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How Your Market-Based Pay Program Perpetuates Gender Pay Inequity


Some years ago, the compensation profession turned its back on the sensible pay programs that had been growing and evolving throughout the business world, and allowed itself to fall prey to vendors (primarily market pay data vendors, not surprisingly) who told them that “market-based” pay programs were the answer to all their needs.  In doing so, the profession has helped to enshrine gender pay inequities and increase by decades the amount of time it will take for women to earn what they are worth.

How does this work?  Isn’t following the market, by definition, “fair?”  After all, the Equal Pay Act and all our other employment discrimination laws allow for it, so it must be fair!

Nope.  Sorry.  The market discriminates.  We all know it does.  We all know that jobs typically held by women are paid less.  Why?  History, for one thing.  Bargaining power, for another.   Many women prefer flexibility, and will take less pay to achieve it.  Some professions (e.g., librarians) lend themselves to flexible work schedules, and pay can be be lower regardless of the qualifications of the people in them.  Some industries, such as manufacturing, simply don’t “value” the “soft” jobs, whether they are in accounting, nursing, marketing or other professions with a strong female contingent.  It really doesn’t matter why any more, because we’re not talking about deliberate discrimination here — we’re talking about the kind of discrimination that comes from ignorance.

The bottom line is that the market does not take into account the value of jobs to an organization.  In even the most rudimentary job evaluation approach, we can see that jobs of equal value to the organization are often paid differently in the market.  When two jobs have equal value, we will always pay the one with the higher market rate what we need to pay — but paradoxically, despite the fact that we know that two jobs are equally valuable to us, we will take advantage of one group of people because the market allows us do it.

Sure, you can stick your head in the sand and say “well, as long as we don’t measure job value, we don’t have to know what we’re doing.”  Whether you use a formal internal equity model or not, those two jobs will still have the same value to your organization.  Whether you officially “know” it or not, you are still perpetuating a pay method that allows one group of people, providing the same value to your organization, to be paid less, solely on the basis of their gender.

Rather than fighting a meaningless and silly battle against the supposed evils of “comparable worth,” simply because we don’t like where the message is coming from, employers should embrace the fact that the way to become an “employer of choice” is to show that they reward employees based the contributions they make.  Of course, it is also up to each and every employee to try and choose to work in places where employers actually value contributions — making employers see the value in doing that.

For more information on how creating truly equitable compensation plans is a business “best practice,” contact Merces.