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COMPENSATION & REWARDS
Feb 3, 2014

Calculating the consequences of wage inequality

U.S. research suggests equal pay would reduce poverty and help economy
    

By Claudine Kapel

If your organization operates in a Canadian jurisdiction with pay equity legislation, you’re probably familiar with the principle of delivering equal pay for work of equal or comparable value.

That’s a core principle at the heart of the legislation in Ontario and Quebec. Similar requirements exist for federally regulated employers under the Canadian Human Rights Act.

Pay equity legislation has evolved in Canada as a means of closing gender-based wage gaps. But in Ontario, for example, women are still earning about 72 cents for every dollar men earn.

The reality, though, is gender wage gaps are much more than a corporate compensation issue. They have economic and societal implications as well.

A new U.S. research paper suggests there are significant benefits to tackling a gender wage gap. Prepared by the Institute for Women’s Policy Research (IWPR), the study suggests equal pay for working women in the U.S. would reduce poverty and grow the American economy.

The paper summarizes work that was prepared for use in a new study by Maria Shriver entitled The Shriver Report: A Woman’s Nation Pushes Back from the Brink.

IWPR concludes nearly 60 per cent of U.S. women would earn more if working women were paid the same as men of the same age with similar education and hours of work. Overall, the average earnings for women would increase 17.3 per cent annually “if women were compensated for their labour supply and human capital in the same way as men in their regional labour markets.”

In addition, the research suggests the poverty rate would be cut in half, falling to 3.9 per cent, from 8.1 per cent among working women.

In her study, Shriver observes that women represent nearly two-thirds of the minimum-wage workers in the U.S. “In the 50 years since the passage of the first Equal Pay Act, the gender wage gap has narrowed by only 18 cents – and more than a quarter of this ‘progress’ is due to losses in men’s wages as opposed to gains in women’s wages. In fact, the reality is that over the past 10 years, the United States has closed its wage gap barely, if at all – by less than one penny – earning the dubious distinction of having one of the largest gender wage gaps among developed nations.”

Shriver identifies the two major drivers of the gender wage gap:

  • A “pernicious wage gap” in certain fields resulting in women being paid less than men even when they have the same degree.
  • The fact that women choose and dominate low-paying fields.

Ultimately, addressing gender gaps is a global challenge. The 2013 Global Gender Gap Report, published by the World Economic Forum, examined gender gaps in four areas:

  • Economic participation and opportunity, including wage equality for similar work.
  • Access to basic and higher levels of education.
  • Political empowerment, including representation of women at the highest level of political decision-making structures.
  • Health and survival – life expectancy and the gender ratio at birth.

The best-performing countries were the Nordic nations, with Iceland in the top spot, followed by Finland, Norway and Sweden. Canada placed 20th overall out of the 136 countries covered in the study, but ranked lower – coming in 35th – with respect to wage equality.

“Countries and companies can be competitive only if they develop, attract and retain the best talent, both male and female,” the World Economic Forum notes in its report. “While governments have an important role to play in creating the right policy framework for improving women’s access and opportunities, it is also the imperative of companies to create workplaces where the best talent can flourish.”

There are no simple answers to the complex issues associated with wage inequality. They reflect a complex mix of choices and opportunities made by governments, employers and women themselves. But concerns about poverty, child welfare, skill shortages and the aging workforce are all converging as reasons why more robust solutions should be sought.

Claudine Kapel is principal of Kapel and Associates Inc., a Toronto-based human resources and communications consulting firm specializing in the design and implementation of compensation and total rewards programs. For more information, visit www.kapelandassociates.com.

    
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