Addressing a Global ESG Issue: Race & Gender Pay Equity

Addressing a Global ESG Issue: Race & Gender Pay Equity

As a prevalent issue across all countries, the growing emphasis on social awareness and
transparency in the workplace has elevated the importance of pay equity from merely
being a compliance requirement for businesses. Implementing fair pay policies not only
helps to mitigate the risk of potential legal action but also enhances a company’s
reputation, promotes employee engagement, and facilitates the attraction of top talent.
In this context, ESG initiatives are increasingly recognizing the importance of addressing
pay equity and promoting diversity and inclusion in the workplace. By taking a holistic
approach to corporate responsibility, companies can create a culture that values diversity
and ensures that all employees, regardless of gender or race, are fairly compensated for
their contributions.

Status Quo of Pay Equity

Pay equity encompasses the avenue of rewarding individuals with comparable work
responsibilities alongside comparable pay, regardless of their gender, color, ethnicity, or
other status. Nonetheless, this process is much more involved than just removing
prejudices. Employers must also consider the employee’s education and job experience,
the position’s duties, and the organization’s financial viability over the long term.
According to the Global Gender Gap Report 2022, gender parity is not gaining ground. In
order to close the worldwide gender gap will need another 132 years. As crises intensify,
women’s working results deteriorate, and the threat of global gender parity reversal
grows.
Businesses and governments pursue an aggressive approach to enforcing pay equity laws,
with agencies coordinating investigations and litigations. The tight labor market is
affecting pay equity, and there is pressure for employers to offer higher starting pay and
disclose pay information. The challenge for organizations is balancing openness and
attorney-client privilege in their pay equity efforts, as pay equity is becoming increasingly
important for employers, and stakeholders are seeking transparency. Organizations risk
significant fines and lawsuits if they do not take pay equity seriously.

Uncovering the Gender Pay Equity

In the US and elsewhere, women earn less in practically every field, from nursing to
teaching to software engineering. Overall, the causes of occupational gender pay
discrepancies include women and men working in various kinds of organizations, a dearth
of women in senior or well-paid positions within occupational categories, and
discrimination. It entails direct pay discrimination at its most fundamental level: males
getting paid more than their female colleagues for equal work for no reason other than
their gender.
Besides, working women frequently experience a “pregnancy penalty” without robust
worker rights like parental and family leave. Women still do a disproportionate amount
of unpaid care and domestic work, such as child-rearing and home duties, which lowers
their earning potential by preventing them from concentrating on their jobs like men.
Pay transparency, rules on parental leave, diversity and inclusion training, and genderbased analysis are just a few measures targeted at reducing the female pay gap. Disclosure
of employee salaries is an aspect of pay transparency that has been shown to lessen the
impact of implicit bias and increase pay equity. Paid parental leave programs for both
men and women help to alleviate the financial burden of caring for women’s professions
and incomes. Equal compensation for equal effort is one of many issues that may be
improved via diversity and inclusion training. Analyzing policies and programs from a
gender perspective helps guarantee that women are not disadvantaged in any way.
Together, these programs help make the workplace more welcoming to people of all
genders.

Exploring the Ramification of Race Pay

At a global scale, the pay gap is one of the most pervasive but observable and hence
treatable indications of institutional sexism and racism. According to the data published
by the Census Bureau, on average, women in the United States get paid 82 cents for every
dollar spent by males, Latin women earn 54 cents, Black women earn 62 cents, and AAPI
women receive 90 cents on the dollar of a white man.
Overall, the causes of the race pay gap in the United States are complex and multilayered,
including systemic and institutionalized racism, educational disparities, occupational
segregation, and discrimination in hiring, promotion, and pay. Historically,
discrimination has limited opportunities and access to higher-paying jobs for people of
color. This has led to disparities in education and skill levels and has resulted in a
concentration of people of color in lower-paying occupations. Additionally, unconscious
biases and discriminatory practices in the hiring and promotion process can lead to
unequal pay and limited opportunities for career advancement for people of color.
Economic, social, and political factors, including historical redlining and the wealth gap,
also play a role in the race pay gap. For example, neighborhoods with predominantly
people of color are often under-resourced and lack access to high-quality schools,
healthcare, and job opportunities, leading to persistent disparities in income and wealth.
Diversity and inclusion training, data collecting and analysis, mentoring and networking
programs, and supplier diversity initiatives are all steps toward eliminating the race pay
disparity. Equality in remuneration for equal effort is another benefit of diversity and
inclusion training. Collecting data on ethnicity and race in the workplace may assist in
discovering inequities in compensation and opportunity and focus remedies
appropriately. Giving minorities access to mentors and networking events may help them
get better-paying jobs and climb the corporate ladder. Together, these pursuits help make
the workplace more welcoming to people of all backgrounds.

Intersectionality of Gender and Race in Pay Equity

Pay disparities represent a complex and wide-ranging issue with ramifications beyond
compensation. Numerous variables, including job title, level, department, and location,
all of which connect with different aspects of diversity, such as color, ethnicity, gender,
and sexual orientation, affect how people are rewarded. It is crucial to investigate these
intersections and how they contribute to inequities and discrimination in the workplace
to properly comprehend the magnitude and effect of wage discrepancies.
Through the lens of intersectionality, it is recognized that the overlapping and
interconnected experiences of people with different identities and how these experiences
contribute to systemic disadvantages. This approach enables enterprises to look further
into the underlying reasons for pay discrepancies and pinpoint the precise areas where
gaps occur. By assessing compensation via an intersectional lens, organizations may go
beyond discrepancies at the surface level and concentrate on the underlying issues that
create disparity.
In practice, intersectionality enables organizations to identify and address specific areas
of concern, such as the likelihood of lower salary offers for LGBTQ+ employees during the
hiring process, disparities in pay for individuals of different ethnicities across a
department, or the unequal compensation of women in senior leadership positions
relative to men. By including intersectional assessment in their DEI strategy, companies
may pursue proactive efforts toward pay equality and make targeted modifications to
their processes and systems.

Peak in the Future of Pay Gap

Moving forward, pay equity initiatives may witness an increase in transparency laws.
According to the International Labour Organization, some countries have already enacted
mandates such as allowing employees to access information on pay levels, requiring
employers to disclose individual pay and advertised position salaries, and prohibiting the
request for salary history. Furthermore, we might witness the proliferation of
independent bodies for equal pay certification, obliging enterprises with a minimum
threshold level of employees to publish information on gender and pay. Other future
measures might include conducting regular audits on gender and pay, undertaking
regular pay assessments with employee involvement, and promoting equal pay
discussions during collective bargaining.
For most enterprises, the inclusion of equity pay is becoming more prevalent within the
“S” element of their ESG obligations. Companies are starting to recognize the impact that
equity pay can have on various ESG issues, such as executive pay equity, gender pay
equity, and diversity and inclusion. Hence, ESG reports are increasingly taking equity pay
into consideration when evaluating a company’s overall approach to corporate
responsibility.
Institutional investors, activist shareholders, and future workers and consumers exert
pressure on businesses to raise the number of women on corporate boards, in the C-suite,
and in senior leadership roles, as well as to provide equitable pay and mobility for women
and people of color. This may influence whether and how businesses throughout the globe
approach diversity, inclusion, and the gender gap.