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The adjusted pay gap refers to the difference in compensation between groups after accounting for various factors. It aims to compare pay more equitably by controlling for elements like job title, experience, education, and industry.
This metric provides a nuanced view of wage disparities beyond raw pay differences. Researchers use statistical techniques to isolate the impact of gender, race, or other characteristics on compensation.
Factors commonly adjusted for include:
The adjusted pay gap is typically smaller than the unadjusted gap. It helps identify potential discrimination in pay practices by comparing "like with like" across demographic groups.
The adjusted pay gap compares compensation between employees in similar roles with equivalent qualifications and experience. It aims to account for factors that legitimately influence pay.
Some key steps in the process include:
Organizations use adjusted pay gap analyses to assess their compensation practices. The findings can reveal areas for improvement in hiring, promotion, and pay decisions.
Regularly conducting these analyses allows companies to track progress over time. It provides insights to help create more equitable pay structures and reduce unjustified disparities.
A large tech company conducted an internal pay equity analysis. They compared salaries of male and female software engineers with similar experience levels, job titles, and performance ratings.
The initial unadjusted pay gap showed women earning 15% less than men on average. However, after accounting for factors like years of experience, specific technical skills, and hours worked, the adjusted pay gap narrowed to 3%.
This remaining 3% difference represents the adjusted pay gap. It indicates potential gender bias in compensation practices that cannot be explained by measurable job-related factors.
The company used this information to identify areas for improvement in their hiring and promotion processes. They implemented targeted interventions to address unconscious biases and ensure fair compensation practices.
Regular monitoring of the adjusted pay gap allows organizations to track progress in reducing unexplained wage disparities. It provides a more nuanced view of pay equity compared to raw wage comparisons.
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