Updated: Aug 12, 2020
Equal work as defined and mandated by the Equal Pay Act (EPA) of 1963, which protects against wage discrimination based on gender. It uses six elements to ascertain wage (in)equality:
Skill: As measured by experience, ability, education, and training required to fulfill a specific job a person performs for remuneration,
Effort: As measured by the degree of physical or mental exertion needed to perform the job,
Responsibility: As measured by the amount of accountability needed to perform the job,
Working Conditions: Two factors are measured, (a) physical environment, and (b) work hazards,
Establishment: The distinct physical location where the work is being conducted.
Equal work is not defined as having identical jobs, however, when comparing wages, the jobs must be “substantially equal” meaning they must be “closely related”. Wage and reward systems within an organization that are based on seniority, merit, quantity, and quality of production, or other basis other than sex are defendable against the EPA’s definition of wage discrimination (U.S. Department of Labor, 2019).
Although the gender pay gap has narrowed over the past 50 years; women continue to earn less than their male counterparts in nearly all occupations. This narrowing has been attributed to the number of women who have achieved higher education degrees resulting in an increase in women filling high-paying occupations. The median earnings of women for all occupations in 2016 was $40,675 and $50,741 for men. However, there are some areas where the gap has significantly narrowed. Occupations such as physicians, surgeons, and pharmacists show a much smaller gap. For example, women pharmacists earn 97 cents for every dollar their male counterparts earn (Newcomb, 2018).
When considering wage inequality, we should consider the greater economic environment in which all organizations function and interact. According to the U.S. Census Bureau as presented by National Public Radio news agency, in the past 50 years income inequality has grown to its largest gap in US history (Chappell, 2019). The overall socioeconomic income environment in the United States also shows inequality in income distribution. These measures of society speak to an economic-political system that seems to propagate inequality at the macro and financial ecosystem level as well as at the micro-level of internal organizational wage systems.
The dominant neoclassical approach to explaining wage inequality has been to use human capital theory to explain wage inequality. Human capital theory takes a supply-side viewpoint and posits that between-group inequalities can be attributed to the differences in employee investments in education, skills, and experience in the labor force. Human capital theory focuses on the individual employee and assumes labor market conditions to be gender-neutral and that the matching of workers to job roles is efficient. Human capital theory has not been able to account for wage inequalities; therefore, the demand-side viewpoint of labor must be explored to find possible causes and solutions (Huffman, 2012).
Every aspect of an organization is affected by the function, effectiveness, efficiency, and health of its interdependent but different employees, teams, and leaders. Wage inequalities negatively affect internal and external socio-economic factors and status. It limits or reduces worker satisfaction, the ability to meet Maslow’s hierarchy of needs, and productivity. Wage inequalities do not stay a secret. Interaction and communication occur between people in different functional roles. When wage and other types of inequalities exist, they can become evident as workers collaborate internally and socialize externally. Inequalities of any kind promote job dissatisfaction and lower morale which in turn decreases effectiveness and productivity (Huffman, 2012).
So, what is a possible answer? The choice to proactively respond or ignore the issue of wage inequality is quickly becoming a bifurcation point (fork in the road) for today’s organizations. The idea of equifinality can affect the health, development, and wellbeing of the organization. Human resource management (or as I like to call it Positive People Management), uses positive psychology to build teams, design organizations, and meet employees’ human needs. Studying the positive effects of human resource management and positive people management may help explain why some companies are more likely to be equitable and have higher rates of effectiveness and productivity. Organizations that proactively work to have positive human resource management policies eliminate morale and productivity lowering practices, such as wage inequality. However, those that continue the outdated practice of traditional human capital management are at risk of reaching their goals in ways that are unhealthy. These unhealthy practices perpetuate workplace issues that have plagued American companies for two centuries. How an organization grows is as important as the fact that it does grow. The process of growth can dictate its ability to be full of vitality and perpetuate growth over time. Wage equality helps bring diversity and variety into an organization adding energy and life by meeting employees’ needs. Engaging an Organization Development specialist to educate senior leaders on the findings and results of positive people management on workforces can help guide organizational change from the top down. Many executives learned organizational design and leadership skills in university programs that didn’t embrace the scientifically proven results of positive people management on organizational effectiveness and productivity. They do not understand the damaging and profit stealing effects of unequal and inequitable employee treatment that human capital theory produces. As a nation, we must begin to institute the proven practices of positive leadership psychology in our organizations and our academic culture.
Gregory Buschman, Ph.D.(c)
Strategic Leadership & Organization Development