Today, equal pay legislation goes into effect in Massachusetts, Vermont, and New Jersey. Similar proposals, from Illinois, New York, and Hawaii, are moving through state legislatures across the country. By one recent tally, approximately 50 different pay equity measures are pending in state houses, all aimed at narrowing the gender pay gap in its many pernicious forms.
New Jersey’s Diane B. Allen Equal Pay Act, which has been described as one of the most sweeping efforts, is named after a former state senator who experienced bias on the job. On average, women in the state earn 80¢ on the dollar for the same work as their male counterparts, a gulf that widens to 60¢ and 43¢ for black and Latina women, respectively, according to the governor’s office. The New Jersey law requires women to be paid equally for “substantially similar” rather than “equal” work, a semantic shift that experts believe will make it much easier for women plaintiffs to demonstrate in court that they’ve been discriminated against.
To avoid such litigation, employers in the three states whose equal pay laws take effect today will need to audit their workforces for compensation disparities and the biases that create them. It’s a government-direct overhaul that far too few organizations have proved eager to undertake themselves. But as employers are forced to comply, they’ll each stand to gain tremendously in the race to attract and retain top talent.
Pay equity remains a top concern
At my company, InHerSight, which lets women rate their employers, our users rank salary satisfaction as the second most important aspect of their workplaces, right after having great paid time off. And in a survey we ran earlier this year, 34% of the women who participated said reviewing salaries and correcting gender pay gaps was the No. 1 way they wanted their companies to improve–the most popular choice by a wide margin. In fact, this is the second year in a row that InHerSight users have rated pay equity as their top issue.
Findings like these should raise the antennae of every recruiter and hiring manager in the U.S. It’s well-established that fairly paid workers are generally happier, more committed, and less likely to leave. The current high watermark of concern over equal pay coincides with a talent crisis in the U.S. workforce, with experts worried about high turnover and employee dissatisfaction. In addition, companies are still struggling to hire and retain women in their leadership ranks while facing mounting public pressure to do so. By mandating equal pay, the new laws in Massachusetts, Vermont, and New Jersey not only address both problems simultaneously, but in doing so they all but compel employers to become more competitive.
Indeed, employers in some parts of the U.S. are already losing out to those headquartered elsewhere. Our data shows that women may be happier in some places than others when it comes to compensation. In a recent analysis of salary satisfaction by location, InHerSight users ranked Washington, D.C., as the top place to work, with Arkansas, Iowa, Nebraska, and Arizona filling out the top five. At the bottom were Louisiana, New Hampshire, Kentucky, West Virginia, and Mississippi. Lawmakers looking to improve their states’ ranking, and thus their employers’ competitive edge, should consider pay equity a powerful tool.
Pay equity laws can vary considerably, but they typically prevent employers from asking job seekers about their prior salaries (Massachusetts passed a separate measure making that change in 2016) in addition to imposing other nondiscrimination protections for candidates and employees. This makes it possible for women to shake off histories of lower earnings while moving from one job to the next, in turn boosting their pensions, retirement funds, and prospects.
And that helps more than just working women. It’s worth noting that mothers are the primary or sole earners for 40% of households with children under age 18, according to the U.S. Department of Labor. While employers may need to shore up their hiring practices and make some cultural adjustments to comply with these new laws, they’re also supporting families–including the millions of parents who are raising the next generation of talent that has yet to enter the workforce.
Finally, according to the Institute for Women’s Policy Research, closing the gender pay would have added more than $512 billion in wage and salary income to the U.S. economy in 2016 alone, or roughly 2.8% of the gross domestic product. By paying women less than men, employers are artificially depressing that economic output. It’s long past time for more state legislatures to follow the lead of Massachusetts, Vermont, and New Jersey and end that practice. Everyone wins when they do, but until then, companies in those three states will have the edge.
Ursula Mead is founder and CEO of InHerSight, an anonymous company ratings platform tailored specifically to women.