For Black History Month, we spotlight the inequity, or unequal access of opportunities, that impact Black professionals. The pay gap between African American or Black professionals and white workers has only slightly narrowed over the years, despite resounding calls for workplace reform and economic justice.
The issues driving pay gaps often have less to do with pay and more to do with the consequence of structural or systemic issues in the workplace. These create societal barriers to entry or career progression for certain groups of employees.
Just as with the gender pay gap, occupational segregation (more men in higher paid industries and women in lower paid industries) and vertical segregation (fewer women in senior and therefore better paying positions) are main drivers of racial pay disparities. Black individuals in the workforce are less likely to be in higher paying or higher job level roles.
This is largely due to institutionalized systems of oppression preventing equal economic and educational access — America’s history is full of events that have prevented the accumulation of wealth in the Black community. Addressing racial pay disparities is an important action that any organization can do to counter these generational wealth inequities.
Organizations of all sizes need to continue or prioritize analyzing wage disparity and understand what drives racial & gender pay gaps, so we can make tangible efforts to close these gaps. Employers, this is your opportunity to contribute meaningfully to Black history, by beginning to dismantle systems of oppression inherited and perpetuated by inequitable compensation.
What issues drive racial pay gaps?
As with gender, occupational and vertical segregation impact racial minorities, who are less likely to be in higher paid managerial positions and more concentrated in low paid hourly jobs.
According to the Bureau of Labor Statistics data, Black workers are not only more likely to work in “blue collar” or service jobs, they tend to be concentrated in the lower-wage jobs including: operators, fabricators, and laborers, rather than higher-paying precision production and craft jobs within those categories.
Payscale’s 2022 State of the Gender Pay Gap data, released March 15th, indicates that white men are more likely to be managers, directors, or executives. Black men or women are more likely to be individual contributors. Sixty-six percent of Black or African American women are individual contributors compared to sixty-two percent of white women and fifty-nine percent of white men.
Education also has a part to play here, with racial minority children facing challenges including: racial and ethnic marginalization, concentrations of minority racial groups often residing in under resourced areas, and language and cultural barriers. This can dampen educational achievements, further impacting access to occupations of higher status and greater earnings. Yet data consistently shows that even when educational achievement is equal, racial minorities still earn less than their white colleagues, suggesting other factors are still at play.
For decades, employers have increasingly relied on a four-year college degree as a baseline qualifying credential for a job interview. Degree Inflation, as Harvard researchers called it, has been especially divisive to potential employees of color: Black individuals possessed only 10 percent of bachelor degrees conferred in the 2018 – 2019 school year (via National Center for Education Statistics).
Social and economic disadvantage impact education and career progression significantly. One such disadvantage is geography. Geographic location impacts racial pay gaps due to the concentration of racial minorities in certain locations, where access to certain types of employers may be unequal to or differ from white communities. This impacts balanced representation across occupational and industrial sectors, driving pay gaps.
Racial stereotypes, i.e. racism, also drive career choices, which impacts pay gaps and contributes to the overall wealth gap. Any stereotype can ultimately undermine accomplishments and enfeeble the spectrum of abilities. Inherent biases can dictate whether and how an employee receives encouragement to apply for leadership positions within an organization and what line of work they are expected to stay in.
Equal pay for equal work is not a reality for many people of color. When we control for education, years of experience, occupation and other compensable factors, most men and women of color still earn less than white men. These gaps remain a stark reminder of the inequities that Black people face.
We define the racial wage gap as the cents on the dollar men and women of a racial group earn compared to white men. To fully understand the differences in pay across racial/ethnic groups, we look at two different measures: the uncontrolled wage gap and the controlled wage gap.
The uncontrolled racial wage gap does not hold employment characteristics, such as job title or years experience, equal when assessing income by race. It simply compares the median income for each group in order to show how people are represented in higher paying versus lower paying jobs.
The controlled racial wage gap, on the other hand, is a comparison of pay between white men and men of color who have the same job and qualifications.
In Payscale’s Racial Pay Gap data from 2021, we found Black or African American men have one of the largest uncontrolled pay gaps relative to white men. They earn $0.88 for every dollar a white man earns. When we hold all employment characteristic equal, Black or African American men still see the largest pay gap. The controlled pay gap for Black men is $0.99 for every dollar a white man with the same qualifications makes.
To put that in perspective, the median salary of a white man in our sample is $75,000; the controlled median pay for Black or African American men is thus $73,900. This suggests a $1,100 difference in pay that is likely attributable to race.
