Four years ago, Yanira Guzmán had just received a work promotion when she found out her division was dissolving. Guzmán made a lateral move within the company and was at the final stage of the interview process. The manager asked her if she had any questions. Guzmán says she didn’t negotiate compensation with her previous employer because she had just been promoted.
“It was knowledge I didn’t have,” says the first-generation Latina and founder of The Career Gem, a full-service career coaching business. “When you move from department to department, you still can negotiate, even within the same company. I didn’t – and that compounds everything. If you’re staying with your company, the yearly increases are very low in comparison. If you go from one company to the next, you can make significant salary increases. That was a loss on my part.”
Research indicates underrepresented groups are less likely to negotiate their salaries because of biases and discrimination. Women negotiate compensation less often than their male counterparts because of the societal perception they should be less assertive than men.
By not engaging in salary negotiations at the beginning of their careers, women can lose over $1 million in lifetime earnings. As we celebrate International Equal Pay Day on September 18, Fair360, formerly DiversityInc explores pay transparency laws — one of the latest tools being used to combat the racial and gender pay gap in the workplace.
Pay Transparency Legislation
Seventeen states, including Colorado, Maryland and Nevada have pay disclosure laws, with more expected in 2023. The laws vary by jurisdiction.
Some laws require employers to provide a pay range in job ads or salary information during the hiring process. Other laws ban employers from requiring job applicants to disclose their salary history. Pew Trusts says not only do pay transparency laws raise women’s salaries, but they benefit minority candidates the most because the group is more likely to receive lowball offers.
“They (women) don’t necessarily know how much they should be asking or how much to negotiate,” says Monalisa Chati, a Strategy and Business Operations Leader at ServiceNow, a cloud-based platform developer and mentor to women in the tech industry. “They take the first or second offer because they’re afraid they’ll lose out on the offer they’ve received.”
READ: Salary Negotiation Tactics for Black Women
Pay transparency laws are still relatively new. In 2018, California became the first state in the nation to legally require employers to provide the pay range for a job.
In 2022, California further revolutionized the pay transparency landscape. The state passed a first-of-its-kind law requiring all companies hiring in the state with more than 100 employees to show their median racial and gender pay gaps. Governor Gavin Newsom has until September 30 to veto it or sign it into law.
“It’s high time to level up the playing field,” says Chati.
Pay transparency laws are gaining traction around the globe.
While no country has yet achieved full gender parity, the World Economic Forum notes that countries including Iceland, Rwanda, New Zealand and Nicaragua have made significant advancements in pay transparency laws. The World Bank says that equal pay for equal work is mandated in 90 economies worldwide.
“An effective template is in place. But without a real commitment from men to share power and authority or strategic demands for change from women, wages between women and men will remain imbalanced,” says Lorise Diamond, Executive Director of Linguistic Communication Development Center, a non-profit start-up and a writing consultant at Claremont Graduate University.
The Race and Gender Pay Gap
The Equal Pay Act, which bans pay discrimination based on someone’s sex, has been in effect since 1963. Yet almost six decades later, gender and racial pay inequities persist.
In 2020, women earned 82 cents for every dollar paid to men. The pay gap is even greater for women of color. At the bottom of the pay parity scale are Latinas who make 49 cents for every dollar paid to white men. The data indicate that Latinas typically must work longer than any other group to achieve equal pay.
“Latina Equal Pay Day is in December,” says Guzmán. “When I started following this — which was about three years ago — we started in October. What that means is we have to wait until October the following year to make what is equivalent to a white male’s salary. As a middle-aged woman, a single mother of two children, it’s taking me longer to achieve what I want.”
Equal pay laws could help provide needed income for women whose earnings support their families. Thirty-four million households in the United States are headed by women, with the majority led by Black mothers. Black women earn 58 cents for every dollar made by white men and lose nearly a million dollars in their lifetime because of the pay gap, according to the National Women’s Law Center.
