JUST Report

JUST Jobs Analysis: Why Pay Equity Is Still Critically Important in the Time of Coronavirus

Report by Kavya VaghulSara Horowitz, and Amanda Keating.

This year, in the face of global pandemic and economic recession, Equal Pay Day – a reminder that earnings for women and people of color lag far behind those of their white, male coworkers – takes on a heightened significance. 

Workers across the board are fundamentally at risk, staring down massive job uncertainty as companies reckon with the impacts of COVID-19. It is a difficult time for corporate America, and many workers will pay the price, despite the actions companies are taking to respond to the current pandemic and economic downturn. It is essential that we remember that those who face the greatest wage inequities are also those most vulnerable to layoffs and high rates of unemployment: women and people of color, who are likely to be out of work longer and face a slower return of pre-recession wages. 

This is especially concerning when we consider that, in 2019, women earned on average about 82 cents for every dollar earned by a man, and for women of color, the pay gap is even greater:

Source: Authors’ analysis of the U.S. Census Bureau, Current Population Survey, 2019 Annual Social and Economic Supplement. “PINC-05. Work Experience in 2018–People 15 Years Old and Over by Total Money Earnings in 2018, Age, Race, Hispanic Origin, and Sex.” https://www.census.gov/data/tables/time-series/demo/income-poverty/cps-pinc/pinc-05.html#par_textimage_0.
Note: Data in 2018 dollars.

One way that companies can begin to bridge these disparities is by understanding the state of wage inequities among their own workers through a pay equity or pay gap analysis, which allow companies to compare wages between different groups of workers with similar characteristics like educational attainment and occupation. And if after controlling for similar characteristics, there’s still a pay gap between those two groups, it indicates that there may be a problem with wage discrimination that needs to be addressed.

Even in more optimistic economic times (remember 2019?), these kinds of analyses were not conducted by the majority of companies, yet we have seen some promising signs, with more and more companies beginning to do so. As we look ahead in the coming year, the question remains whether these trends will continue. Will companies continue to prioritize this issue even in an economic downturn (and eventual recovery)? 

With women and people of color more vulnerable to systemic discrimination during periods of recession, pay equity analyses remain vitally important, and the decisions that companies make today could affect the lives of these workers for years to come.

How Many Companies are Disclosing on Pay Equity?

Based on our research, only 22% of the 922 largest, public U.S. corporations that we ranked in 2020 (or 206 companies) disclosed that they conducted a pay equity analysis between 2016 and 2020 for their U.S. workforce – the first step in ensuring that workers are paid equitably. This represents a 57% change in rate of pay equity analysis disclosure since our look at companies in last year’s Win-Win of JUST Jobs

As we demonstrated in that report (which looked at data disclosed from 890 companies between 2015 and 2018), disclosing this type of analysis is not only a win for workers – who benefit from wage adjustments as a direct result of the transparency analyses create – but it’s also a win for employers, who see the financial benefits to disclosure. Companies that disclose that they’ve conducted a pay equity analysis report, on average, nearly an 8 percentage point higher mean five-year Return-on-Equity compared to their counterparts. 

Source: JUST Capital’s Ranking of America’s Most JUST Companies 2020.
Note: Disclosure data on pay equity analysis have been updated as of March 2020, though values reported publicly by the company for 2016, 2017, 2018, and 2019 have also been accepted.

Which Industries are Leading on Disclosure?

The “win-win” of disclosing conducting pay equity analyses is apparent across the vast majority of industries, with all but the Oil & Gas, Health Care Providers, and Telecom sectors seeing increased rates of disclosure. 

Among both last year’s ranked corporations and this year’s, Internet companies lead when it comes to transparency around conducting pay equity analyses, with over 50% disclosing in the 2020 Rankings. The Food, Beverage, & Tobacco industry, however, has seen the largest growth in rate of disclosure – a percent change of 88% – closely followed by the Consumer & Diversified Finance industry, with a percent change of 64%. 

Explore the industry-level disclosure rates for conducting pay equity analyses by hovering over each bar in the chart below:

Source: JUST Capital’s 2020 and 2019 Rankings of America’s Most JUST Companies.
Note: Our disclosure data from the 2020 Rankings have been updated as of March 2020, though values reported publicly by companies for 2016, 2017, 2018, and 2019 have also been accepted. While this chart presents pay equity analysis disclosure rates for 2019 and 2020 Rankings data, it is important to note that the universe of companies in each year is slightly different. Between the two years, there are approximately 848 overlapping companies amongst the universes of companies we ranked, and a total of 87 companies went from providing no disclosure in the 2019 Rankings to disclosing in the 2020 Rankings.

Explore the full list of 922 companies below, to see which disclosed conducting a pay gap analysis in our 2019 and 2020 Rankings:

Which Companies are Disclosing That They’ve Conducted a Pay Equity Analysis? 

Important to note is that, while we see more companies disclosing that they’ve conducted a pay equity analysis, relatively few share the results. In 2019, 81 companies (or 8.8%) released the results of their analyses. What’s more, our preliminary analysis of the results has indicated that many companies have radically different methodological approaches to assessing pay gaps among their employees, making it difficult to compare or even establish a standard against which to evaluate the state of pay equity.

Because there are no reporting regulations around pay gaps in the United States, companies provide widely varying portraits of the results from their pay equity analyses. In some cases, companies actually report the ratio of the median earnings of one group (usually women) compared to another (usually men). Sometimes, these ratios are further disaggregated by ethnicity or occupation. In rare cases, companies actually disclose wage bands by gender, ethnicity, and occupation (kudos to Intel), offering highly granular insights into the state of wage inequality across different groups. At the other end of the spectrum, companies don’t provide any actual context about differences in wages, but rather announce that they found no statistically significant differences in pay among the groups they evaluated. 

For the few companies that do report out median earnings ratios, the data show relatively small pay gaps (well below the estimated national average), suggesting that the incentive to disclose results may primarily be to share good news and celebrate success rather than providing a benchmark for accountability while on a journey to pay equity.

How to Put Pay Equity Principles into Practice

While there is much to be done to create methodological standards – and while companies face new challenges and uncertainty in the time of COVID-19 – conducting a pay equity analysis is a critical step to ensuring that the workers who stand to be most affected by the crisis are better protected. And disclosure around these practices is also critical, because it helps to hold corporations and their peers more accountable for addressing inequities within their workforces. 

As more companies move toward disclosure – and we hope to see the numbers continue to rise in the coming years, even as we move through and past the coronavirus crisis – it’s also equally important that there is alignment in how these analyses are conducted, as well as how the results are released. We urge corporate leaders to consider conducting a pay equity analysis for their U.S. employees, even today, and to take inspiration from mandatory reporting frameworks  in the UK, in France, and others for how to conduct these analyses and release their data. 

Taking these steps helps to move the needle forward not just for individual employees, but for women and minorities across the nation who must work well into the year to catch up. And it’s a win not only for workers, but for business as well.

For more information on how to conduct a pay equity analysis at your company, reach out to corpengage@justcapital.com for more. And to better understand some of the actions companies are taking as a result of the coronavirus crisis, read more here.

Have questions about our research and rankings?  We want to hear from you!