Over three months into 2019, women will finally have earned in 15 months as much as men did in the past 12. Started in 1996, National Equal Pay Day is the day in the current year that women and minorities have to work through in order to equal the wages of their male counterparts for the entire previous year. April 2, 2019 is the date this year, representing an additional three months plus of work to women need to reach pay equity. What’s being done to bridge this gap? With timing appropriate for National Equal Pay Day, the Paycheck Fairness Act is being considered by the US House of Representatives to determine the future of the salary history ban.
Where are we along the path to parity? The jury is out. Pew Research reported that in 2018, women earned 85 cents to every man’s dollar, up 5% from Census Bureau data of 2017. But many suggest wage parity has been largely stalled. One study suggests the wage gap for women will take over 100 years to close. Another reports that bonuses and other forms of incentive pay add to the problem.
Last yeah, Zenefits produced an equal pay report based on original SMB data, which found that the gender wage gap in small businesses was 18% greater than the national average. According to that 2018 data, women were paid a whopping 34% less than their male counterparts within the SMB world.
The caregiver penalty can cost women dearly. Simply taking one year off to care for family or children resulted in 39% lower wages for women against women who did not take time off. Even without taking time away from their careers, the Economic Policy Institute found women with children, on average, are paid 4.6% less per hour than women without.
Generally, even women small business owners earn 80 cents on the dollar to their male counterparts. That can change: small businesses interested in closing the gap at their organizations can get help and advice to make sure their business reaches wage parity. Small steps, such as examining records, re-categorizing jobs, and reviewing hiring practices, and utilizing software to ensure equal pay across your company, can help.
As more companies examine their payroll practices, an uncomfortable truth emerges. The gender wage gap is real and correction will cost millions. But a commitment to salary equity is driving change. Data suggest that when companies disclose their wages, the gap between male/female salaries can shrink by 7%. As consumers continue to pressure business to be good corporate citizens, the trend to equity may increase.
At the legislative level, both House Democrats and Republicans are introducing wage equity legislation aimed at closing the gap. The Democrat’s Paycheck Fairness Act would bolster penalties against businesses that pay women unequally. The GOP announced it’s introducing a Wage Equity Act in the coming weeks.
One crucial component of wage inequity is the practice of asking salary history, and many states and cities have banned employers from requesting or requiring the information during at least some stages of the hiring process. The idea behind the ban is that women and minorities have historically experienced pay discrimination; using a salary history as a baseline for a new compensation offer is a practice that perpetuates this pay discrimination. In most legislation, employers are barred from asking for salary history, at least at the initial stages of the interview process.
An example of how the law can increase equity could be that a company is hiring several new team members for the same job. Their intent is to pay $12.00 per hour. One candidate’s salary history reveals they are at the federal minimum wage, $8.25 per hour: another’s history showed they are earning $10.00. per hour. If both were offered $2.00 per hour more than their current rate, one would be at $12.00, the other at $10.25. Both would be doing the same work, but one would be paid less. That pattern can continue throughout their career if all new wages are based on past history. Even though both are doing equal work, one will never reach parity.
This pattern is seen more typically for women and minorities. Salary history bans can help business bring staffers on board with wage equity, breaking the pattern over a lifetime of earning. Many large companies have adopted salary bans on their application practices, even where legislation doesn’t exist, in an effort to move toward parity. Some have shifted to announcing wages up front and assuring all new hires for that position are brought in at the same rate.
As of this printing, 11 states and Puerto Rico have banned salary history requests and requirements:
A dozen cities and counties have also banned the inquiries:
New salary history ban legislation is pending in four more states:
In Philadelphia, Pennsylvania, a District Court Judge struck down the city’s salary ban ordinance, citing inquiry about prior salary violates an employer’s First Amendment right to free speech. The 2018 ruling, however, allowed the city to prohibit employers from using the information in order to set future rates of pay. An appeal was recently heard the Third Circuit Court and many businesses, states and cities are eagerly awaiting the outcome of the case to weigh whether their own laws (or proposed ordinances) could be overturned as well.
In June of 2018, Michigan prohibited salary ban laws statewide. Local governments are not allowed to regulate what information employers require, request or exclude on applications or during the hiring process. The ban went into effect January of 2019, although the state exempted some of its own state and some “autonomous” agencies from complying, meaning they are prohibited from asking about salary history.
In April of 2018, Wisconsin passed a similar law, stating local governments could not pass legislation that prohibited employers from asking about salary history.
As awareness grows about wage inequity, more businesses, large and small, are working toward parity. The first step in any journey is recognizing the problem exists, and for many, the extent is shocking. As business moves to be more socially responsible, bridging the wage gap for women and minorities must be a top priority.