Fair Pay in the USA
“What do you earn?” In the USA, this is not a taboo question, but quite appropriate for small talk. But does dealing with the subject of money openly have any effect on fairer pay in companies? On the occasion of the 64th Session of the Commission on the Status of Women (CSW64), we have taken a look around the country where Equal Pay Day was invented.
The oddities of US legislation are legendary. For example, women in the state of Vermont need their husbands’ permission to wear dentures; in Eureka in the state of Nevada, men with mustaches are forbidden to kiss women; and in Michigan, until 2015 swearing in front of women or children was prohibited. Not so curious but just as inconsistent is regional legislation on the subject of equal pay: the federal state of Mississippi does not have its own equal pay laws.
The level of pay differences between men and women also varies from one federal state to another. The biggest regional gaps are to be found in Louisiana (30.6%) and Wyoming (29.9%); by contrast, New York (12.3%) and California (11.9%), are at the other end of the scale. On average, the national statistical pay gap is 18 percent. In contrast to Germany, the difference in pay in the United States of America is additionally broken down by ethnic origin: whereas women of Asian origin earn 10 percent less than white men, women of Hispanic origin earn just under half, at 46 percent of what their white male colleagues earn.
A milestone that sends out a signal
The call for fair pay is by no means new in the USA, however. In 1930, the lawyer Dr Lena Madesin Phillips founded the International Federation of Business and Professional Women (BPW). Right from the start, economic equality and participation were central concerns for the network of working women. The network, which was founded in New York, soon grew, today numbering 25,000 women in 107 countries, and the call for fair pay has become ever louder.
In the 1960s, women in the USA mounted a major campaign, and finally, their voices were heard right at the top, ensuring that the legislative basis for equal pay was laid. In 1963, the then President of the United States of America, John F. Kennedy, ceremonially signed the Equal Pay Act: a milestone that really sent out a signal.
Equal Pay Day – the hit export
Another quarter-century on, however, it became clear that law alone is not enough to actually close the pay gap. In 1988, women in the USA started the Red Purse Campaign: they took to the streets carrying bright red handbags, to draw attention to the fact that women’s purses were ‘in the red’. In 2007, BPW Germany followed suit with the Rote Tasche [red handbag] initiative, which culminated a year later in the very first German Equal Pay Day. Germany is not alone in running such a day of action: every year, network members from Brazil to Japan draw attention to the difference in income between men and women. This global campaign – like Coca-Cola and Santa Claus – is a successful US export.
In the USA itself, the next major legislative act at the national level followed in 2009, when then-President Barack Obama signed the so-called Lilly Ledbetter Fair Pay Act. The employee Lilly Ledbetter had sued tire company, Goodyear, because, for years, she had been paid a significantly lower salary than her colleagues in the same management role. The Supreme Court of the United States confirmed that it was a case of unequal pay, but at the same time stated that the time period for filing the claim had already expired. This gap in the law was closed; women who have been affected can now claim their rights even after long periods of time. In spite of all the efforts by the subsequent administration to reverse the law, the rule stands to this day.
Fair pay right up to the Supreme Court
In general, legal action for fair pay is taken much more often than in Germany, where that happens only extremely rarely, and the number of lawsuits can be counted on the fingers of one hand. Amongst other things, this is down to the fact that plaintiffs in the USA usually attract a great deal of attention as well as prominent support. In the case of Lilly Ledbetter, not only was there a great deal of reporting, but the plaintiff also had prominent support: as a judge at the Supreme Court, Justice Ruth Bader Ginsburg threw her weight behind the case. Whether it is individual cases in Silicon Valley or class actions against large corporations, the readiness for court battles is comparatively high in the USA.
More recently, headlines were made by the players of the US national women’s soccer team at the 2019 FIFA Women’s World Cup in France: at the awards ceremony, they loudly demanded equal pay. The subsequent negotiations were unsuccessful – the action against the United States Soccer Federation is still pending.
Transparency: drawbacks and advantages
Openness on the subject of money in the USA has also long meant that application documents usually include a so-called ‘Salary History’, in which previous positions and salaries were to be listed. The problem with that was that once discrimination in matters of pay had occurred, this was perpetuated along a person’s subsequent career path. In order to avoid this, since January 2020 employers in New York have been prohibited from asking about salary history. In this way, in new appointments, new salaries – regardless of previous unequal treatment – can be set at the actual appropriate level.
Overall, the culture of open discussion of money matters does have advantages: it is not only the employees asserting their rights but also many US companies that are showing a great deal of courage in matters of pay transparency. The absolute pioneer is Buffer: the software provider has developed a formula that is used as the basis for setting salaries – there are no longer any pay negotiations, and discrimination in pay is excluded. Salaries are also made transparent and are available for all to see. And the cloud computing developer Salesforce is consistently ensuring fair pay: since 2015, around 9 million dollars have been invested every year in order to balance out any differences in income. At first sight, it seems a lot, but on closer inspection, it is relatively little – in fact, not even 1 percent of the annual turnover of 10 billion dollars.
Companies such as Starbucks are also setting a good example: the coffee enterprise has been analyzing the gender pay gap every year for the last ten years and was able to close the pay gap in 2018. But the company is not resting on its laurels here and has a very precise plan to make sure that the gap will remain at zero in the future too.
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Knowing about the pay gap and being willing to rid the world of the unjust state of affairs are evidently not enough to actually ensure fair pay. It is right here ...