How to Measure - and Fix - the Gender Wage Gap at Your Company

Why did women we hired at Google in 2015 on average receive 30% larger salary increases than the men we hired? Because in the US women are paid less than men for doing the same quality and volume of work. And employers who want to fix that gap - as we do - can fix it every time they hire and promote a woman.

I recently published an editorial in The Washington Post about eliminating the gender wage gap, a well-documented, well-researched, and persistent problem. I argued that something called anchoring bias perpetuates and exacerbates the wage gap.

As I wrote in the Post: “When it comes to making pay decisions, we anchor too much on someone’s current salary instead of what the job is worth. Imagine hiring two accountants. One (call her Eliza) currently makes $50,000 and the other (Alexander) makes $58,000. And let’s say the average accountant in your company makes $60,000. It feels natural to offer Alexander a salary of $60,000, just like everyone else gets. But for most managers, it feels wrong to give Eliza the same salary. After all, that’s a $10,000 raise! Wouldn’t that be unfair to Alexander, who only got a $2,000 raise? And why not save a few bucks by paying people based on their past salaries? But that approach ignores the reality that women are consistently, and unjustly, paid less than men for the same work.”

The solution is to have a target wage based on what the job is worth, and offer that salary rather than anchoring off of someone’s prior salary. That means, on average, women you hire (or promote for the first time if they already work for you) will get bigger raises than men, but going forward they’ll be paid the same. By paying for the role, not the person, you start with a clean slate and mitigate any bias embedded within Eliza’s prior compensation. In other words, you correct the pay bias that exists in society.

But how do you tell how big a problem you have? How do you figure out how much to pay in the first place? And how can you catch inequities as they arise? Designing and testing fair pay practices are steps organizations everywhere can take to create more equitable workplaces. We’ve released a re:Work guide on pay equity that walks you through an approach:

1. Set a compensation philosophy to guide how you award compensation. Do you want to pay at the top of market or the middle? Will you focus on fixed pay like salary or motivate people with opportunities for big bonuses?
2. Structure compensation processes and pay for the role. Don’t base pay on what the people you hire happen to have been paid before. Set a target for each job, and a range that you’re willing to pay around that job.
3. Run a pay equity analysis. Once the above two are in place, check to make sure the system is working as intended by conducting regular and rigorous analyses. There may be good reasons for two people to be paid different amounts for the same job, but you want to be able to prove the differences *are* due to good reasons (like different performance levels) and not because of someone’s gender.

A common question is whether you should stop asking candidates about their current pay. The point of fighting for pay equity is not to ignore how things are today: it’s to do better tomorrow. So if your managers can’t overcome their anchoring bias, then don’t ask about current salaries. If you can overcome that bias, go ahead and ask, but then be sure to base your offer on what the job is worth. In which case you’ll have done the right thing and gotten some insight into what your competitors are paying.

The systemic underpayment of women chips away at our society's values of fairness and equality — and has a real economic impact on our daughters, sisters and mothers. It also diminishes men if we stand by and allow this bias against women to persist.

But we can change the system. If, instead of falling prey to anchoring bias, we corrected women’s wages with every hire and promotion, I believe we’d eliminate the gender wage gap within a decade. Let’s begin.

================================

If you’re enjoying these posts, check out my book, Work Rules!: Insights from Inside Google that Will Transform How You Live and Lead.