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Impact of Gender Pay Inequity on Morale and Work Culture

How and why her 49 cents to his dollar affects far more than her wallet.

by Laura Freebairn-Smith, Partner, Organizational Performance Group

“To every woman who gave birth to every taxpayer and citizen of this nation, we have fought for everybody else’s equal rights. It’s our time to have wage equality once and for all and equal rights for women in the United States of America." —Patricia Arquette

"Depression, anxiety, somatic symptoms, and high rates of comorbidity are significantly related to interconnected and co-occurrent risk factors such as gender-based roles, stressors and negative life experiences and events. Gender specific risk factors for common mental disorders that disproportionately affect women include gender-based violence, socioeconomic disadvantage, low income and income inequality, low or subordinate social status and rank and unremitting responsibility for the care of others." —World Health Organization

What the Research Shows

“The commonly used figure to describe the gender wage ratio—that a woman earns 80 cents for every dollar earned by a man—understates the pay inequality problem by leaving many women workers out of the picture. …this report provides a more accurate measure of the income women actually bring home to support themselves and their families.

"Women today earn just 49 cents to the typical men’s dollar, much less than the 80 cents usually reported. When measured by total earnings across the most recent 15 years for all workers who worked in at least one year, women workers’ earnings were 49 percent—less than half—of men’s earnings, a wage gap of 51 percent in 2015. Progress has slowed in the last 15 years relative to the preceding 30 years in the study.

"The penalties of taking time out of the labor force are high—and increasing. For those who took just one year off from work, women’s annual earnings were 39 percent lower than women who worked all 15 years between 2001 and 2015, a much higher cost than women faced in the time period beginning in 1968, when one year out of work resulted in a 12 percent cut in earnings. While men are also penalized for time out of the workforce, women’s earnings losses for time out are almost always greater than men’s.” —The Institute for Women’s Policy Research’s 2018 report, “Still a Man's Labor Market: The Slowly Narrowing Gender Wage Gap”

My Breakdown

The gender pay gap is both completely visible and invisible at the same time. The statistics and data are readily available and well-analyzed from many sources – institutes, governments, universities. And yet, we– whether by family unit, organization, state, or country – as a collective culture, tolerate this extremely well-documented form of discrimination. Inside most organizations, other than the public sector, compensation is a taboo topic.

The impact of this disparity in pay has a profound effect on our communal health, the health of our children, the stability of relationships, and more. Women are underpaid by billions of dollars annually, which in turn causes both single family and dual head of family households to live with less means. Households with inadequate means, with poor or ill-constructed social safety nets such as those in the United States, suffer stress which in turn decreases effective parenting, lowers nutritional standards, and negatively impacts the long-term viability of the core adult relationships in the household.

What impact does this pay inequity have in the workplace? For a visceral, anecdotal view of the impact it has across gender lines, take a moment to watch the YouTube video, “Kids React to the Gender Pay Gap” in which three pairs of children, one boy and one girl in each pair, perform the same task and then are rewarded differentially in front of each other.

Three things are striking about the children’s reactions. First, the boys see the unfairness and none of them tries to justify getting paid more. The boys are dismayed at the girls’ underpayment and are uncomfortable with it. Second, the girls are crestfallen. The crush of this unfairness is seen on their faces and in their bodies. The third reaction of interest is the girls’ trepidation in speaking up about the unfairness. They look down, use hesitant language, and take a while to find their voice. In the end, both boys and girls agree that the pay difference is not right.

This is what happens when pay inequality is out in the harsh light of day. We don’t expose this deep form of discrimination to that light in our organizations on a regular basis. We should. Both men and women should be angry about this problem. It affects all of us and our children and those we love.

Pay inequity also impacts the effectiveness of our organizations and our teams:

“The pattern of our findings broadly supports the view of pay disparity articulated in the psychology, sociology, and organizational economics literatures. These literatures posit that the workplace is a social organism, where the relational aspects of pay cannot be divorced from its economic value. They predict that being paid less than one’s peers is a disamenity; this accords with our finding that relatively lower paid workers substantially reduce output and attendance. These literatures also predict that discontent among some workers can break down social cohesion and cooperation, fostering social conflict and altering the dynamics of the group more broadly.” —Quarterly Journal of Economics

How do we go about changing this inequity? There are hundreds of small and big steps we can take. I mention three here: (1) Men speaking up, (2) bringing your organization’s pay into the light of day, and (3) leading bravely.

First, men speaking up. One of my mentors, Yale professor David Berg, said, “It has not been enough over the last 50 years to say to women, “Well, why don’t you stand up for yourself? Why don’t you go say something to the men?” We know from research on what it takes for oppressed groups to be able to create change and not be oppressed, they need the people in power to speak to the people in power.”

