Closing the gender pay gap is a difficult problem to tackle. Being more transparent about compensation has been touted as a potential solution, but does it work? The CEO of weighs in on what the data shows and what practices companies can implement to help address the problem.

Talking about how much money you make is still taboo in most workplaces. As more employees share their salary information openly online and off, this social norm is changing, and HR departments are preparing for a future in which pay transparency is an expected part of work culture.

Mixed into this discussion is the idea that greater transparency could end gendered pay inequity, but does data back this up? A new report from argues it does. Scott Torrey, the CEO of PayScale, discussed the results of the report on Wharton Business Daily with Al Gardner, who was filling in as host. 

Interview Highlights

1. Pay inequality between women and men is an old problem that persists today.

“If we were to break the problem down, we have to go all the way back to 1963. When the Equal Pay Act came out, the gap was $0.59. Today, according to PayScale surveys and research, the gap has narrowed to $0.78-$0.80, which is a significant movement, but clearly not enough.”

“The real question becomes, ‘What happens when you control for the different variables that could create inequality, i.e. (employees with) the exact same education, exact same background, timing in their job, etc?’ With a sample size of more than 1.6 million profiles, we’ve been able to determine that the gap is still at 2 percent. Now, 2 percent, compounded over the life of somebody’s career, can really add up.”

2. Companies that implement more practices around pay transparency are seeing the pay gap closing among their employees.

“The important thing to note is that companies are at different points in the journey. The most transparent and the most extreme would be those that post (the salary of) every single person’s job. That’s difficult to do, and let’s be honest, very few companies are actually doing it.”

“However, there are a larger number of companies being clear about what exactly their job grades are, what their pay is for those jobs, and what skills and experiences it takes to get those jobs. It’s those companies that are being more transparent that are actually closing the gap. In those companies, women are actually making more than men in many cases, and that’s a super powerful factor. So transparency is truly solving this problem.”

3. There are specific actions companies take to help close the pay gap:

  • Figure out where your company is, culturally, on the transparency spectrum. It’s going to be driven by your industry. It’s going to be driven by your bottom-line goals and your compensation philosophy. I think any CEO out there should be asking themselves, ‘Am I using market data to price my jobs and effectively confirm the truth?’ Use market data and make sure it’s timely. Make sure it’s accurate.”
  • Make sure you train every manager on how to hire and develop great people, and how to manage difficult conversations. “This is a skill set about talking about pay and making sure every single employee in your company knows how to have that conversation. Ensure it happens in an open and authentic way.”
  • Price the job, not the person. “There’s a tremendous amount of unconscious bias that has built up over the years that is not helping women. The less we talk about ‘Sally and Tom,’ and the more we talk about (for example) what is required of a database administrator in the City of Dallas and what that job should pay, the better off we’ll be.’

— Emily O’Donnell

Posted: February 24, 2020

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