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        THE RACIAL WAGE GAP
        PERSISTS IN 2020

        THE RACIAL WAGE
        GAP PERSISTS
        IN 2020

        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. The controlled racial wage gap (RWG) is a comparison of pay between white men and people of color who have the same job and qualifications. As we see below, our research into the racial wage gap shows us that racial bias is alive and well in the U.S. workforce.

        FOR EVERY DOLLAR A WHITE MAN MAKES, HOW MUCH DOES AN EQUALLY QUALIFIED PERSON OF A DIFFERENT RACE OR GENDER MAKE?

        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. Black men see a pay gap of $0.98. The median pay for white men in our sample is $74,500, thus the controlled median pay for black women is $72,300 – 97 percent of white men’s earnings in the same job. For black men, controlled median pay jumps to $73,000. This suggests a $2,200 pay disparity for being a black female and a $1,500 pay disparity for being a black male

        If we expand these annual salaries over a 40-year career and account for average yearly wage growth, these differences can add up to hundreds of thousands of dollars. For example, at a $0.97 wage gap black women earn $5.46 million over their career relative to white men who earn $5.62 million. A black woman with the same job and qualifications would need to repeat 2020 2.2 times to catch up to white men’s lifetime earnings. Over the last five years, the average yearly improvement of the controlled pay gap for black women was $0.004. To close the $0.97 controlled pay gap for black women at this rate would take another seven years.

        Read more about Equal Pay for Black Women

        THE RACIAL WAGE GAP WIDENS WITH CAREER PROGRESSION

        White professionals, men in particular, still have the highest rates of being in leadership roles. Whereas Asian men and women have the highest rates of being individual contributors and the lowest rates of being managers, directors or executives. It is important to note that the demographic group “Asian” covers many different ethnic groups that are not treated equally in the workplace.

        WHITE WORKERS HAVE A LARGER PERCENTAGE OF THEIR WORKING POPULATION IN HIGH LEVEL JOBS THAN OTHER RACES

        The opportunity gap offers a key insight into workplace racial bias and how it plays out in corporate America. Asian professionals, for example, lag dramatically behind other groups in attaining leadership roles despite higher earnings in general. From these metrics, it stands to reason that Asian workers are often perceived as highly capable and end up earning higher pay yet face other unfair perceptions that dissuade promotions. Indeed, race is consistently shown to have a high influence in getting call backs or interviews for a job. Racial bias can also occur in employee referrals and performance reviews, other factors that influence receiving promotions or job offers. In other words, while merit may seemingly be the basis for hiring decisions, the perception of other’s merit is first filtered through racial bias.

        For those who have attained the same positions of power as white men, their hard work in proving their excellence and merit may have seemingly paid off. However, it does not pay equally. Further gains in professional clout made by people of color are generally met with less equitable pay as they progress in their careers.

        FOR EVERY DOLLAR A WHITE MAN MAKES, HOW MUCH MORE OR LESS (+/-) DOES A PERSON OF A DIFFERENT GENDER OR RACE MAKE IN A GIVEN JOB LEVEL?

        Pay gaps often widen by age and job level, a sign of white men’s salaries increasing at a faster rate than other groups as they progress in their career.

        FOR EVERY DOLLAR A WHITE MAN MAKES, HOW MUCH MORE OR LESS (+/-) DOES A PERSON OF A DIFFERENT GENDER OR RACE MAKE IN A GIVEN AGE RANGE?

        THE RACIAL WAGE GAP VARIES BY INDUSTRY AND LOCATION

        The differences in earnings by race and gender become more nuanced across industries. American Indian and Alaska native women see the three largest pay differences from equally qualified white men. These industries are Accommodation & Food Services ($0.91 RWG), Construction ($0.93 RWG), and Retail & Customer Service ($0.93 RWG).

        Among men, the industries where we observe the largest pay gaps compared to equally qualified white men are Construction (Black men: $0.94 RWG), Arts, Entertainment, & Recreation (Black men: $0.95 RWG), and Real Estate & Rental/Leasing (Hispanic men: $0.95 RWG).

        FOR EVERY DOLLAR A WHITE MAN MAKES, HOW MUCH MORE OR LESS (+/-) DOES A PERSON OF A DIFFERENT GENDER OR RACE MAKE IN A GIVEN INDUSTRY?

