Sample Economic Essays on Pay Inequity in the U.S.

One of the most persistent forms of inequality in the United States is wage inequality. Over the past four decades the bulk of workers, particularly people of color, have experienced inequality in wage. Gains in wage growth in the 1990s and the late 2010s have been dampened by the climbing wage inequality across the U.S. where workers in the middle and bottom of the wage scale keep losing the gains made in wage growth and at the same time continue to struggle to satisfy their needs instead of developing themselves. Wage inequality is worse for women, blacks, and Hispanics, who get only a fraction of the pay of their white male counterparts. The situation is worse for for Black and Hispanic women, who aside from their poor pay, earn even less than that their White female counterparts. As such, pay inequality is a significant problem for minorities in the U.S. A review laws and policies that that incriminate flaunting of laws and punishes any discriminative practices in pay and hiring practices will go a long way in correcting the pay gap.

Review

The gender pay gap is one of the most consistent features of the American labor market. From the 70s, women have consistently earned less than their male counterparts, nearly 60 percent of the males’ pay for the same job done (Blau and Kahn 8). In the recent years have, however,  the levels of pay for women have improved. Data by the National Partnership for Women and Families (NPWF) shows that as of 2020, “the median annual pay for a woman who holds a full-time, year-round job is $45,097 while the median annual pay for a man who holds a full-time, year-round job is $55,291” (NPWF 1). The data indicates that women earn 82 cents for every dollar paid to men, a figure that amounts to $10,194 in annual gender pay gap (NPWF 1). Herein, even with changes and growth in average pay, women still earn less than their male counterparts.

Although the pay gap has been narrowing, the difference in gender pay is persistent even within and between different occupations. A study on the pay difference between male and female physicians in the U.S., for instance, found that female physicians earn $20,000 a year less than their male counterparts (Jena, Olenski and Blumenthal 1295). A similar pattern characterizes other occupations, in which across full-time working employees in management, sales, office and administrative support, and production, women are shortchanged in pay. Studies show that in sales, production, management, service, office and administrative occupations, women get 64 cents, 69 cents, 77 cents, 78 cents, and 94 cents respectively for every dollar earned by their male counterparts (NPWF 3). Even in different industries, women continue to see disproportionate pay for the same work done as their male counterparts. In health care and social assistance, manufacturing, retail trade, and educational services, women earn 71 cents, 77 cents, 78 cents, and 88 cents for every dollar paid to men in those industries respectively (NPWF 3). Unfortunately, the pay inequality has a bleak outlook for the minority women since Black and Latina women get a lesser fraction (63 and 54 cents respectively) of their male counterparts’ pay for the same job done compared to white women (Jena, Olenski and Blumenthal 1295).  Indeed, inequality in income based on gender is a significant issues withing occupation.

Part of the explanation for the persistent gender gap is the difference in skills possessed by men and women. women tend to be less skilled and employed at lower-paying industries and occupations than men (Blau and Kahn 8). While that explanation may have held ground four decades ago when education and entry into the job market were difficult for women, it does not at the present because of the changed circumstances of women. Statistics on education attainment show that on average, the number of women who have completed four years of college and higher levels of education has surpassed that of men (see graph 1). Despite the better educational attainment for women in comparison with men, women continue to earn less than men even when both genders have similar qualifications and skillsets. Surveys of the gender gap show that women with master’s degrees earn 67 cents for every dollar paid to men with similar qualifications (NPWF 3). Worse is that women with associate degrees, despite their higher qualifications, earn less than men with high school diplomas, even as some women with master’s degrees earn less than men with bachelor’s degrees. Indeed, this trend suggest that the wage inequality between the genders is not based on qualifications.

Graph 1. Percentage of U.S. population with four years of college and more from 1940-2019 by gender. Source: (Duffin n.p.).

More interesting is that even with the recent growth in wages, women’s wage growth is less than that of men. A recent survey by the Economic Policy Institute on the growth of minimum wages across the nation showed that while the overall minimum wage grew by 4.1 percent in states with a minimum wage increase, men’s wages increased by 3.6% even as those of women grew by 2.8 % (see graph 2) (Gould n.p.). The disparity in wage growth means that women are consistently disproportionately disadvantaged and bound to fare poorly on economic outcomes.

