Income Parity and Wage Gaps: Gender, Race, and Other Factors
In order to secure a flourishing economy, where women succeed as do all people, it is crucial to understand how diversity, equity, and inclusion affect everything from hiring to wage parity in today’s workplace.
First things first, what is income (or wage) parity?
- the state or condition of being equal, especially regarding status or pay.
- parity of incomes between rural workers and those in industrial occupations
Studying the Gender Wage Gap
Wage inequality for working women translates into lower lifetime pay for women, less income for families, and higher poverty rates. For example, in every single state in the U.S., women experience lower earnings and higher poverty rates than men; they just differ by how much.
Researchers have studied the gender pay gap in two ways: non-adjusted and adjusted pay gap. To keep it simple, the adjusted pay gap removes the differences in womens’ hours worked, type of occupation, education path, and job experience. (Of course, in real life, we can’t just ignore these factors; more on that below.)
For example, in the United States in 2021, the non-adjusted average female’s annual salary is 82% of the male’s average wage, compared to 98% for the adjusted average salary, where the two roles are the exact same.
So, What Causes Wage Gaps?
We can trace the rise in economic inequality in the US back to several factors. These include, in no particular order: technological changes, globalization, the decline of unions, and the eroding value of the minimum wage.
National Inequality Makes It Even Harder: The Great Gatsby Curve
One reason for the concern over wage inequality is that people in the lower rungs of the economic ladder experience diminished economic opportunity and mobility in the face of rising inequality, a phenomenon referred to as “The Great Gatsby Curve.”
The Great Gatsby Curve illustrates the connection between how concentrated the wealth is in one generation, and the ability of those in the next generation to move up the economic ladder compared to their parents. Translation: If the wealth is concentrated in a small number of rich families, children growing up in poor families are even less likely to improve their financial situation in adulthood than if the wealth had been more equally spread through the various classes.
The Gatsby curve shows that children from low-income families are less likely to improve their economic status as adults in countries where income inequality was higher around the time those children grew up.
So why does this matter for the United States? The US has had a sharp rise in inequality since the 1980s. Just before the Great Recession, income inequality in the US was as sharp as it had been at any period since the time of “The Great Gatsby.”
As put by Alan Kreuger, former Chairman of the U.S. Council of Economic Advisors, “The fortunes of one’s parents seem to matter increasingly in American society.” In a society that has historically and repeatedly funneled wealth toward those people with certain identities… we can start to understand who gets left behind.
Did You Know?
Income inequality in the US is found to have increased by about 20% from 1980 to 2016.
But Is the Disparity ONLY Gender-Related?
As we’re sure you’ve guessed, dear reader… nope. Just as we see with other forms of discrimination, pay inequality is intersectional.
For instance, workers with a disability are less likely to work full-time, year-round, in nearly every occupation (U.S. Census Office data). So when we measure the pay gap, if we include all workers — regardless of work schedules or occupation — we get a complete picture of the pay gap for people who live with disabilities. Workers with a disability get 66 cents for every dollar made by those with no disability.
And despite the efforts of equality proponents, income inequality persists amongst races and ethnicities. In fact, the wage gap between Black and White workers has actually increased since 2000. Unfortunately this can’t come as a huge surprise to us, as pay inequality has increased overall.
So, What Do We Do About It?
1. Implement International Examples
Some countries have found success in shrinking the gender pay gap through policies that:
- Prohibit employers from dissuading employees from discussing their wages;
- Expand employer pay data collection efforts
- Implementing equal pay for work of equal value guidelines
- Using gender-responsive budgeting
- Providing credits for caregivers
- Bolstering damages for victims of wage discrimination
One piece of legislation that would contribute to the labor rights movement in the U.S. is the PRO Act.
Of course, once any policy is enacted, it must be enforced. That means voting in politicians who push specifically for thorough enforcement of these and other equitable policies.
2. Education Matters
Education is an important baseline requirement for economic mobility. To start, having universal, high-quality preschool would ensure that every child — regardless of their family background — can start school ready to learn. This includes providing nutritious food in, and out of, school. Doing so has been proven to support “alleviating hunger, reducing micronutrient deficiency and anemia, preventing overweight and obesity, improving school enrollment and attendance, increasing cognitive and academic performance, and contributing to gender equity in access to education.”
That said, increased quality of educational access has only a limited impact on wage disparity.
3. Minimum Wage or Universal Basic Income
Raising the minimum wage and indexing it to inflation thereafter would help make it easier for working families to make ends meet, and for women to have more security when bargaining for better working conditions and wages.
Another solution to consider is the Universal Basic Income, which would relieve each family of the burden of securing basic survival. If you’re curious, check out this UBI impact visualization for the potential impacts of a Universal Basic Income on various societal challenges.
4. Diversity At Work
One key way to alleviate the gender wage gap is to ensure a diversity of equity advocates are in top positions within organizations. And, companies that reach gender and racial parity (30%+) at the executive and board levels are 15% more profitable and 19% more innovative than peer organizations lacking diversity. Building a representative leadership pipeline from the entry-level to the C-Suite is crucial for business success.
Diversity, Equity, and Inclusion initiatives matter. Not just in terms of creating corporate growth and stability, but in providing opportunities to bridge the income and wage gaps we have struggled with for decades.
If you or your organization is ready to do more than just talk about “supporting diversity,” reach out to us.