Monday Mornings with Madison

Equal, Fair and Equitable – Part 2

The world is not always a fair place.  Some people are born into money while others are born into poverty.  Some people are born healthy and others are born sickly.  Some people are just prettier or more charismatic or intelligent than others.  None of that seems fair. But it is human nature to want to impose a sense of justice in the world.

Indeed, fairness is a fundamental concept that everyone understands.  We all carry a sense of justice and know what it feels like to be wronged.  Issues having to do with equal treatment and fairness are often emotional and controversial.  It is especially sensitive when comes to the topic of equal pay for equal work.  In such situations, business leaders and managers need to consider all the evidence to determine what is equal, fair and equitable in order to do what’s right for both the company and its employees.

Point and Counterpoint

Most economists and researchers agree that overall most women’s paychecks in the U.S. are not ‘equal’ to those of their male counterparts in positions ranging from factory floors to prominent boardrooms.  But some argue that while the pay is not equal, it is fair and equitable given a myriad of factors.  A variety of “valid reasons” are cited – that have nothing to do with gender bias – for why men and women, as a whole, are often not paid the same.  These arguments suggest that specific circumstances, not discrimination, account for why women earn less.  Here are some common arguments.

Argument 1 – Women earn less because they choose professions that generally pay less than those chosen by men.

It is true that traditionally women in the U.S. have chosen and continue to choose in large numbers occupations that typically pay less than the occupations commonly chosen by men.  Because men choose occupations that pay more, they therefore earn more.  This has been validated by the data.  One of the most comprehensive surveys of occupations and gender was done by the American Community Survey between 2009 and 2013.  Of the 3.5 million American households they contacted, the data showed that secretary was the most common job for women, as it has been since 1950. Next on the list were nurses and elementary and middle school teachers.  By contrast, the most common jobs for men were drivers and sales workers, followed by managers, which includes all types from investment fund managers to supply chain managers.

The choice of lower-paying occupations certainly accounts, in part, for why women – as a whole – do not earn the same pay as men.  It may not be equal, but it is equitable. This, however, doesn’t explain why there is unequal pay between men and women even within specific occupations.  For example, in 2013 male elementary and middle school teachers reportedly earned a median income of $1,096 a week while female elementary and middle school teachers earned a median income of $956 a week.  This was true even though women held over 70% of all elementary and middle school teaching jobs.  Women earned .87 cents for each dollar earned by a man in the same occupation.  That is neither equal nor equitable.

Argument 2 – As a whole, men go into technology and hard science occupations more than women.  Those careers pay better.

Again, the argument points to career choice as the cause of pay discrepancies.  And it is true that there are more men than women in technology and hard science occupations.  Men still outnumber women in those professions about three to one.  However, even in those well-paid occupations where there is a notable shortage of women, men still earn more than women in the same jobs.  For example, in 2014, women in a technical director role earned $97,817 on average while men in the same job title earned nearly $40,000 more a year.  For accountants, there was a $32,578 salary gap.  Again, that is neither equal nor equitable.

Argument 3 – Women are more likely to have “gaps” in their careers, primarily because of child rearing and child care. Less experience means lower pay.

This argument carries a lot of weight.  The child-bearing and child-rearing issue explains, in part, why even within some industries women earn less.  A 2010 study by Reach Advisors, a U.S. market research firm, showed that in some U.S. cities, childless women under the age of 30 were earning up to 20% more than men.  In fact, in 147 of the largest 150 U.S. cities, single, childless single women earned an average 8% more than men.  The same research also showed that older women, married women, women with children, and women living outside big cities earned far less than men.  The key variable in this study was education.  Most of the women earning more than men had earned masters degrees or higher.

That said, there is conflicting data about whether the pay gap arises only when women marry and have children.  A study by the American Association of University Women found a 7% wage gap between male and female college grads a year after graduation, even controlling for college major, occupation, age, geographical region and hours worked.  Seemingly even before they began having children, women with a Bachelor’s degree got jobs earning significantly less than their male counterparts.

Similarly, a study by the John J. Heldrich Center for Workforce Development at Rutgers University polled 600 young men and women who graduated college between 2006 and 2010 and found that young men were out-earning young women by an average of more than $5,000 per year. Male participants reported first-year job earnings averaging $33,150, while young women earned about $28,000.  So, for most women (with or without Bachelors degrees), the pay gap starts early and seems to accelerate over time.  Women without advanced degrees typically earn about 90% of what men are paid until they hit 35. After that, median earnings for women are typically 75–80 % of what men are paid.