Graph 2. Wage growth. Source: (Gould n.p.)

The pay parity in the U.S. paints a grim picture for people of color. NPWF informs that women of color are the most adversely affected by the nation’s persistent and prevalent gender and the racial pay gap. Latina, Native American, Black, and Asian American women earn a fraction of the pay that their white male counterparts do regardless of education qualification and experience. Latina women earn 54 cents for a dollar paid to white non-Hispanic males. Thus, where a Latina earns $33,540, the white non-Hispanic male earns $61,576 translating to $28,036 a year in median average difference for a full-time job (NPWF 2). Native American, Black, White, and Asian women earn 57 cents, 62 cents, 79 cents, and 90 cents on every dollar earned by a White male (NPWF 2). At the same, racial gender parity disadvantages Black males more than other racial groups. In comparison to their White counterparts, Black males earn 87 cents for a dollar earned by a White male, extending to 91 cents for Latinas, and 95 cents for Native Americans (NPWF 2). The racial pay parity point to underlying systemic problems that require expedited solutions to solve the racial and gender pay gap issues currently plaguing the U.S.

Perhaps one of the greatest areas of pay inequality in the U.S. is between the CEOs and employees. Statistics show that on average employees earn only 0.271% of the amount that CEOs earn (Mishel and Wolfe n.p.).  The difference in pay between the mentioned parties is on the increase and has reached a critical level. Per into the pay gap between CEOs and employees, in 1978, CEOs earned 30 times more than their employees (Mishel and Wolfe n.p.). The gap has steadily increased over the years: in 2016, the average CEOs of 350 companies in the U.S. earned $15.6 million, peaking in 2014 where they earned 299 times more than the average employee (Mishel and Wolfe n.p.). while the pay for while American workers has increased by 11.2% between 1978 and 2019, that of CEOs has grown by 937% (Mishel and Wolfe n.p.). Moreover, CEO pay is 5 times higher than that of to some of the high earners in a company. Part of the reason CEOs are highly paid is their position and power to set their pay and not their experience, education, or special talent. Thus, while some CEOs have only associate bachelor’s degrees, they earn many times more than employees with master’s and even Ph.D. The exorbitant pay structure of CEOs and top management in organizations point to a lack of trickling down of economic growth to the workers who put in the bulk of the work in the organizations.

Proposal

Addressing pay inequality requires a multi-prong approach that involves a review of laws that cover pay inequalities as well as organizational policies that cover remuneration. At the core of the pay gap are issues related to employment discrimination and lack of enforcement of laws covering equal pay. Biases during the hiring process consistently drive unemployment among minorities in the United States with little improvement over the past 25 years (Jena et al. 1296). The large differences in income propagate poverty among the minorities by translating into large and tenacious gaps in wealth, which then morphs into large and persistent inequalities in access to resources and advancement opportunities. the Equal Pay Act of 1963, the Civil Rights Act of 1964, and the Lilly Ledbetter Fair Pay Act of 2009 were passed to stop the pay parity (Flynn n.p.). Despite banning discrimination in pay based on race and gender, equal pay remains a pipe dream. It is, therefore, important to review and work towards the enforcement of these laws. Reviewing the laws should include expanding their scope to include emerging issues, such as the LGBTQ, as well as include serious consequences where employers are found guilty of flaunting the laws.

Despite the existence of the laws, the wage gap in the U.S. persists as a result of systemic failure, thus the system ought to be broken to resolve the problem. Research into the roots of the pay gap in the nation indicates that the country’s history of racism and sexism is to blame (Flynn n.p.). The system is rigged in such a way that despite the existence of laws, in theory, aimed at preventing the gap, the systemic setup perpetuates racism and sexism. Breaking this pervasive history and ensuring equal representation provides a solution. For instance, Don and Doris Fisher invested equally in founding Gap Inc. (McElhaney and Smith 10). As a result, the company has a history of equity and is hailed as one of the most equitable companies in the world. Therefore, in addition to reviewing the existing laws that cover discrimination, it is also important to introduce new laws that widen the scope of coverage to ensure that minorities and women are protected against the racist and sexist tendencies that define the nation.

