We’re exploring income inequality this month on Impactfull. And we can’t talk about income inequality without mentioning wage gaps in the US.
Wage gaps affect many Americans in one way or another due to the diversity of its factors—whether it be race, gender, family or corporate salary.
Racial Wage Gap: The Equal Pay for Equal Work Myth
There are no U.S. states with completely equal salary rates between white people and BIPOC. However, the racial gap between white people and BIPOC in the US varies by state.
The most radical differences in wage in comparison with white counterparts exist among Black and Hispanic workers, while Asian Americans observe greater wealth inequality within their community—not in comparison with their white counterparts. In other words, Black and Hispanic workers have the lowest weekly median income and low-income Asian Americans are poorer than White counterparts while wealthy Asian families are richer.
“Equal Pay for Equal Work” only applies to some Americans, as it exempts many people of color. While the racial wage gap is even more extreme when uncontrolled for education, years of experience, occupation and more, it remains substantial even when controlled for these variables. This is, in large part, due to gaps in opportunity, discrimination/systemic racism and occupational segregation, meaning that specifically men of color have higher rates of holding low-level jobs than white men. Even when holding management positions, Black men are paid less than their white counterparts. Additionally, they are more likely to work in low-paying industries like social services, in comparison to white men in senior positions.
The Black-white wage gap has grown considerably, especially since 2000. In this case, only small effects on class-based wage inequality are observed in response to increased equality of access to education and opportunities. As shown by William Darity Jr. and others, racial wage gaps remain almost completely unaffected by narrowing the black–white college attainment gap. While Black unemployment rates are at stunningly low levels, there has been little wage growth for Black workers.
Gender Wage Gap: Sexist Pay Discrimination
The gender wage gap is a topic of great discussion now, and in the past, in response to the significant growth in women’s labor force participation. As an increasing number of women work longer hours and pursue higher education, they consistently earn less than men; the gap is wider for most women of color.
Over the past 15 years, the gender gap in pay has remained relatively stable in the US. In 2017, one-in-four employed women reported earning less than their male counterparts doing the same job, whereas just five percent of men reported earning less than their female counterparts. In 2019, the US Census Bureau analyzed the gender pay gap and found that full-time, year-round working women earned 82 cents to every dollar their male counterparts earned. In 2020, according to an analysis by Pew Research Center, women earned 84 cents to every dollar men earned of median hourly earnings (full and part-time workers). Based on this, it would have taken an extra 42 days of work for women to earn what men did in 2020.
While many factors drive the gender gap, difference in years of experience and hours worked, occupational segregation and discrimination are most persistent. Women are disproportionately forced to leave the workforce to accommodate unpaid and unsupported obligations, such as caregiving. As a result, they tend to have less work experience and work fewer hours.
Occupational segregation leads to the funneling of women and men into different industries and jobs according to gender norms and expectations. This is much more disadvantageous for women, as traditionally gender normalized “women’s jobs” are ones that tend to offer lower pay and fewer benefits than so-called “men’s jobs” do.
Lastly, gender-based pay discrimination is still a very real issue—especially for women of color—even though it has been illegal since The Equal Pay Act was passed in 1963. Many employers create a workplace that discourages open discussion of wages and instills a fear of retaliation in employees. Not only this, many employers enable gender-based pay discrimination decisions to follow women from job-to-job by relying on prior salary history when hiring and deciding compensation, instead of deciding new rates specific to the job and the position.
Corporate Salary Gap: Why Those with Wealth Stay in Wealth
The corporate salary gap is rooted in companies’ salary structure hierarchy. This salary structure is usually divided into “bands” of similar positions with an executive tier of CEOs and chief officers at the top of the hierarchy, followed by a management tier of VPs, managers/team leaders and then regular employees who are further classified based on job importance and seniority. In other words, it is ranked by importance to the company and its functions. Due to this, those in higher positions of authority are paid increasingly more in wages in comparison to those near the bottom of the hierarchy. A CEO’s wages are often astronomically higher than those of a regular employee.
This is not actually reflective of an increase in the value of a CEOs’ work; it is more likely to reflect CEOs’ close ties with corporate board members who set salary rates. CEO pay has historically been tightly linked with the stock market’s health, although this connection has loosened over the last few years. Unlike regular employees, upper-level management’s salary rates are not established by a “market for talent”.
This is an issue because high CEO and upper-level authority pay sets a trend for others like them in the corporate and even nonprofit sphere, creating a culture and system of outrageous salary gaps. It pulls up the pay rates for high managerial positions while pushing down those of middle to low managerial positions. This unreasonable and excessive CEO pay is a major contributor to rising income inequality.
In fact, CEO pay has risen 940 percent from 1978 to 2018 while regular employee pay has only grown by 12 percent. Other company executives also thrive, with a 339.2 percent growth in earnings from 1978 to 2017 as spillovers from CEO pay rises have pulled up executive pay rates overall. This was a major factor that doubled the top 1 percent and 0.1 percent of American households’ income shares.
Can We Reverse the Trend of Wage Gaps in the US?
Policy, awareness and action are the only things that can reverse trends of income inequality due to wage gaps in race, gender, and salary. While most of us don’t have the power to introduce or pass new policies to begin the process of closing the gap, we can use our voices to create awareness.
Many people have the misconception that things have improved all-around in terms of wealth and income inequality in the US. However, that is just that: a misconception. When faced with these injustices, we must do all we can to spread awareness, break misconceptions and advocate for change.
Feel free to contact me at cho.katie@outlook.com
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