How to Bash Pay Inequity One Linear Regression at a Time
No one loves an HR Manager who is always banging the gavel about the implications of legal missteps.
And maybe it’s just the people I hang out with online, but there seems to be a big misconception when it comes to paying men and women equally.
I am not here for a debate: Pay inequity is illegal and it is still prevalent.
Kennedy’s 1963 Equal Pay Act explicitly prohibited gender-based wage discrimination.
And 56 years later, we’re still not there.
According to this Business Insider article:
The US Census Bureau data shows that women make an average of $10 000 less than men per year
The gender pay gap (the percentage amount that women make less than men) varies by state, with New York having the smallest pay gap (11%)
Women of color face an even greater pay gap than white women
Women with children earn comparatively less than men with children
There are plenty more depressing (if not infuriating) statistics in that article — it’s well worth a read.
How do we close the pay inequality gap? It’s not going to happen overnight. But we can examine solutions to put in place on a per-company basis.
My Dad is a math-loving engineer and my mom is an energetic, empathetic kindergarten teacher. The joke is that I landed squarely in the middle – as an HR Manager.
My Dad convinced me at a young age that math will change the world.
So I stretched my right brain as far as I could by taking in the hardest and most challenging courses that I could in my small Ohio town.
I never fell in love with Math, but I did learn to respect its power.
Pay inequity is a hard topic to raise no matter what angle you take; it's sensitive and full of stigma.
But a simple statistics exercise can rectify past wrongs and get companies into compliance.
Most of my clients and employers have been appalled when they see stats like the ones I shared above, and want to make a change.
They want to be employers of choice, and they want to promote women and minorities.
So, how does one tackle an issue as big as this one?!
How can one person make a big difference?
By running a simple linear regression on employee salaries, you can quickly determine if there is a statistical difference between between salaries of the men and women in your organization.
By running a multiple regression, you can take this one step further and look at how different minority groups might be affected by your compensation strategy. This analysis should be done annually.
(If it’s been a few years since that college stats course, a quick search on YouTube should bring you to a simple lesson.)
Once you have your numbers, you will clearly see whether or not there is a significant variation in pay. If it’s your first time running this report, you will most likely see a few deviations.
Examine each deviation scenario that has a red flag. Is there a reason for the statistical difference? Could you validate it if you were to be audited by the Department of Labor (DOL)?
Hint: Documented performance discrepancies could be a culprit. Often, employers will cite years of experience of the women or minority who has fallen below the salary threshold.
And this one you have to be careful with. Employees are HIRED for the skills that they bring to the table.
If your main reason for paying a man more than a woman is about experience, you have an issue.
Everyone should be paid equally for the work that they are currently doing.
It is tough to be objective, but I’ve never encountered an organization that is intentionally discriminatory. As an HR Director, I always had a third party to help comb through these details to help me understand my personal and organizational biases.
It’s important to look at this audit as a first step in your noble step to eliminate pay biases. It isn’t a pass or fail test. The analysis should be a tool to make your organization better.
If you have a problem, fix it! This can be done discreetly by making incremental pay over several months or years...or it can be done with a loud bang.
Announce to your employees that you are committed to rectifying pay inequity, conducting an equity audit and will adjusting pay accordingly.
The strategy that is best for your organization will vary depending on leaderships stance and the company culture.