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  • David Wudyka

Pay Transparency

Payroll, pay transparency

Question: My company wants to set a goal of reducing the pay gap between men and women. Do we have to achieve “full parity” for us to be considered successful? Or is “solid progress” enough?

These are the days of pay transparency, and most companies and States have just begun to address it. By law in a number of States, companies MUST strive to reduce the “gender equity” gap, as it is known. Pay practices produced a gender pay gap of 30% for many years, and 20% since the Great Recession began in 2008.

The supposition is that at least part of this gap is caused by female pay discrimination. Pay transparency forces companies to ignore any effects of prior discrimination in the pay history of women by establishing a new, more positive pay path. Therefore, job applicants cannot be asked about their current or last pay rate. This potentially produces a higher starting base pay rate than one based upon what the applicant was being paid.

As far as “what’s good enough”, consider this story about the efforts of Natasha Lamb to influence the efforts of major financial institutions to reduce the pay gap today:

· According to Bloomberg Business Week (, Ms. Lamb attended a CitiGroup Board of Director’s meeting. She urged them to increase the transparency of male to female pay. Lamb challenged them to divulge the pay differences between genders in all job classifications, after holding seniority “constant.”¹ But the Board rejected her request, citing a “host of other factors” that influence the pay gap. For example, one idea often cited is the movement of women in and out of the workforce.

· Two pay data companies conducted a similar study but added Education to the analysis. This reduced the gap to 6.4% in one case and 6.1% in the other. Not bad! This is close enough to be considered “corroborative research.”

So what’s the bottom line on the gender pay gap in your company? Once again, it depends upon a number of factors, including the mix and level of your job classifications. A company with a high ratio of male professionals and a low level of female administrative personnel is unlikely to close their pay gap anytime soon. But, over time, the company can strive to hire more female professionals to mitigate the gap.

In conclusion, any goal of improving pay transparency and reducing the pay gap is laudable, whether the company achieves “full parity” or not.

(In the coming months we will share more ideas about how to reduce the gender pay gap in all companies.)

¹Holding a variable “constant” is a way to improve the quality of comparative analyses. By holding more variables constant, like Education, researchers can be more confident that they are comparing two groups on the same basis. As reported in this blog, the pay gap was reduced by approximately 14%.

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