Written by
Ruth Thomas
Senior Consultant and Co-Founder, CURO
LinkedIn

15 July 2021

For many organizations, prioritizing pay equity with analysis is a clear starting point to better their workforces. But biases and prejudice that exist in the workplace, mainly due to pay myths and misconceptions, can make getting the necessary buy-in challenging. Some of the most common myths that can derail pay equity progress were addressed in our Debunking Pay Equity webinar.

In this blog, Ruth Thomas, Co-Founder and Senior Consultant, and Vicky Peakman, HR and Gender Pay Gap Consultant, cover the top six myths that exist in the workplace, contributing to pay inequity and barriers for minority employees throughout the talent lifecycle. 

The six pay equity myths that exist in the workplace are: 

  1. Pay gaps are not real
  2. Men and women doing the same work are paid equally
  3. Women choose to have children and deprioritize careers
  4. Women choose to work in low-paid roles and sectors
  5. Men don’t want to be caregivers
  6. Minority groups are not discriminated against when it comes to pay

Myth 1: Pay gaps are not real

When we talk about pay gaps, we mean the differences in average pay gaps (for example, the gender pay gap is based on the difference between the average hourly pay rate for men and the average hourly pay rate for women). This doesn’t account for differences in specific job roles, age, or previous experience which is why some critics claim it is not a true representation of pay equity.

Although we agree that pay gaps have less to do with pay or equal pay, they are an important indicator of structural inequality.  The UK became more aware of this due to Gender Pay Gap (GPG) regulations announced in 2017. This truth is now becoming more and more recognized in the US as well, due to similar pay gap regulations being introduced and speculated.

Gender pay gaps reflect the fact that women are under-represented in senior, better paid jobs and over-represented in low-paid work – also known as vertical and occupational segregation. They are also the result of the unpaid care work historically done by women – which undermines career and pay progression and the historical undervaluation of female work. We will come back to these issues shortly.

 

Myth 2: Men and women doing the same work are paid equally

This is the counterargument to the average pay gap debate; that pay gaps are not real because when you compare men and women doing the same work, they are paid equally. Unfortunately, that is not always the case.

There are three ways of investigating comparing men and women pay for the same work: 

  1. By occupation / occupational category 
  2. By regression analysis
  3. By whether or not employees are taking legal action

1) By occupation / occupational category
Firstly, looking at it by occupation / occupational category. Are men and women paid the same for the same occupation? The American Community Survey and the UK ASHE (Annual Survey of Hours and Earnings) show data by occupational category and it’s hard to find any with pay gaps of less than 5%, and even harder to find a pay gap towards women. There’s just one UK-specific category (secretarial and related occupations).

2) By regression analysis
Secondly, using regression analysis to account for legitimate factors such as experience, education, sector and location. Again, the pay gaps reduce but do not disappear - both in the US and UK.

3) By whether or not employees are taking legal action
Thirdly, we can look at whether or not employees are taking legal action over pay discrimination - and if they are winning. There are between 20,000 and 30,000 cases each year in both the UK and US. It isn’t clear how many of these are successful, as many are dealt with out of court, but successful cases do reach the news headlines on a regular basis.

The only way to really provide validation is by performing a pay equity audit. The tide is turning in terms of organizations pro-actively preparing and conducting a pay equity audit – rather than waiting for a claim to be made against them.

When working on client pay equity analysis/audit projects, the most common cause we see for pay differences is tenure. Mothers spend less time in paid work and more time working part-time, than fathers do. As a result, mothers miss out on earnings growth associated with more experience. This introduces us to our next pay equity myth.

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Myth 3: Women choose to have children and de-prioritize careers

The issue here is the word “choice”, as it is often a forced choice and not a gender-based career choice. Women often have no “choice” to stall their careers due to lack of workplace flexibility and the lack of opportunity to share childcare responsibilities equally.

A Harvard Business Review study has highlighted that a gap in the workplace exists. In the study, 96% of employees said they need flexibility, yet only 47% reported having access to the types of flexibility they need (a gap of 54%). This gap is even larger for women, as only 34% of women said they have access to the flexibility they need.

