What’s Lost in the Pay Gap

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With its sprawling glaciers and red-hot volcanoes, Iceland is as bold in its natural beauty as in its determination to eradicate pay inequality. Earlier this year, the Nordic nation became the first country to force employers to prove they pay women and men equally for the same work. Under the new laws, companies in both the public and private sectors must procure government certification of their equal-pay policies or face fines.

Iceland’s move is hardly the only recent effort to narrow the gender pay gap around the world. In Germany, employers are now required to reveal the differences women and men are paid for similar roles, while across the Atlantic, several states and New York City have tried to hit the issue by banning employers from inquiring about salary history during the recruitment process. Almost assuredly, more laws are coming.

But as legislators focus on minimizing the pay gap, they may be missing the bigger picture. Experts say the issue has less to do with equal pay for equal work and more to do with the lack of women in senior leadership positions. “All of these laws go in the right direction; none of them on their own will fix the issue,” says Ben Frost, vice president and general manager at Korn Ferry.

Recent analysis by Korn Ferry shows that the pay gap between men and women is surprisingly small among men and women of the same level, company and job function. In the UK, for example, that figure is 0.8 percent. But as the scope widens, so too does the gap: The pay gap in the UK is 2.6 percent among men and women at the same level at the same company; 9.3 percent among men and women of the same level; and 28.6 percent among men and women overall. All 33 countries surveyed in the report were found to follow this trend.
This points to a problem in female representation—women aren’t getting to the top-paying jobs and industries. Indeed, in the UK, men make up 67 percent of all management jobs and 78 percent of all executive jobs, but just 43 percent of all clerical jobs, according to Korn Ferry. On top of that, top-paying industries such as engineering and tech remain male dominated.

While the new laws targeting the pay gap itself are unlikely to resolve this core issue, they may be useful in eliminating some conscious and unconscious biases. For example, companies that are prohibited from asking a job candidate’s salary history will no longer be tempted to perpetuate an existing pay inequity or rely on someone’s salary history to determine what a job should pay. Women, who as a group have historically struggled with salary negotiation, may also benefit in this situation.

“Anywhere you can take out subjectivity or individual negotiation and replace that with something objective and assessment based has to be a good thing,” says Frost.

Of course, the best answer may be for companies to stay ahead of any legislation—and about 60 percent surveyed by Korn Ferry have in fact assessed gender pay equity in the past two years. For its part, the New York City-based HR software company Namely, with 450 employees, decided to implement its own ban on salary history six months before the official ban went into effect in New York and extended the same policy to other offices. That gave the company’s hiring managers and recruiters time to familiarize themselves with the new laws (infractions come with penalties of $125,000 to $250,000), but also reaffirmed what the company already knew: that pay equity and job role evaluation is critically important in hiring the best talent. The company had already been doing regular pay equity analysis two years prior to the new legislation.

“A lot of companies were like, [the ban] is such a bad thing, we don’t know how to approach it,” says Ashley Pelliccione, Namely’s senior director of talent acquisition. “We looked at it and said this is a really good thing, we just have to work through it.”

(click the image to enlarge)

 

Authors

  • Lauren Covello

    Contributor, Korn Ferry Institute

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