This is happening: Men are talking to men, and they are saying, “This is not okay and I don’t want to be a party to it.” We saw this key change in the civil rights movement when Whites started standing next to Blacks in the marches.

It is critically important that men be part of this call for change. That doesn’t mean that women can’t make change on their own, but there is a tipping point that happens when those in power speak to those in power and say, “No, no more.” When women as a whole have this incredible bravery, when one or two women start to go out into the public and say, “I will no longer be shamed or told that it was somehow my fault,” and other women line up, then we see change.

Second, shining a light on your organization’s pay practices. Analyzing your organization’s overall pay practices through the lens of gender will help you see where your organization falls short in gender pay equity. Share that data. Have discussions with staff. Be clear about what actions the organization will take to remedy the situation. Organizations can adjust the entire compensation structure to remove gender disparity; this should be done while fixing the underlying assumptions or guidelines that created the disparity. Some organizations do retroactive adjustments to a specified moment in time. Training for compensation specialists can assist in avoiding future disparities.

Third, lead bravely. Even with good data, here’s one of the greatest challenges I see in the leaders of our client organizations – they buy into the marketplace’s devaluing of women. They rationalize away the undervaluing of “women’s work” with statements like, “But that’s fair market pay.” This is the lowest form of leadership – to perpetuate a status quo that hurts individuals, organizations, and our society – just because the system has created that status quo.

I believe that in the current system we have, organizations serve as a primary cultural driver and moral compass, partially because right now our government system is not working well. It will work well again in the future – I’m an optimist – and it has worked well in the past; and hopefully, if we make some systemic changes to our government, it will work even better in the future. I have to be an optimist in that regard.

In the meantime, organizations, for-profit and non-profit, are driving culture, and they’re driving people’s daily experience of reality. I want to encourage leaders to think about their organizations as microcosms of what is possible. Instead of patching and layering actions on a badly built organizational “chassis” (putting policies one over the other, or doing things like saying, “Let’s just look at compensation. If we solve compensation, then we’ve got gender equity”). I would encourage leaders to tackle this issue of gender inequality on multiple levels.

Be brave. Be fearless. In the face of emotion, go there. Allow people to have the conversation. Not willy-nilly, not unstructured, not in a way that’s damaging – but in a facilitated, carefully constructed conversation. People need to process the feelings they’ve had; feelings are data.

We do also need to look at compensation. We need to be transparent to some extent, and you can do that artfully. It doesn’t have to be complete transparency where people can’t handle that much data yet. Organizational citizens are not given much training to understand how compensation is determined so you might need to educate your staff to make them more astute organizational citizens. They then start to understand why there are some pay differentials, but it shouldn’t be by gender.

Pay differentials should be determined by how much experience people bring and how much risk they’re carrying for the organization (not personal risk outside the workplace). In compensation, what some laypeople don’t know is that someone’s compensation level reflects risk. Many laypeople don’t understand that the more risk a person holds for an organization, the more they get paid. Pay should reflect risk, the person’s experience, how much revenue they’re generating, and other factors. It should never be based on gender. To this day, sometimes you’ll hear a conversation in which people say, “Well, do they have a family they're supporting or not?” That’s not the question you should be asking.

As a CEO what I hope you’re asking is, “Is this a livable wage?” Forget what the government dictates. Ask yourself, could you live on this? Whether you are single, with children, or whatever life structure you have, can you live on it? I want to encourage leaders to say, “How do we process the gender issues together and become a place where we have deep meaningful dialogue?"

We can transform not only our policies but also our understanding of how we work together and create a community that supports everyone.

ABOUT THE AUTHOR: Laura Freebairn-Smith is Partner at Organizational Performance Group, an organizational development consulting firm that believes people and their ability to work together are critical to the success of your organization.

References

[1] https://www.who.int/mental_health/prevention/genderwomen/en/

[1] https://www.govdocs.com/gender-pay-inequality-how-bad-is-it/

[1] Still a Man's Labor Market: The Slowly Narrowing Gender Wage Gap; https://iwpr.org/publications/still-mans-labor-market/

[1] http://frac.org/wp-content/uploads/hunger-health-impact-poverty-food-in…; https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4863915/; and many, many more articles and research studies

[1] “THE MORALE EFFECTS OF PAY INEQUALITY*; EMILY BREZA, SUPREET KAUR, AND YOGITA SHAMDASANI; Quarterly Journal of Economics; July 2016

[1] https://medicine.yale.edu/psychiatry/people/david_berg-2.profile

About the Author

Stacey Tisdale is CEO of Mind Money Media Inc. and has reported on financial issues for nearly 20 years. She authored The True Cost of Happiness: The Real Story Behind Managing Your Money, (John Wiley & Sons). 

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