Within organizations, employers have an opportunity to review their recruitment and remuneration policies to not only comply with existing laws but also level the ground for employees. One of the reviews should involve an equal representation of both males and females in all levels of the organization and not relegate others (women and people of color) to junior positions. Gap Inc. for instance, evened out its pay parity by balancing not only the pay for both its male and female employee but also equally representing males and females in its senior positions (McElhaney and Smith 10). The possibility of making such changes, as evidenced by Gap Inc., means that organizations can and should review their employee compensation policies and remove any biases that discriminate against minorities. Such an assessment should involve an internal analysis of pay practices to determine whether some groups have unfairly received higher compensation than others in starting wages; bonuses; training opportunities; and period salary and work to remove these imbalances (Jena et al. 1296). The equal pay for equal work done and for equivalent skillset principle should apply for everyone in the organization.

Discussion

One of the arguments for lower pay for women is the industries and occupational choices taken by women and minorities. The argument here is that women tend to get into low paying jobs and careers, most of which require lower skill sets in comparison to men. Women and people of color have traditionally shunned careers in STEMs (science, technology, engineering and mathematics), which traditionally pay better than humanity-based careers (McElhaney and Smith 10). Nevertheless, this argument is flawed given the increasing educational attainment of women and minorities. More women and people of color continue to do better in the STEM-based courses and sometimes outdo their white male counterparts. While women possessing lower skill sets was an argument that held ground 4 decades ago when education attainment for women and people of color was low, the two groups have joined the ranks as some of the most brilliant people in the U.S. Moreover, the law expressly incriminates such racist and sexist leanings providing guidelines for non-discriminative pay.

Conclusion

Pay inequality is indeed an economic problem that affects American society. A history of racism and sexism propagates the pervasive pay gap that discriminates against people of color and women. Reviewing non-discriminative laws and expanding their scope as well as restructuring organizational recruitment and compensation policies provide solutions to the pay inequality that exists in the U.S. The fact the inequality and discriminative recruitment policies deny women and people of color opportunities for advancement and access to resources explains the high poverty levels experienced by the two groups. Leveling the playing field has the potential of elevating women and people of color out of poverty, increasing organizational diversity, and helping not only organizations but also the nation to reach higher levels of economic and social prosperity.

Works cited

Blau, Francine, D. and Kahn, Lawrence, M. “The Gender Pay Gap: Have Women Gone as Far as they Can?” Academy of Management Perspectives, vol. 21, 2017, pp. 7-23. https://inequality.stanford.edu/sites/default/files/media/_media/pdf/key_issues/gender_research.pdf

Duffin, Erin. Percentage of the U.S. Population with a College Degree, by Gender 1940-2019. Statista, 2020. https://www.statista.com/statistics/184272/educational-attainment-of-college-diploma-or-higher-by-gender/.

Flynn, Andrea. “It Takes Black Women in the U.S. 20 Months to Earn What White Men Make in a Year. Here’s the History Behind That Wage Gap.” Time. https://time.com/5655678/black-womens-equal-pay-day-history/.

Gould, Elise. State of Working America Wages 2019. Economic Policy Institute, 2020. https://www.epi.org/publication/swa-wages-2019/.

Jena, Anupam, B., Olenski, Andrew, R., and Blumenthal, Daniel, M. “Sex Differences in Physician Salary in US Public Medical Schools.” JAMA Intern Med., vol. 176, no. 9, 2016, 1294-1304, https://jamanetwork.com/journals/jamainternalmedicine/article-abstract/2532788.

McElhaney, Kellie and Smith, Genevieve. Eliminating the Pay Gap: An Exploration of Gender Equality, Equal Pay, and A Company that Is Leading the Way. University of California, 2017. https://www.icrw.org/wp-content/uploads/2017/11/Eliminating-the-Pay-Gap-Kellie-McElhaney-and-Genevieve-Smith.pdf

Mishel, Lawrence and Wolfe, Julia. CEO Compensation has Grown 940% since 1978. Economic Policy Institute, 2019. https://www.epi.org/publication/ceo-compensation-2018/.

NPWF. America’s Women and the Wage Gap. NPWF, 2020. https://www.nationalpartnership.org/our-work/resources/economic-justice/fair-pay/americas-women-and-the-wage-gap.pdf