Compounded, race and gender intersect to result in wider pay gaps for women of color. Men of color generally earn less than white men, but all men out earn the women within their racial ethnic group. Among the controlled group, Black men and women have some of the lowest earnings compared to white men. Black women earn $0.97 for every dollar earned by a white man with the same job and qualifications. What this means is that Black women are most likely to be paid less despite having the same level of experience and other compensable factors as white men doing the same job.
Women also tend to move up the career ladder at a slower pace than men. We call this phenomenon the opportunity gap. When we look at the opportunity gap by race and gender, it offers a key insight into workplace racial bias and how it plays out in corporate America.
All women of color except for Black women start out with controlled pay equity relative to white men at the individual contributor level, but as they progress up the corporate ladder, the gender pay gap widens. Black women individual contributors make $0.99 for every $1 white men make when the same job characteristics are controlled for, but only $0.95 as executives.
Over a 40-year career, these losses add up. When we take the sum of median pay from each year, over 40 years, where each year the median pay increases by 3 percent, looking at uncontrolled data, Black men stand to loose about $670,000. For Black women that number is almost double, about $1,290,000. Evaluating lifetime earnings in this way offers us a bigger picture of gender and racial economic disparity Black folks face in the United States.
Outside the parameters of our research, there are further issues of inequality that can affect Black representation in the workforce. Black male youth today face a crisis of mass incarceration fueled by the school-to-prison pipeline. This effectively removes a large percentage of black or African American men from the workforce and raises obstacles for them returning to the labor market. The resulting employment barriers only exacerbate income inequality by race.
What can employers do about racial pay gaps?
Despite the troubling behavior of our racial and gender pay gap data, there is hope that change may be coming. After 13 years of reporting on compensation best practices, 2022 will become the first year where most organizations (52 percent) plan to do a pay equity analysis. An indicator of progress, however, only 38 percent of those orgs plan to do something to address their pay gaps.
Data-driven racial pay gap reporting is essential to understanding the different experiences of individual racial groups. Only by analyzing employee data can we move beyond anecdotal evidence and subjectivity to truly measure inequality. From there, we can start to understand where disadvantage and barriers occur in order to take corrective action.
Collecting workplace ethnicity data has to be a priority. In the US, the Equal Employment Opportunity Commission mandates the reporting of workforce data from employers with more than 100 employees including race.
When it comes to taking action, driving accountability from the top down is critical to success. The first step is to set goals and objectives for diversity, equity, inclusion, and belonging (DEIB). Next, assess which goals are most important for your organization based on current shortcomings measured from employee data. Objectives need to then be translated into an actionable plan that sets measurable goals aligned to an accountability framework.
More generally, opening up conversations on race across the organization and giving all employees a safe space and voice to share thoughts is paramount. Many choose to do this through Employee Resource Groups (ERGs) encouraging discussions on different experiences to provide insight into unseen barriers and devise practical and creative solutions. It’s all about fostering an inclusive culture where people are fully and happily able to be themselves.
As with gender, considering barriers to entry for Black professionals and other racial minority groups can have a lasting impact on representation. Challenging educational selection or work experience bias during recruitment can help, alongside creating work experience opportunities for everyone rather than leaning on networks and referrals. Representation is also improved by drafting job specifications in a more inclusive way, requiring diverse shortlists, and introducing diversity to interview panels to tackle any unconscious bias.
Just as important as barriers to entry, consider barriers to progression and their impact on racial pay gaps. Company-wide transparency is crucial in communicating promotional, reward, and career opportunities to helps ensure employees do not deselect themselves based on perceived hurdles. As with recruitment, diversity in selection panels and appropriate manager training can also help tackle unconscious bias.
Organizations don’t typically intend to pay people differently based on race, gender, or any other protected category status. It is illegal to do so. However, equal pay is a legacy issue that persists for many, especially when pay gaps are assumed not to exist rather than actually measured. Pay inequity is pervasive for many Black workers.
Some may know that they have a pay equity issue but don’t know the extent of it. Again, only by crunching the numbers and committing to pay equity analysis can you truly uncover key areas of inequality. This should become a part of your ongoing compensation practices.
The ultimate aim of analyzing racial pay gaps should be to make employers reflect on why discrepancies in pay exist within their organization and prompt them to raise awareness and understand the root causes of these issues. This will lead to solutions.
We can’t change the course of history without remembering and reconciling the injustices of the past. Black workers deserve better. It’s past time all employers opened their eyes and invested in closing racial and gender pay gaps at their organization. Until all these gaps are closed, the work is not done. What side of history do you want to be on?