Pay equity is the floor, not the ceiling

Earlier this summer Google made headlines when it agreed to pay $118M in a pay equity lawsuit, followed by Hewitt Packard paying $8.5M to settle a gender pay gap suit in September.

The uptick in legal action stems in part from pay transparency laws.

Next week New York City's law goes into effect. Starting Nov. 1, employers must disclose the minimum and maximum annual base salary or hourly wage for a job, promotion or transfer opportunity in any advertisement for any open job.

Phew!

After a lifetime of pay secrecy, pay transparency laws are a breath of fresh air for workers. No longer do we have to wait until the end of a hiring process to find out that a job pays $40k less than the market rate, or that our new coworker makes more than us for the same role.

Beyond giving individual workers more power, experts argue that pay transparency is a path toward pay equity. Equal pay for equal work, regardless of gender, race and ethnicity, sexual orientation, and other identities.

Here's the dirty secret - the controlled pay gap on the basis of gender and race is relatively small. According to Payscale's 2022 compensation report, the controlled gender pay gap is $0.99 for every $1 men make.

Pay equity is the floor.

Companies that want to get off the floor need to work towards paying a living wage. A living wage is defined as the minimum income necessary for a worker to meet their basic needs - think rent or mortgage, transportation, food, and in 2022, broadband internet and reliable devices.

From the lens of a living wage, i.e., income necessary for basic needs, we can better understand the real wage disparity.

Take for instance the fact that a potential starter homebuyer must make $170,171 a year in the Greater Seattle Area to afford a home. The median for Black households in Seattle is estimated at $41,300, well below the U.S. median of $69,700 and $78,600 for Latino families - while the average stands at $110,000.

Even if an employer has pay equity and radically transparent wages, their employees might continue to live under the poverty level (maybe you've heard of a little company called Amazon).

?? Here's a tool that's worth adding to your toolkit - MIT's Living Wage?calculator ?lets you see if compensation at job you're excited about will allow you to live comfortably.

Data for Equity

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