Perceptions of wage inequality among employers and employees
The report, which examines existing inequalities, was sponsored by the Ultimate Kronos Group (UKG).
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“Change is difficult and doesn’t happen overnight, but the time to act is now,” noted Brian K. Reaves, chief belonging, diversity, and equity officer at UKG.
The report, presented in the United States by Harvard Business Review Analytic Services, exposes how business organizations continue to make progress in prioritizing equal pay among men, women and underrepresented groups in the workplace.
According to the results, although the efforts to balance salary burdens are recognized, employers and employees continue to have very different perceptions about how it is being achieved, while significant systemic barriers continue to be presented when it comes to implementing lasting change.
Equitable pay is a basic human right. It is fundamental to an individual’s sense of worth as well as their ability to care for themselves and others.
The study, “Making Pay Equity Work for All,” compares responses from 453 company executives and 3,005 employees of all levels, examining in detail the following aspects:
- The strategies that separate pay equity leaders from the rest
- The impact of intersectionality on the perception of progress in pay equity
- How leadership, pay transparency, clear communication channels, and innovative technology tools can help organizations achieve lasting pay equity?
The report forms the cornerstone of UKG's Close the Gap initiative, which raises awareness and action around pay equity.
“We are all born with equitable talent, but society has shown we lack equitable opportunity. For far too long, the pay scales have been tipped in favor of white men. This study shows now, more than ever, that organizations must recognize the importance of prioritizing equal pay in the workplace, disparities persist, and employers’ actions are not always enough or aligned with employees’ expectations,” underscored Reaves.
According to the results of the study, while 74% of executives consider pay equity to be a moderate or high strategic priority, 71% of employees agree that the topic is an important priority for their organizations. However, this is one of the few concepts in which they agree, since the perceptions of employers and employees on equal pay are at opposite poles:
- Less than half of employees (41%) believe that their employers have successfully achieved equal pay.
- 26% say their organizations have completely failed to ensure equal pay for equal work.
- 49% of companies do not have a well-established equal pay plan, and nearly a quarter (24%) of employees do not know if such plans exist within their organizations.
Lack of Transparency?
The wide difference in opinions between employers and employees seems to be based on the lack of transparency that exists within the organizations, which is reflected in the unreliable information that is socialized around the existing salary differences:
- 46% of organizations admit they are not transparent in the area of pay equity, and 34% of employees say silence is a major barrier to implementing pay equity.
- Nearly a third (32%) of employees say they are unwilling to talk or negotiate.
- Black, Hispanic, and Latino employees (40% vs. 28%) are twice as likely as white workers to be silent, followed by 34% of Asian or Asian American employees.
Main Triggers of Wage Inequality
- More than a third (35%) of Black employees attribute discrimination in promotion opportunities as a major factor, followed by 26% of Asian Americans and 20% of Hispanic and Latino employees.
- 32% of Black employees and 25% of Asian, Hispanic and Latino employees cite discrimination in wages or hourly rates.
- Thirty-two percent of Asians, 31% of Hispanics and Latinos, and 27% of black employees cite differences in wage bargaining power, compared to 25% of white workers.
- Employers say the majority of their efforts target women (59%), followed by people of color (55%), ethnic minorities (45%), members of the LGBTQ+ community (33%), and people with disabilities (23%).
- 40% of white men believe their employers have succeeded in establishing pay equity for all employee groups, compared to just 25% of women, 23% of black women, 22% of Hispanic or Latino men and 16% of Asian women.
“What this data tells us is that pay inequity isn’t just limited to one specific attribute. It’s the intersectionality of all these things — race, gender, gender identity, sexual orientation, and more — that contributes to the persistence of unequal pay for equal work performed. Organizations and their leaders must commit to doing the hard work — putting in the time, effort, and resources to uncover where those biases exist, whether intentional or not — and take steps to correct the problem and do right by their people,” highlighted Reaves.
“As an organization whose purpose is people, we know that an individual’s income impacts every aspect of life, including their health, wellness, family, and future,” added Reaves.
To the question of who should be responsible for executing the corresponding actions so that salary equity is achieved, the respondents answered as follows:
- According to 47% of executives, the Chief Human Resources Officer (CHRO) is primarily responsible for implementing the change.
- 39% believe it is the CEO's responsibility.
- 32% think it should be a member of the senior executive team.
- Only 8% believe it is the responsibility of the Chief Diversity Officer.
- A third of employees (37%) feel the CEO should oversee pay equity initiatives and 6% believe it is the responsibility of the CHRO.
Business Survey: Harvard Business Review Analytic Services surveyed 453 Harvard Business Review audience members via an online survey conducted between April and May 2022. Respondents were qualified to complete the survey if they were familiar with the company's pay equity plans or efforts.
Consumer Survey: Harvard Business Review Analytic Services surveyed 3,005 full-time employees (ie, not senior or executive level) drawn from a third-party research panel. The study was conducted through an online survey conducted in May 2022.
“Change must start at the top, but it’s the responsibility of all leaders to work collaboratively to build an inclusive and equitable culture where all employees feel valued and have the opportunity to thrive. HR has a particularly critical role in spearheading these efforts, but the rising role of the chief diversity officer presents immense opportunity to infuse diversity, equity, inclusion, and belonging into all aspects of an organization, and work in lockstep with HR to enact meaningful and long-lasting change,” said Pat Wadors, Chief People Officer at UKG.