        Geographical cuts also offer nuanced pay gaps. By state, the lowest racial wage gap is for American Indian and Alaska Native women in Virginia at $0.88. Interestingly, Hawaii sees the worst racial wage gap for Native Hawaiian and Other Pacific Islander women, at $0.90. This reminds us that the largest pay disparities can occur even where a minority’s presence is high.

        We see this same phenomenon among men. The worst male racial wage gap is in Mississippi among Black or African American men at $0.92, a state where 38 percent of the population is black. Asian men, typically high earners that surpass white men’s earnings, see the second worst male racial wage gap by state in Oklahoma, at $0.93.

        FOR EVERY DOLLAR A WHITE MAN MAKES, HOW MUCH MORE OR LESS (+/-) DOES AN EQUALLY QUALIFIED PERSON OF A DIFFERENT RACE OR GENDER MAKE?

        Pay inequities occur on many different fronts: from unequal pay for equal work, to opportunity gaps preventing people of color from attaining leadership roles, and even unequal wage growth widening pay gaps at higher age groups and job levels. Throughout all of these metrics, white men maintain an edge over other groups.

        Even as we observe more equitable pay outcomes overtime, income disparity is only one factor of the greater racial wealth gap. For centuries, violent and systemic racism has suppressed the opportunities for people of color to gain wealth and property, or plundered it when they did. As a result, each generation faces cyclical injustices that deter people of color from gaining equal footing. PayScale’s controlled racial wage gap analysis shows that even when people of color hold equal merits and positions of power as white men, pay isn’t equal. The aggregated racial differences this creates in lifetime earnings, which support property ownership, investments, and retirement savings, are huge barriers in alleviating generational wealth disparities.

        WHAT YOU CAN DO TO CREATE PAY EQUITY

        For organizations interested in conducting pay equity analysis but unsure how to begin, PayScale has put together a guide that walks you through the process of getting started with pay equity analysis, including how to obtain buy-in from both legal and executive stakeholders.

        In addition, PayScale has launched a pay equity solution in partnership with the USC Race and Equity Center, founded by Dr. Shaun Harper, to help organizations analyze, monitor and maintain pay equity over time with advisory services on diversity, equity and inclusion.

        Pay Equity Analysis

        METHODOLOGY

        PayScale collected profiles from half a million respondents with a bachelor’s degree from our online salary survey between August 2018 and August 2020 that provided information about their education, industry, occupation and other compensable factors. Respondents also reported demographic information, including age, gender and race. We leveraged this sample of respondents to measure the racial wage gap between equally qualified individuals of different racial/ethnic groups and white men.

        Definitions

        Total Cash Compensation: TCC combines base annual salary or hourly wage, bonuses, profit sharing, tips, commissions, and other forms of cash earnings, as applicable. It does not include equity (stock) compensation, cash value of retirement benefits, or value of other non-cash benefits (e.g., healthcare).?

        Median Pay: The median pay is the national median (50th Percentile) total cash compensation (TCC). Half the people doing the job earn more than the median, while half earn less. ?

        Controlled Racial Wage Gap: This is the amount that a person of color earns for every dollar that a comparable white man earns. That is, this is the pay difference that exists between racial groups after we control for all measured compensable factors. If the controlled pay gap is $0.97, then a person of color would earn 97 cents for every dollar earned by a white man with the same employment characteristics.

        Controlled Median Pay: To illustrate the racial wage gap, we calculate this estimate of what the typical professional of color would earn if they occupied the same position as the typical white man.

        Industries: PayScale uses 15 industry categories that are custom aggregates of the North American Industry Classification System (NAICS).

        Job Levels:

        Individual Contributor: Employees who do not manage others.

        Supervisors/Managers: Employees with people management responsibilities.?

        Directors: Employees who manage managers, but are below the level of vice president.

        Executives: Employees with the title of vice president or higher.

        Lifetime Earnings: Lifetime earnings is the sum of median pay from each year, over 40 years, where each year the median pay increases by 3 percent. This is because 3 percent has been found in previous research to be a standard annual increase in base pay by the majority of employers.

        Race/Ethnicity: Respondents could choose one or more of the following and could opt to self-identify in an open-response.

        American Indian and Alaska Native

        Asian

        Black or African American

        Hispanic

        Native Hawaiian and Other Pacific Islander

        White

        Only respondents who chose exactly one of the above were included in our analysis of the gender pay gap by race.