“When you’re talking about cents to a dollar — people don’t acknowledge it as much. But in a lifetime, it adds up, which is sad,” says Chati.
WEBINAR RECAP: The Impact of Implicit Bias During the Hiring Process
The Center for American Progress (CAP) says securing equal pay for women requires enforcing equal pay laws and an in-depth understanding of how race and ethnicity affect pay outcomes.
“Blatant racism, implicit bias and anti-Black sentiments have material consequences for women of color living in a society built and sustained by males and white supremacy,” says Diamond.
“U.S. institutions, and as a result our culture, recognize racial and gender hierarchies, social and economic ladders where those who identify as Black, Indigenous and people of color reside at the bottom rungs, while people who identify as white hold primacy at the top. Women as an identity group continue to struggle against gender inequality and demand wages comparable to men’s when performing identical tasks,” she adds.
Pay inequality is also prevalent outside of the United States.
Globally, women only make 77 cents for every dollar men earn, according to UN Women, the United Nations entity dedicated to gender equality. The gap is greater for women of color, mothers and immigrant women and tends to be larger in developing countries.
How Companies Can Tackle the Pay Gap
While 98% of job seekers say it’s important to know the salary before applying for a job, only 12% of online jobs in the United States include salary information. Pay transparency laws aren’t prevalent in every state or jurisdiction, leaving companies to decide how they will address the topic.
Recent studies have highlighted the effectiveness of pay transparency laws in reducing the gender and racial wage gap. While research from the Harvard Business Review (HBR) found that pay transparency laws are beneficial, they can have unintended consequences like compressing pay. HBR says that could prompt employees to seek non-monetary ways to receive benefits from employers and increase the number of managers granting alternative rewards to employees.
Research from JUST Capital that only 23% of companies disclose that they have pay equity analyses. Apple and Cisco are among the companies that have publicly shared the results of their gender pay equity research. Microsoft said it will include pay ranges in all of its U.S. job listings beginning no later than January 2023. Experts say the move could prompt more companies to make pay disclosures to attract and retain talent.
“The onus is on the candidate, they have to do their research and they have to look up the salary, but the onus is also on the companies to not go through these exploitative behaviors,” says Guzmán.
Pay transparency laws could increase the risk of pay discrimination lawsuits because employees may feel like they’re being underpaid, according to research from Bloomberg.
“The burden is increasingly on workers to kind of prove employment discrimination and prove intent and it’s difficult to prove intent,” says Rosalind Chow, Associate Professor of Organizational Behavior and Theory at Carnegie Mellon University. “There needs to be some restructuring of the way that we the way that anti-discrimination litigation takes place so that the people who experience it can find some relief.”
Empowering Women of Color
When pay transparency laws require that pay ranges are visible to all job applicants at the start of the hiring process instead of the final stage, women of color can avoid underselling themselves.
Guzmán says “the law can give more ammunition and information to prospects to determine whether they want to continue with the process. Negotiation can still occur, but it will now occur within that range.”
Employees that feel they are not paid fairly are more likely to leave. In conjunction with pay transparency laws, women of color can use salary negotiations to shrink the racial and gender pay gap, but many of them view it as a privilege.
Clarissa Fuselier, Principal Strategist and founder of the consulting company Inclusion.Logic admits that just like Guzmán, she didn’t negotiate compensation when her previous employer promoted her.
“Sometimes we say, I’m not gonna complain,” she says. “This is a good opportunity. I’m just going to take what they give me and then show out and then the money will come.”
Fuselier says pay transparency laws can encourage women of color to be better champions of their careers by showing them their value.
“If you don’t know how much money you are being paid and how much opportunity is out there, you’re stuck in the spin of maybe it’s just me. Until you start understanding how that dollar amount equates to the work, you won’t be able to advocate for yourself,” she says.
READ: Women of Color Undervalued Despite DEI Focus
