What is Pay Justice? Dismantling Inequities in Pay

I’m a fan of salads. I didn’t used to be, but salads have grown on me in my forty-plus years of eating. I like a salad with lots of fresh ingredients balanced with multiple flavors. Making a yummy salad is an art. Every ingredient makes a difference. It’s similar to pay systems. I didn’t really pay attention to pay systems until I was older. Now I enjoy them because I see pay as a linchpin system for diversity, inclusion, and equity work.

Let’s start from the beginning. What is pay? I define pay as an employee’s base income not including bonuses, incentives, or benefits. And when I talk about pay, I’m including all employees – part-time, temporary, salaried, front-line, etc. Sometimes pay is also referenced as wages and compensation. You may have seen headlines lately that US job candidates are asking for more money and employers are increasing their compensation budgets. Most people blame inflation of recent years. However, the US has been experiencing wage stagnation since the 1970s.

Similar to salad mixes, people have a lot of varied opinions here. Let me be clear on mine. I have worked in human resources, specifically in pay, for many years, and I have seen firsthand how wage stagnation and antiquated pay systems have created inequity in the workplace. First of all, the cost of living in the United States is growing faster than the cost of labor. Cost of living includes basic necessities such as housing, transportation, food, and healthcare. Based on the US Bureau of Labor Statistics consumer expenditure survey, the average cost of living in 2020 was $61,334. This means that a person needs to make $29.48/hour to sustain a living wage in the United States. Cost of labor is how much money the job market will support paying someone.

Reading and understanding these numbers may seem like an intellectual exercise, but it’s not. After working with several employers, I have found that pay decisions impact employees on a deeply personal level because pay is tied to paying the bills and providing for loved ones - basic survival. The ingredients of a pay system are incredibly important. Employers looking to redesign pay systems need the following ingredients:

●        Pay Equality: Equal or fair pay may be defined as everyone has the same opportunities and resources. This is typically the baseline for employers; however, employees need explicit communication on how equality is supported in pay processes. Why? Because not every employee starts in the same place or has the same needs.

●        Pay Equity: Equitable pay is found in a system which recognizes that each employee has different resources and opportunities. The employer seeks to understand and provide what people need based on these differences. Some examples here are geographic locations and sector market rates.

●        Pay Justice: Pay justice focuses on the systemic barriers that prevent employees from reaching their goals, not characteristics of the employees themselves. Changes here are systemic interventions that remove barriers for employees, such as creating more internal opportunities for vertical growth and advocating for gender pay gap impacts to be addressed in pay systems.

I created these terms in 2021 as a way to describe how pay is a critical component to an employer’s effort to disrupt systems of inequity. Pay justice is a new term. At the organization level, pay justice looks like transparency, equity, and sustainability. It’s the work happening while you are creating equality and equity in your pay system. Again, each of these pay system ingredients are vitally important individually and together.

And here we are back at salads. Ingredients make a big difference. What can you do about your own pay mix? Get curious. Research your own pay. Research your own cost of living. Ask your employer about their pay philosophy. Understand how pay is structured at your organization. Employers have a big collective responsibility around pay. What can organizations do about their pay mix? Get curious and get moving. Research how your organization’s pay aligns with your talent market and cost of living for your geographic locations.  Share your pay philosophy with your employees and listen to their feedback. Post your pay philosophy online and your salary ranges in job postings. Pay systems may not be your favorite item in human resources, but they make a huge difference in people’s lives.

Photo by Dose Juice on Unsplash

Need help with your company’s pay system? Loftis Partners can help. Check out our services here.