Demystifying “Equal Pay”
Today marks Equal Pay Day in the United States: this is the infamous day* that marks the disparity between average male and female wages. But Equal Pay Day is just one of many terms used in the marketplace — pay gap, pay equity, pay parity, mean, median, pay inequity.
It’s a confusing landscape to understand, and it’s a tough one for companies to navigate. There is an increasing amount of government legislation that requires some form of employer pay reporting — U.S. states California, New York, and Massachusetts; Canada; France; Sweden; and the United Kingdom, to name a few. And more recently, investors focused on environmental, social, and governance (ESG) investing are showing a growing interest in the median gender pay gap. All these entities use different definitions, timeframes, and requirements loosely grouped into the concept of pay equity.
While I’m not an economist or compliance expert, I am a compensation leader who focuses on these issues every day. There are two different ways I think about fairness in pay:
1. Pay parity: the way we at Adobe define it is ensuring that individuals doing the same job, at the same level and in the same location, are being paid fairly and equitably. This is the focus we at Adobe have taken with our pay practices, and we achieved global pay parity in 2018. This approach addresses employees’ desire to know that they are being compensated fairly relative to their peers.
2. Pay distribution: it’s a term that I use for how pay is allocated across the organization. Pay distribution reflects the breakdown of pay across jobs that men and women are in — relative to higher and lower paid functions as well as seniority levels. Two of the most common approaches to understand pay distribution are:
- Mean pay: a “mean” is an average of a set of numbers. In the context of pay, a mean could be determined by adding up every full-time salary earned by individuals within a group and dividing by the number of people in that group. In a gender context, this would give the average pay for men and the average pay for women in the organization. This approach is not the most helpful in illustrating pay distribution, however, because a small number of very high-paid individuals can meaningfully swing the average.
- Median pay: a “median” is the middle number within a sorted list of numbers; thus median pay could be determined by finding the middle person in each group if their salaries were sorted from low to high. This approach is less prone to large swings based on a few individual salaries, but the median can be difficult to move depending on the makeup of the broader workforce. For example, replacing the top 10 male company earners with women may not move the median point very far if numerous low-paid roles are held by women; alternatively, adding a large number of new, low-paid male workers might improve the median but not be a meaningful sign of female progress.
Regardless of the approach, pay levels in any organizations result from many factors, including supply and demand for a given job; the level of contributions that each employee is making; the education and experience levels of new hires; ensuring that a company’s processes and practices provide fair opportunity for all; and some degree of discretion.
When it comes to employee pay, we as a company and industry need to prevent bias in the rewards process, and we believe focusing on pay parity is one of the most effective ways to do that. But equitable pay distribution is a larger long-term goal we should all have as a society: everyone, regardless of gender, color, or other personal trait should have the opportunity to pursue and succeed in highly paid roles in our society. A snapshot of any given company does not show the full picture, but looking across all industries with a benchmark like Equal Pay Day is vitally important.
While we can’t change the pay landscape overnight, we at Adobe are committed to continuing to pursue our Adobe For All strategy to advance diversity and ensure fairness for our employees. It is important to us that our employees feel respected, valued, and included, and that they trust in our processes. As we continue to maintain our pay parity, we are now addressing the next challenge which we call “opportunity parity” — ensuring our practices provide fair opportunities for every employee to grow and develop in our organization.
Let’s all strive toward the day when Equal Pay Day becomes obsolete.
*Information on how the Equal Pay Day date is determined is available from the National Committee on Pay Equity here.