A Women’s Policy Research study found that women who took just one year off from work had annual earnings of 39% less than women who worked all 15 years between 2001 and 2015.

The impact of historical pay setting practices are often used as a “rationale” for prioritizing the male’s career. This perpetuates the expectation that it always makes sense for women to shoulder the majority of domestic work – and further exacerbates the gender wage gap. Women (and men) should always have the choice to not work, or put their career on hold if they choose to. But they should not feel they have to.

 

Myth 4: Women choose to work in low-paid roles and sectors

Once again, the issue is the word “choice”. By the time a woman enters the workplace, her “choices” have been steered by her time in education, expectations of those who raised her, cultural norms and societal pressures.

To make matters worse, when women increasingly enter a field, the average pay in that field tends to decline, relative to other fields.

Computer programming is an example of a field that has shifted from being a very mixed profession, often associated with secretarial work in the past - to being a lucrative, male-dominated profession. When men flooded the field, pay went up. In contrast, when women became park rangers, pay in that field went down.

Women around the world are also more likely than men to work part-time. And part-time work, even for the same kind of job in the same occupation and sector, has a lower hourly wage with fewer social protections and benefits than comparable full-time work.

Men have always worked longer hours of paid work than women, and the gap continues to be more than 9 hours per week (though women do correspondingly more unpaid work).

 

Myth 5: Men don’t want to be caregivers

We’ve discussed women's role as caregivers – but we can’t overlook men’s role as well, including the societal expectations that also exist here.

But there is now an expectation among Millennials – and fathers in particular – that flexibility, family-friendliness and work-life fit should be part of working life. We also know that societal expectations of gender role stereotypes hurt men as much as women - men feel pressure to be present and 100% focused.

 

Myth 6: Minority groups are not discriminated against when it comes to pay

In the same way that some claim individuals of different genders doing the same work are paid equally, the same claims are also made based on race and ethnicity.

Even after controlling for education, years of experience, occupation and other compensable factors, there is still an ethnicity pay gap. But this is not a uniform difference. For example, Black women earn $0.97 for every dollar earned by a white man with the same job and qualifications, whereas for Black men see a controlled pay gap of $0.99.

Additionally, the Bank of England found that the gap was not decreasing for the adjusted gender gap. This could be related to the intersectionality with other challenges, such as deprivation and low pay work. As with girls, ethnic minority children grow up facing similar downgrading of their abilities, and are a product of expectations and societal norms.

When immigrants’ qualifications are not recognized in the labor market of the host country, they can experience "occupational downgrading" meaning many are likely to be overqualified for the job they do end up pursuing.

We can’t talk about this myth without mentioning the recent UK government-commissioned review into racism. The review controversially concluded that the United Kingdom is not an institutionally racist country - and instead laid the blame on individuals and families. There is a lot of evidence that there is structural bias within the UK and only by trying to unpick the reasons for this, will we begin to be able to address it. This is why we recommend all companies also look at race and ethnicity when undertaking their pay equity analyses and audits.

 

Debunking Pay Equity Q&A with Ruth Thomas and Vicky Peakman

Question: What are the pros/cons of various approaches to conducting pay equity analysis, including having outside legal counsel do it? 

Answer: Historically, pay equity analysis was something that was outsourced to legal or reward experts who provided advisory services. For many companies, this was done on a reactive basis in response to a litigation claim or due to legislative requirements. Today, more organizations are wishing to address pay equity proactively to prove their commitment to fair pay and reap the reputational benefits associated with doing so. That is why more and more companies are turning to the relatively new sector of HR tech - pay equity technology – that can support their team with ongoing proactive pay equity analysis, provide greater ownership of the process and the ability to flex the model as their workforce evolves.

Question: What type of reporting will be required for pay equity?  What should an organization be focused on for this analysis?

Answer: A pay equity audit should:

  • Identify where employees are doing the same/comparable/substantially similar work and compare their pay;
  • Identify and explain the reasons for any pay differences;
  • Aim to eliminate any pay differences that are either directly or indirectly discriminatory; and
  • Explore root cause issues that may drive ongoing pay disparity across your talent lifecycle.

