Salary Transparency Brings Us One Step Closer to Pay Equity
Despite state and federal laws prohibiting pay discrimination, racial and gender wage gaps persist in America. Women still earn 83 cents for every dollar men earn, based on the most recent U.S. Bureau of Labor Statistics data. That wage gap is even wider for Latina and Black women. What’s the solution to pay inequity?
The Role of Salary Transparency in Pay Equity
To learn more about the current state of pay inequity, I spoke with Hannah Williams, the founder and CEO of Salary Transparency Street (STS). In early 2022, she launched a series that has since amassed more than a million followers across the influencer’s various social media platforms. While STS has many goals, Williams said the primary one is to remove the taboo associated with talking about money, particularly salary, and normalize wage discussions from the get-go. She said that applicants should be made aware of salary ranges when they apply for a job.
“The value of the interviews is showing people's different career journeys and different experiences, as well as sharing information and resources that help them get there. We are also breaking taboos by showing the value of talking about money, and how we can do so productively,” Williams added.
Dr. Akilah Cadet, founder and CEO of change management and organizational development consulting firm Change Cadet, explained that transparency is key for companies wishing to achieve pay equity. “Pay equity is one part of the change needed to create the cultural shifts needed for overall diversity, equity, inclusion, belonging, and/or anti-racism efforts.”
Pay equity also sets employees up for long-term success, particularly if they’re members of historically oppressed groups. “When an employee is paid fairly from the start, it is the beginning of value within the company, helping with overall retention, which is especially important for BIPOC (Black, Indigenous, and People of Color), women, and disabled,” explained Cadet. “No one likes the feeling of learning that you make less than a peer.”
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Race and Gender Pay Gaps
“We know that BIPOC, women and disabled tend to get paid less than white men or women,” said Cadet. “Being transparent with salaries, especially in job descriptions, helps with the overall value of current and potential employees and their sense of belonging.”
Over the course of thousands of interviews, STS has uncovered the enormous pay disparities suffered by women, people living with disabilities and members of the LGBTQ+ community “[Salary] transparency there helps so many marginalized groups who previously didn't have the means to advocate for themselves,” explained Williams.
I also spoke with Julie Levinson Werner, a partner in Lowenstein Sandler’s Employment Practice Group, who represents companies in tech, life sciences and financial services. She said employers must be able to justify compensation and pay differentials, and this cannot be due to unlawful discrimination based on race, gender or other protected attributes.
Although people may argue that workers need to negotiate for larger salaries, this isn’t as simple as it may seem. Williams explained that in addition to there being a power imbalance within employer-employee relationships, social implications can also prevent people from negotiating their pay. Additionally, even when workers do negotiate their salary, those who are members of a historically oppressed community are statistically more likely to end up with a lower salary. “Because ultimately, your pay is up to the decision of a person and not a system, and when you have transparency, you have a system,” Williams explained.
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New Salary Transparency Laws
Nearly 20 states now have laws around pay transparency. “They drive a lot of progress forward, because what happens with these laws now is companies that weren't being held accountable to the standards before are now forced to,” explained Williams. Rather than learn about salary from word of mouth or fellow employees, which can lead to resentment, organizations are now required to abide by the law.
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Werner said the employers she speaks with often worry unnecessarily when new legislation is passed, because they overestimate the administrative burden of compliance. However, New York City’s new salary transparency law, for instance, is primarily focused on the inclusion of a good-faith salary range in job postings and does not require employers to submit reports.
Conversely, California’s new pay transparency law requires employers with at least 15 workers to not only include pay ranges in job postings but also provide pay data to the government.
Perhaps unsurprisingly, companies have discovered loopholes in legislation, resulting in some postings listings a range of more than $100,000 between the minimum and maximum salary, said Williams. “It's a start. I think that it's a little bit of a guideline and a book for companies to start following. And as we see what works and what doesn't with laws that currently exist, we can improve them moving forward,” she shared.
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A Holistic Approach to Achieving Pay Equity
Salary transparency is only one component of closing the wage gap. "The first thing to do is a pay audit, to review all salaries at all levels with a priority with gender and ethnicity/race (where there are the most discrepancies)," said Cadet. She explained that these audits can be done internally, or companies can hire an external consulting firm to serve as an external observer.
Yet audits are only part of the solution. Cadet said leadership should then report out the findings from the audit to staff, along with how management is going to address them. “In addition, leadership should review all job descriptions and salary ranges to assure they reflect cost of living, appropriate level of education/certification, and include the salary (some states, like California, require salaries included in a job description).”
Williams shared that she hopes the pay gap will narrow as a result of statewide pay transparency legislation, coupled with good management and honest conversations with employees. According to Werner, “It'll take a number of years to really know whether [salary transparency legislation] improves pay equity … It's just a question of whether this is an effective tool to get there.”
On a final note, Williams clarified that transparency legislation is not a one-size-fits-all solution. “Companies deserve the right to figure out what works best for them, and that really means deep introspection as a company and solid management that understands the needs of their employees,” she said.
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About the Author
Dr. Kyle Elliott, MPA, CHES (he/him/his) is the founder, career coach and executive coach behind CaffeinatedKyle.com.