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May 1, 2023

Why your DEI strategy must include pay equity

Successful diversity, equity, and inclusion efforts incorporate pay equity. But do yours? Here's why your DEI strategy must include pay equity.

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Diversity, equity, and inclusion activities are central to a successful organisation. But do your DEI efforts include a focus on pay equity?

In the grand scope of DEI, pay equity can be overlooked. Sure, pay equity conversations will happen at organisations. But when it’s time to set DEI goals and initiatives, pay equity isn’t a top priority. For example, the payroll team might discuss it related to pay fairness or executives might talk about it as part of their ESG report. But does it move from mere conversation to a defined DEI plan with a visible leader pushing pay equity forward?

The pervasiveness of pay disparity

Pay equity is the notion that employees who perform similar job duties should receive equal compensation for their work regardless of their identity. In essence, pay equity means a woman should earn the same amount as a man performing the same job.

While the idea is simple on paper, unconscious bias often gets in the way. Gender, race, ethnicity, ability, and other realities have informed how employees are paid. And the statistics are quite revealing when it comes to pay disparity and the challenge to rid the workplace of its injustice.

In two decades, the needle hasn’t moved much on gender pay equity. Pew Research Center reports that “In 2022, women earned an average of 82% of what men earned … These results are similar to where the pay gap stood in 2002, when women earned 80% as much as men.”

And it isn’t much better when we consider the racial pay gap. The U.S. Government Accountability Office reports that, based on 2021 data, the following racial pay gaps exists when compared to the earnings of a white man:

  • Hispanic or Latina women experience a pay gap of 42 cents on the dollar.
  • Black or African American women experience a pay gap of 37 cents on the dollar.
  • White women experience a pay gap of 21 cents on the dollar.

Though these statistics reflect the situation in the United States, they are indicative of worldwide problems. The International Labour Organisation shared that in its Global Wage Report 2018/19, “women earn on average about 20% less than men, although there are wide variations across countries.”

A quick aside: Pay equality vs. pay equity

It’s also important to note that pay equity and pay equality aren’t exactly the same, though they both are essential to a nondiscriminatory compensation strategy. Pay equality is all about equal pay for equal work—ending the gender pay gap across all positions. Pay equity challenges employers to consider additional variables like higher skillsets, longer tenure, and better job experience when addressing pay discrimination between employees of similar qualifications and backgrounds.

Why pay equity fits into DEI

These statistics are disheartening, but just because the past two decades only saw incremental change doesn’t mean the next two must be so stagnant. This data can serve as a loud and clear call to action for your organisation to take pay equity much more seriously and put it at the front of your DEI agenda.

But how exactly does the pay gap fit into your DEI strategy? To start, pay disparity has much to do with the E in DEI: equity. If you want to comprehensively address inequity in your organisation, you can’t limit it to fixing inequitable hiring practices or limited promotional opportunities. It must encompass compensation as well.

If you don’t address pay inequality, you’re robbing historically disenfranchised people of literal money in their pocket. Less money over a long time builds significant gaps in lifetime earnings.

Say a man makes $100,000 and a woman doing the same job earns 20% less that year. Well, that’s $80,000 for the woman in year one. But compound that inequity over a 40-year career where both stay at the same job with the same wage with the same pay gap, and suddenly the man has made a cumulative $4,000,000 while the woman has only made $3,200,00. That’s $800,000 she will never be paid, despite performing the same duties. And that doesn’t even take into account pay raises, promotional opportunities, time away for parental leave, and more.

You can avoid furthering this inequity in your organisation by addressing pay equity as part of your DEI strategy today.

How you can build pay equity into your DEI strategy

While no one can solve the pay gap overnight, you can take steps right away to work toward true equity at your organisation. Here are a few ideas to get started:

  • Pay transparency. One of the first and most important initiatives you can undertake at your organisation is pay transparency. This means committing to increased information sharing about your employee compensation to internal and/or external audiences.
  • Involve the entire organisation. Your HR team or DEI director can’t affect organisational change alone. Collaborate with others in your organisation to build a comprehensive effort to examine internal inequities and plan how you’ll rectify unfair compensation differences.
  • Collaborate with others. You can also work with others outside your organisation. Research nonprofits and issue-driven organisations to partner with and audit your current pay structure. You can also bring in influencers to encourage cultural change and discuss things like the #PrivilegeTax.

These are just the first steps toward equity at your organisation — you can always do more to address the gender pay gap. But the simple act of beginning your pay equity journey is the most crucial, as it will help you affect meaningful change in employees’ lives and change the heart of your organisation.

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