Ill-advised & Ineffective Laws & Regulations Aimed At Creating Pay Equity
An employee’s pay rate should be a function of the relative value (internal & external) of his/her role, competence in the role and performance in the role. To allow personal characteristics to influence pay is unethical, dysfunctional and generally illegal. Denying entry into a role based on personal characteristics rather than qualifications is unjustified.
Legislatures and regulatory agencies have created mandates aimed at increasing pay equity that are both ineffective and ill-advised. Although “comparable worth” never became part of federal law a number of state legislatures created mandates aimed at increasing pay equity. Most are ineffective and/or ill-advised. The relative worth of a job (role) varies based on its value to each organization. In a research-intensive organization those with scientific knowledge are critical to performance – administrative roles less so. To conclude that pay discrimination exists because male employees are paid vastly more than female employees ignores the reality that occupational choice may have resulted in far more males in scientific roles and far more females in administrative roles. Entry into roles must be based on personal choice and/or qualifications, not prejudice, and if some roles attract more of one gender that does not constitute discrimination. Yet organizations should not be held accountable for personal career choices of individuals.
Aggregated data is often used to contend that gender discrimination exists. Further analysis might (and often does show) that “similarly situated” employees do not display the same magnitude of male – female gap in pay levels. But headlines are created for effect so the desired conclusion may drive interpretation, rather than analysis. In states with comparable worth mandates thousands of hours are spent preparing reports that contribute nothing to true pay equity. In some cases, legislators and regulators are seeking pay equality rather than pay equity. That however creates unwarranted pay discrimination as well, although the impact on various types of employees will differ.
Recent regulations have been created regarding disclosure of pay information in several states. Some of these require the disclosure of the pay range for the jobs being recruited for. The U.S. economic system has accorded the right to organize, staff and manage workforces to the organization. Since organizations compete for talent mandating this type of disclosure is regulatory overreach and places private sector organizations in difficult situations. Some employers have narrow pay ranges, while others use wider ranges (and some have no ranges at all). Some have policies governing where a new employee will be paid within the range, based on qualifications relative to those required in the job. Others may require all new hires be paid a starting rate that corresponds to the range minimum or that is below the midpoint. Although an organization wants to keep their pay structures confidential these disclosure requirements deprive them of that right.?
Regulations requiring disclosure of pay ranges or hiring ranges are aimed at allowing each candidate to debate whether they are being offered a fair hire rate relative to the range. Cognitive bias causes us to believe we are better than we are and that we are more capable than we are. This can cause a candidate to believe they should be offered more, even though that is not justified by existing capabilities. Since employers are also free to assign different importance weights to education, experience and special skills depending on the job differences in hiring rates can be near impossible to explain to candidates (at least to their satisfaction). As a result, in addition to being an unwarranted intrusion the mandates increase uncertainty about what is fair.
Prior to the recent mandates on disclosing hiring rates there were a number of new regulations that precluded employers from asking candidates what their current pay rate was. It is unclear how this contributes to increasing pay equity. Candidates are free to lie about their current pay and it is difficult for the potential employer to get accurate information, so most staffing professionals do not place much weight on what someone cites as their current pay. It is often hard to equate the role the candidate would be entering to what they did for the prior employer, making this piece of information of questionable value anyway. Going through the legislative process to create something that is of no value sets the stage for seeking other areas for unneeded intrusion.?
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Bottom Line
Pay discrimination exists. Whether it is based on gender, race, age, ethnicity or religion it is unethical and should be subject to laws and regulations that provide remedies. Recent research has shown that at an aggregated level females earn around 80% of males in the U.S. That figure is meaningless. Further analysis that compares across gender for people who are “similarly situated” often shows a remaining difference that is much smaller, and often within the range of statistical error. Accusing employers of discrimination when that is unwarranted is wrong.?
Historically occupational choice has resulted in occupational clustering that shows differing percentages of incumbents by gender and race. If this is a result of free individual choice it does not constitute bias. However, if people have been arbitrarily excluded based on personal characteristics this needs to be alleviated. The landmark Griggs v. Duke Power case established the “bona fide occupational qualification” concept that denies the right to use qualification requirements that are not needed to perform the role if it results in statistically significant bias.
?Employers can only lose if they are viewed as being guilty of discriminating based on personal characteristics, rather than capabilities. They also forego the chance to have the most competent people doing their work. Yet they should not be subject to laws and regulations created by legislatures and agencies that are ill-advised or ineffective. Compliance increases costs and diminishes the faith in regulators to behave responsibly and within their powers.
About the Author:?Robert Greene, PhD, is CEO at Reward $ystems, Inc., a Consulting Principal at Pontifex and a faculty member for DePaul University in their MSHR and MBA programs. Greene?speaks and teaches globally? on human resource management. His consulting practice is focused on helping organizations succeed through people. Greene has written 4 books and hundreds of articles about human resource management throughout his career.
Consultant, Contractor & Change Agent: Total Rewards (Compensation, Benefits, Pfce Mgt., Recognition, Wellbeing, EX, etc.), Board RemCo, Governance, People / HR / Talent, Transformation, OE, OD, Leadership
1 年Dr. Robert Greene has, through his writing, helped facilitate my professional development over the decades. He continues to challenge the way we think and operate in matters of Rewards, and the broader area of human resource / talent /people .... management. Worth reading and learning from this article and others in his body of work.