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The Price of the Status Quo

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How the Gender Pay Gap Costs You

It’s indisputable that there’s a real pay gap. People can argue about how big, but that’s almost besides the point. … The point is that every woman, every girl deserves to get paid what they’re worth.
— Sheryl Sandberg

Recently, a $100 million punitive class-action lawsuit was brought against the international law firm Chadbourne & Parke LLP alleging gender discrimination. Attorney Kerrie Campbell, after transferring her practice to Chadbourne & Parke, discovered that she was earning about half the pay of her lateral male partners.

WHEN INCLUSIVE AND GENDER EQUAL MESSAGING CONTRADICTS REALITY

Campbell alleges this pay inequality reflects gender bias and is a result of the “boy’s club” culture she experienced at Chadbourne & Parke. She was disillusioned to find herself a casualty of the gender pay gap, as the messaging she received from Chadbourne & Parke prior to her transfer there indicated a commitment to fair and merit-based compensation policies.

This case serves as a reminder that it is not enough for an organisation to claim gender equality or diversity commitments, they need to follow through.

Chadbourne & Parke are not the only law firm to find themselves in hot water over gender discrimination issues. Sedgwick, a San Francisco-based firm, and Mintz Levin Cohn Ferris Glowsky and Popeo of Boston are both enmeshed in similar suits.

As publicity builds around Cambell’s case, law firms are taking a closer look at how the gender pay gap affects them, and the findings are not encouraging. In fact, a survey conducted by Jeffrey Lowe—a partner at Major, Lindsey & Africa—found that male partners earned (on average) $949,000/year compared with $659,000/year for female partners.

THE GENDER PAY GAP IS INSIDIOUS

There’s nothing new or particularly surprising about the gender wage gap. The gap has likely been around for as long as wages have been around.

Data for the U.S. shows that the gap has narrowed since the late 1970s, but has remained more or less stagnant during the last decade or so.

In Canada, the pay gap is particularly bad, more than twice the global average, according to Catalyst Canada. Women with full-time work earn just 73.5 cents for every dollar a man makes.

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LEGISLATIVE RESPONSE MANDATES TRANSPARENCY

The persistence of the gender pay gap has prompted legislators to mandate the monitoring and reporting of pay gaps within organisations.

In April, 2017, the UK mandated that companies with over 250 employees must publish their gender pay gaps. This means that public, private and volunteer sectors will be required to disclose average pay for men and women, including bonuses. According to a BBC News report, “half of the UK workforce will be affected by the new reporting rules, which encompass 9,000 employers and more than 15 million employees.”

Australia, for its part, has established a Workplace Gender Equality Agency responsible for regularly publishing detailed statistics on the pay gap. In addition, large firms are now required to report their pay gap statistics to the Agency.

Pay transparency policies have been recommended at the provincial level in Canada. In Ontario in particular where, according to the Equal Pay Commission, the gender wage gap has persisted for nearly 3 decades. Among the Equal Pay Commission’s proposed recommendations, the requirement for employers to report and make publicly available wage and pay arrangements, including the breakdown for different compensation structures.

Iceland is leading the way with new legislation that requires companies to prove they pay women and men equally. For half a century, Iceland has had laws in place similar to the ones described above, but Thorsteinn Viglundsson, Iceland’s social affairs and equality minister explains the need for more forceful requirements: “We want to break down the last of the gender barriers in the workplace … History has shown that if you want progress, you need to enforce it.”

STRATEGIES: DESIGNING FOR PAY EQUALITY

Equal pay for equal work. It’s common sense. It’s also overdue. Let’s close the gap and let’s do it now.
— Joe Biden

The gender pay gap is complicated in both its causes and its wide-reaching effects on society. The solutions are just as nuanced. But organisations interested in reducing their own gender pay gap can begin by implementing design changes proven to counteract the pay gap and the structures that reinforce it. The following four steps represent the type of design changes that can be described as behavioural architecture. They are design solutions to a very human problem.

 

1. RUN DATA ANALYSIS

Find out where you stand. If your organisation does not keep track of compensation data as it relates to demographic details, then you can’t know how bad your pay gap is—though you can assume it’s there. If you can get a handle on the problem as it exists in your particular organisation, then you’re also in a position to identify what factors are driving it, address those factors, and measure the effectiveness of your approach.

2. IMPLEMENT PAY TRANSPARENCY

Don’t make the issue of pay a hush-hush subject. Keeping compensation confidential can sometimes means it gets discussed around the water cooler anyway. Implementing pay transparency is a means of demonstrating accountability. It can encourage individuals in positions of power to think twice about the compensation structure they apply and how it relates to their demographics. Pay transparency also allows employees to feel confident they are not victims of gender or other biases.

3. CHANGE NEGOTIATION POLICY

There is ample evidence showing that women are less successful at negotiating on their own behalf. One solution is to have employees negotiate on behalf of their counterparts, providing them an incentive commensurate with the increase they secure. A less complicated measure would be to eliminate negotiations altogether and implement salary increases based on set criteria.

4. STOP SALARY HISTORY REVEAL

When a potential hire reveals their current or previous wage, the figure they reveal functions as an anchor for the wage they will be awarded. When women approach interviews already making less than their male counterparts, the inequity is highly likely to be perpetuated.

 

CLOSING THE PAY GAP – STAKEHOLDER PERSPECTIVES

Organisations cannot afford to leave their gender pay gap unchecked. If checks and balances are not in place to ensure employees are being compensated fairly, organisations may face the steep costs of litigation and negative brand exposure. When a workforce can be confident that compensation is awarded fairly and equitably, the employees benefit, but so does the organisation they work for. Equitably paid employees who have access to a transparent compensation scheme can feel more loyalty toward their employers and can exhibit enhanced performance and productivity. On a broader scale, society benefits when its members receive compensation commensurate with their contribution. 

Closing the gender pay gap benefits us all.

 

 

 

                          

© Dr Kristen Liesch 2017. All rights reserved.