
  – unequal distribution of domestic labour,
  – disruption in a woman’s career trajectory, and/or,
  – very few companies offering flexible offerings such as remote or work-from-home arrangements to accommodate the increased load.

Like with most things, transparency and preparedness seem to be the key.

✅ Pay transparency is one way to combat pay gaps. By learning more about what your colleagues and others in your domain are making, you have better leverage in negotiations.

✅ Prepare for your negotiation by conducting market rate research, practising, and rallying internal support.

✅ In your negotiation, be sure to discuss how you want to contribute as much value as you can to the organisation, and also explain the value you’ve added thus far. Don’t leave without getting anything – try again.

✅ As a manager, if a colleague asks for a raise, be mindful that they could have other options. Before the conversation, do your research; during the conversation, it is key to listen, and afterwards, deliver the good/bad news in a tactful way.

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The bottom line?

Gender parity equal pay for equal work as required by law, whereas, gender pay gap refers to the fact that women earn less than men due to the positions they occupy.

Gaps in pay can be attributed in large part to systemic inequalities perpetuated throughout time. As underrepresented groups struggle to get a foot in the door, those poorer-quality jobs have an impact on their wages later on.