A holistic pay equity audit will look at both the unadjusted and adjusted pay gaps, factoring in legitimate business factors that may explain pay variance and use a combination of cohort and statistical analysis to achieve this.

Question: What to do in a small company where there may be only 2 or 3 people in a particular position?

Answer: For smaller companies the issue is less about “equal work” as “equal value”. Group employees together by considering which are “substantially similar”, for example analysts in different departments or team leaders across the business. This way you can determine whether there are any employees who are valued the same by the organization but who are paid differently. Small companies are at an advantage in that they can set in place the systems and structures now to ensure that current and future employees are paid fairly as the organization grows.

Question: How do we get business leaders to buy into the need to do pay equity analysis and invest in this?

Answer: Pay equity has become a societal, economic, legal and political issue with companies facing greater scrutiny on what they’re doing for pay fairness. Societal and stakeholder expectations of businesses have changed and those who fail to address fair pay will now be left behind. This is why business leaders are taking action now.

Evolving legislative landscape and recent social movements have further highlighted the need to improve gender and racial equality. Add on a global pandemic, and the result is a disproportionately negative impact on minority groups that has threatened a setback on any progress made to date on pay equality.


Question: How do you convince the employees of the credibility of the pay equity analysis and maintain it?

Answer: It’s important to recognize that pay equity is a conversation about culture and trust, and should be part of your wider talent strategy. Setting up processes for ongoing analysis with regular tracking is the best way to ensure long-lasting results. To ensure a sustainable approach to pay equity, you also need to know if your compensation policies are working the way they’re supposed to. There are many places in the employee journey where unintended negative consequences can occur. Also, be aware that sustained change also requires a shift in mindset. And this needs to be from the top down. We covered this on a previous compensation webinar.

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Question: Is gender pay equity a reality in public sector jobs as well? Where do we see more pay gaps (public vs private sector jobs)?

Answer: Pay gaps tend to be smaller in the public sector versus the private sector due to pay governance approaches, which tend to be more structured and are more likely to be the result of collective bargaining – factors that have been shown to support more equitable outcomes. But pay freezes, below-inflation pay offers and a reduction in the number of high-skilled jobs have impacted gender pay gaps in the public sector in recent years.

Question: Which objection do you see most often with CURO clients? And do some industries suffer from one more than others?

Answer: The three most common objections to undertaking pay equity analysis are:

  • It is not a business priority
  • It’s too risky to do a pay equity audit; and
  • We don’t have the data – or employees won’t disclose the data

These are fairly common across all industries. We’re seeing that leading employers who are committed to DEIB (diversity, equity, inclusion, belonging) are more likely to want to understand their status on fair pay.

Question: What is the breakdown for minority-owned companies? Is there equality there?

Answer: There is evidence that more diverse organizations perform better. McKinsey found that diverse executive teams were 33% more likely to have industry leading profitability. Boston Consulting Group found that female-founded startups generated 10% more in revenue over a five year period despite receiving less than half the investment.

Question: How do we start gathering some of the data such as ethnicity/race when we have never done so before?

Answer: You should start by getting clarity on any legal requirements in the jurisdictions you operate in on requesting and capturing ethnicity data. Then, you should be clear on what you intend to do with the data. Is your analysis going to be on a binary approach or a multi-factor approach? This will impact the data you collect. Be aware that this is data that needs to be collected sensitively and with informed consent. Employees need to understand the reason for giving their personal information, as many are suspicious that it might be used against them in some way. Protected category disclosure (or declaration) rates themselves reveal a lot about organizations, so it can sometimes take years for employees to be comfortable disclosing. This is why many will frame the exercise as part of their wider DEI (diversity, equity, inclusion) communication strategy.

 

Take back the truth 

Our advice for gender equality advocates: take back the truth. These are just the top six myths that exist and contribute to pay inequity and barriers in the workplace. The more we challenge bias and prejudice, and educate ourselves and colleagues around these misconceptions, the more positive change we can bring to our team - both in terms of business philosophies and culture. Stay tuned for part two of our Debunking Pay Equity blog series.

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