Guide: Structure and check for pay equity

Understand the research

Francine Blau, a leading researcher in the field of gender pay equity at Cornell University’s School of Industrial and Labor Relations, and her colleague Lawrence Kahn looked at a large sample of US workers in 2010 and calculated the pay gap between men and women to be 20.7% (women making roughly 80 cents on men's dollar). For historical context, the pay gap reduced dramatically in the 1980s, but has plateaued since 1990.

Of the 20.7% differential, much can be attributed to non-gender variables such as the fact that a greater proportion of women than men are in lower paying occupations. Other variables such as experience, unionization, and region also help explain some of the difference. Even after controlling for all of these factors, Blau and Kahn still found an unexplained 8.4% pay gap. This research tells us that even when you account for occupation, industry, experience, and other factors, women are still earning only 92 cents for every dollar a man earns.

Research is also emerging about how structure and accountability can fix pay inequity in organizations. In one longitudinal study, Emilio Castilla at the MIT Sloan School of Management, worked with an organization that had historically seen statistically significant lower pay increases for women and minorities. In Castilla’s study, managers were trained to base decisions about pay increases on consistent criteria (i.e., performance ratings) and asked to justify bonus amounts. Then a newly created committee reviewed managers’ pay increase recommendations and had the authority to modify pay decisions to correct any problems. Leaders across the organization also received an annual report on all pay decisions made within their division.

Castilla monitored the next four years of pay data and found pay increases no longer differed by demographic group. The adoption of increased structure, supported by accountability and transparency, decreased the pay gap.

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