Companies with 100 employees or more will soon have to begin
reporting wage data to the federal government. When the new rule, announced by President Obama in January, takes effect next year, it will be the punctuation mark on an eight-year effort to close the pernicious wage gap affecting women and minorities.
“The goal is to help businesses that are trying to do the right thing...to get a clearer picture of how they can ensure their employees are being treated equally,” Obama said in his announcement. “A better picture of the data will also help us do a better job enforcing existing equal pay laws.”
Data is a fine start, but it’s one of many tiny steps yet to be taken on the path to true pay parity in the U.S., a goal that for decades has proven stubbornly insurmountable. Half a century since President John F. Kennedy signed the Equal Pay Act into law, women still earn 80 cents for every $1 a man earns, and Black and Hispanic women earn even less. Some predict it will take at least another 100 years to level the playing field.
We caught up with two companies that practice open salary policies to see how transparency has impacted wage equality within their ranks.
Change comes from the top
Some companies have decided to get ahead of the curve. Marc Benioff, CEO of Salesforce, spent $3 million closing the gender wage gap at his company last year. On a smaller scale, startups like Buffer and SumAll already make salary data open to employees.
At Buffer, a San Francisco-based social media management tool founded in 2010, company leaders decided early on to not only make salaries public to all employees but to the outside world as well. Anyone with a link to the company’s salary spreadsheet can see exactly who earns what.
“It was one of the scariest things to us to publish that data,” Buffer COO Leo Widrich told Yahoo Finance. Conversations around pay transparency began in 2013 and at the time, most workers supported the move but some were skeptical. “They weren’t sure about their friends finding out or their family tradition was more about keeping [pay] under wraps. We had a lot of back and forth to make sure people understood and we weren’t running people over,” Widrich said.
When the link ultimately went live, the feedback was overwhelmingly positive. Along with a fair amount of media coverage, within a month Buffer saw a surge in job applications. Buffer also made it possible for other young companies to see what factors weighed in their compensation decisions — things like location, job experience, and tenure.
“There’s not a lot of information out there when you’re starting your company on how much you should pay someone or even how to think about that,” Widrich said. “We believe almost as a law that being open with the world is a good thing.”
Just about every hiring manager makes job experience one of the key factors in determining compensation. At Buffer, workers are ranked, in ascending order, as “intermediate,” “advanced,” or “master,” depending on skills and experience. It’s the one part of the job formula employees can use to really negotiate. As Atkinson noted, though, and as we’ve learned from research, this is a particular weak spot for women who are less likely than men to brag about their experience and accomplishments.
We asked Widrich whether he had noticed that women at Buffer were more likely to be categorized at the lower end of the experience ladder. Before he looked at the data, he was confident that women at his company were paid as much as men doing the same job.
But when Buffer analyzed their salary data for Yahoo Finance, a trend emerged: Men were far more present in high-paying roles like developer and men were also more likely to be ranked at a higher experience level than women. Male workers earn an average salary of $98,705, compared to $89,205 for women.
Of the 24 women at Buffer, the majority (58.3%) are currently ranked at the lowest level (“intermediate”) compared to 35% of men. Women are less likely to be ranked at the next highest level, “advanced,” as well — 37.5% compared to 61.4% of men. Only one of the three employees listed at the highest level — “master”— is a woman.
Through a spokesperson, Buffer CEO Joel Gascoigne said: “While we try and remove bias from every area of the salary formula, experience is absolutely one area where we could improve."
An uphill battle
Since its launch in 2011, New York analytics startup SumAll employees have been able to access company-wide salary data whenever they want.
SumAll CEO Dane Atkinson learned the hard way what happens when employees are left in the dark during his tenure as CEO of website developer SquareSpace. Some workers gained access to private salary data, sending shockwaves through the company.
“I had to bear witness to conversations in public restaurants where adults were crying because they felt the inequity was so horrible,” Atkinson said. “They felt we had lied and treated them unfairly.” He readily acknowledges his role in their dismay.
“My experience hiring women was that they’re much less confident or willing to brag about their prior work history,” he said. “It’s just easier to dismantle their prior work and put them at peer levels that are lower than their actual contributions.” Today, he calls his old negotiating style “evil.”
With a clean slate at SumAll, he’s made sure salaries were transparent from the get-go. Transparency, he quickly learned, was no panacea for pay gaps. But it did make it fairly easy for employees to point out that SumAll tended to pay minorities and women less than men.
No matter how fair the compensation formula or how gender-blind hiring managers try to be, we all have our own internal biases. Women are more likely than men to be penalized when they appear angry at work. People with “black-sounding” names are less likely to get job interviews. When asked to identify the smartest students in their class in a recent study, male biology students were 19 times more likely to identity another male student, even when a female student was a better performer.
Transparent salaries haven’t totally eliminated these biases at SumAll, Atkinson said, but it has made it harder to ignore them. Employees don’t feel shy about speaking up when they feel a colleague isn’t being paid fairly. “Almost to a person, there has been a conversation around [how we pay] minorities and females and it’s not just a woman speaking for herself,” he said. “It’s the whole team saying ‘we are paying women less than we should.’”
The accountability factor
The idea that transparency alone begets wage equality is far-fetched. Many people aren’t even prepared to acknowledge that a pay gap exists. In a recent survey by Glassdoor, a whopping 7 out of 10 employed adults said they believed men and women are paid equally for equal work.
Obama’s plan to get salary data from private employers will at least make it harder for gaps to be ignored. It’s what the companies do with that data that will matter, says Lauren Stiller Rikleen, a workplace expert who runs professional seminars on equal pay and unconscious bias. Rikleen co-authored a report for the American Bar Association on the persistence of the wage gap at law firms.
“We know from the experience in the legal profession that simply having open compensation does not equalize the gap,” she said. Many top-tier law firms have open compensation systems for partner-level attorneys and yet women earn 87% of what men earn.
“When you have compensation systems that are open, people are not focused on analyzing why and when they are challenged on it, there’s always an excuse,” Rikleen said.
When the Obama administration’s new salary data rule goes into effect in 2017, employers will have fewer opportunities for excuses. There have also been state-led efforts to address the pay gap. In California, companies are now required to justify pay differences between male and female workers with similar duties.
Without measures like these, it’s next to impossible for women and minorities to know whether they are being discriminated against in pay unless they ask coworkers personally. When salary data is made available to the government (the Equal Employment Opportunity Commission will oversee it), it could make it easier for workers to build a case.
Unfortunately, there’s still no tool to prove whether unconscious bias is holding women and workers of color back. It is notoriously difficult to prove gender or racial discrimination, as we saw in the unsuccessful lawsuit brought by former Reddit CEO Ellen Pao against her former employer.
At Buffer’s semi-annual company retreat in January, its 80 employees participated in an unconscious bias seminar. They aim to increase women on staff from 27% to 35% by the end of the first quarter. Says Widrich: “There’s definitely still work to be done.”
Have you ever earned less than a coworker in a similar role? E-mail us at email@example.com.