Argument 4 – Men and women do not treat work the same way.  Men tend to place a higher value on careers and income.

While advanced degrees may help eradicate the pay gap between men and women, it’s had little effect on the proverbial glass ceiling keeping women from the highest positions of leadership.  But why?  It seems that part of the issue has to do with individual goals.  A survey of men’s and women’s reasons for obtaining an MBA found that men acquiring an MBA aspire to become President or CEO of both public and private companies while women MBAs rank management consulting, executive level vice-President positions and non-profit executive management high among their career goals.  Simply put, men desire the highest leadership positions and go after those jobs, while women don’t.

What was unclear from the study is why women don’t aspire to top leadership positions.  Is it because they don’t desire the power, responsibilities and the income that goes with top positions the way men do?  Or is it that women don’t think they can occupy those positions either because few do, or because of an unspoken cultural bias that says leaders are male?  Clearly, though, the most accomplished women aren’t earning as much as their male counterparts in part because they aren’t landing the top jobs that pay the most.  The jobs aren’t equal so the pay isn’t equal.

Argument 5 – Men are simply better negotiators.

One reason why the pay gap seems to widen with age may have to do with that men are better at negotiating for higher salaries.  Research confirms that, by and large, women get fewer raises and promotions, in part, because they aren’t as good at negotiating as men.  Overall, women are generally uncomfortable playing hardball.  Over 20% of women never negotiate salary or raises at all.  Women commonly report feeling guilty about asking for more money than is initially offered.

This fact is validated by research.  Emily Amanatullah, an assistant professor of management at the University of Texas, did an experiment in which men and women were asked to negotiate a starting salary for themselves. Then she had them negotiate a salary on behalf of someone else.  Not surprising, when the women negotiated for themselves, they asked for an average of $7,000 less than the men. But when they negotiated on behalf of a friend, they asked for just as much money as the men.  Amanatullah believes the reason women don’t advocate for themselves as forcefully as for others is that in addition to dealing with the issue of money, they are also managing their reputation.  Women worry that pushing for more money will damage their image.  There is research that shows this is a legitimate concern.  Both male and female managers report being less likely to want to work with women who negotiate during a job interview.  They didn’t report feeling that same way about men who negotiate for more money during a job interview.  So, when women do negotiate, they are likely to receive less than men or they are penalized for violating social norms. While it is true that men are better negotiators, there is a difference in how men and women who negotiate are treated that is neither equal nor fair.

Argument 6 – Men are more likely to seek dangerous jobs with hazard pay.

This is just plain true.  In these occupations, men earn more because of hazard pay. It also explains why men also make up 93% of all workplace fatalities.  Dangerous jobs pay more.

Unequal Can Cut Both Ways

Of course, there are occupations in which inequality swings in the other direction.  For example, female fashion models make 10 times as much as their male counterparts.  But this is not very common.  In fact, drawing on data from the U.S. Census Bureau’s 2009 American Community Survey, a study sampled three million college graduates between the ages of 25 and 64 who supplied their majors and subsequent earnings.

According to the data (which included people in a variety of occupations, education levels, location, etc.), overall women earned more than their male counterparts in only three occupations:  physiology, information science and visual and performing arts.

When it comes to compensation and promotions, there is very little ‘equality’ to be found.  As for fairness and impartiality, research seems to indicate a certain amount of unspoken bias that exists in hiring, raises, promotions, etc.  The pervasive discrepancies in pay and opportunities across occupation levels, age, education and industries seems to point to a playing field that not entirely level.  Why should this matter to businesses?  When businesses hire and manage people in a way that is not fair and equitable (irrespective of whether it is ‘equal’), does staff not feel valued.  Those employees might leave the company, driving up the costly turnover rate.  More importantly, a reputation for inequitable treatment might discourage top talent from joining the company.

Companies that want to be equitable in their compensation with both men and women might conduct salary audits to proactively monitor and address gender-based pay differences.  Employers might look at how they hire and promote to ensure that the factors influencing decisions strictly focus on selecting the best person for the job.  That is, after all, what is best for every company anyway.  In turn, female employees might consider taking a negotiation course to improve their skills in this area.  Only then might the issue of equal, fair and equitable finally be laid to rest.

Quote of the Week

“Equal pay isn’t just a women’s issue; when women get equal pay, their family incomes rise and the whole family benefits.” Mike Honda

 

© 2015, Written by Keren Peters-Atkinson, CMO, Madison Commercial Real Estate Services. All rights reserved.

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