Focusing on the pay gap undermines the commitment to equity

The recent memo from OPM Acting Director Rob Shriver on pay equity coincidentally was issued within days of a related statement from the Society for Human Resource Management that sets forth a change in policy that is counter to OPM’s message. The change was summarized succinctly in the Wall Street Journal column, “America’s HR Lobby Scraps the ‘E’ From DEI.”

In a recent statement, SHRM indicated that they will shift “to leading with Inclusion as the catalyst for holistic change in workplaces and society” because they aim to address the "current shortcomings of DE&I programs, which have led to societal backlash and increasing polarization.” 

The gap, as OPM has defined it, is an artificial number comparing the average pay of men and women. It compares male and female data from the multiple pay schedules across the country and the hundreds of occupations, which is not consistent with federal EEO statutes. However calculated, the gap comparison pits men and women against each other – the reason for SHRM’s decision.  

SHRM’s shift reflects what’s unfolding in the social environment this election year. That’s the focus of a new report from the American Enterprise Institute that says “the share of men under 30 who said the U.S. has gone ‘too far’ promoting gender” and Gallup reported there is a 30-point difference between women ages 18 to 29 who identify as Democrats and the men in the same age group. This January 2024 report from Axios may explain why: “Companies are backing away from DEI.” 

Equal Pay Has Been a Long-Term Goal

Shriver’s memo on pay equity opens with federal data showing the current gender pay gap is 5.6%. That’s compared with the current 16% in the private sector. Superficially, a gap that small should be celebrated – but it’s not a meaningful measure of the gender gap or equitable pay.  

Government has a long history of addressing equal pay. It first made headlines in World War I when the War Labor Board ordered employers to pay women the same as the men they replaced. The equal pay policy was adopted again at the start of World War II. 

In the early 1960s President Kennedy created the President’s Commission on the Status of Women, which  led to passage of the Equal Pay Act in June 1963.

That law requires men and women in the same workplace be given “equal pay for equal work”. Jobs need not be identical, but they must be substantially equal. The court cases summarized on the EEOC website focus narrowly on men and women in very similar jobs, and with rare exceptions they have the same title. 

This is consistent with the views of many political leaders. When the Paycheck Fairness Act was reintroduced in 2021, one of its sponsors, Rep. Rosa DeLauro, D-Conn., said , "the concept is simple: men and women in the same job deserve the same pay.”  

The media focus on the gap is subtly different but significant. Closing the gap is seen as an indicator of progress. Last year, as an example, Pew Research issued its report on “The Enduring Grip of the Gender Pay Gap.”  An internet search of the phrase “gender pay gap” produced at least 1.3 million results.

Career Choices Contribute to the Gap

Analyses from by the Center for Economic and Policy Research show the narrowing of the pay gap “is almost entirely due to the retirement of older worker cohorts who, on average, had larger pay differentials.” Today, the remaining gap is largely due to career choice decisions made by young people starting careers.

That is reflected in the choice of college majors. Women account for 75% or more of the students in the “20 most common majors” for womens: nursing, teaching, social work, etc. Men account for 75% or more of the graduates in 13 of the 20 highest paying majors – virtually all are STEM fields. Males also account for 75% or more of the workers in the 10 highest paid hourly jobs. Gender gaps continue to appear in federal occupational data (e.g., 69% of STEM employees are male).

A key related point is that a high percentage of women are concentrated in sectors where pay increases are constrained by funding issues – especially education (65%) and health care and social assistance (78%). That’s reflected in pay increase data since the start of the COVID pandemic.

Considering the occupational trends, it’s unrealistic to expect the national gap to close.

Focusing on “Diversity and Inclusion”

The leadership of SHRM says the organization is “committed to leading with Inclusion and Diversity, knowing a culture of Inclusion is the true catalyst for effecting positive change in our workplaces.” That’s consistent with multiple research studies.

“The data doesn’t lie: companies that are committed to diversity and inclusion outperform those that aren't,” according to McKinsey researchers Sundiatu Dixon-Fyle and Sara Princes. “But the benefits of having a diverse workforce extend beyond the financial. There’s a strong correlation between diversity in influential company leadership roles and multiple indicators of holistic impact across workforce, community, and environmental components.”

The goal of Executive Order 14035 is “to promote diversity and inclusion in the federal workforce, expand its scope to specifically include equity and accessibility.” Agencies are “to address any pay inequities and advance equal pay…consistent with applicable law.”   

The reference to the law is relevant. There are a small number of recently adopted state laws that go beyond “equal pay for equal work,” but no statute suggests national comparisons of gender pay levels in diverse jobs.

The EO also promotes diversity and inclusion for a long list of underserved communities that goes beyond the usual gender and racial/ethnic groups. “[G]ender pay gaps, and pay inequity” are not addressed until Section 12, close to the end. Agencies are required “to build evidence to…address any pay inequities and advance equal pay.” Closing the gap is never mentioned. 

Diversity and inclusion are qualities describing an organization’s culture that can and should be reinforced with workforce management practices: recruiting, training, coaching and recognition. Words like engaging, respectful and empathetic are often used to describe diverse and inclusive organizations. They emphasize equal opportunity.

Pay Inequities Exist Everywhere

The comparison of averages ignores the many factors that influence salary decisions. Pay differentials exist in every sector and every labor market. Differentials are not always inequities.  The list of separate pay plans confirms different circumstances warrant differentials. 

Simplistic analyses have limitations. The averages, as an example, show larger differentials for management jobs. Those jobs continue to be filled by older males but analyses could also consider years of experience, industry dynamics, size of organization, reporting relationships, and job function.

Statistical analyses are needed to “measure” and understand the factors that explain differences in pay, but decisions to limit pay adjustments to women and racial/ethnic groups are best addressed by leaders who understand how it could impact the work culture.