What's the Difference Between Pay Equity and Pay Equality?

Pay equity and pay equality are complicated concepts that have very real financial and social implications. We'll first use a simple example using gender to explain the meaning.

From 2008 to 2020, Marvel released 20 movies featuring a male superhero before we got 1 about a female superhero.

Pay equity is about paying a female superhero the same as a male superhero for the comparable work of saving the world. But pay equality is about changing our systems and culture so that more women can become superheroes in the first place.

At your company, you can think about achieving pay equity as the bedrock foundation upon which to build an ongoing commitment to equality for all.

What is pay equality?

Pay equality is about equal access to opportunity. This is a big concept and an important one. Women, people of colour, disabled people, queer people, and other marginalized groups have all sorts of barriers to accessing high paying jobs.

These barriers can be systemic on a global level, like the way that kids of color have less access to quality education and less encouragement to pursue STEM fields.

They can be systemic within your company, if your workspace is not wheelchair-accessible or your promotion system penalizes people who choose to have children.

The barriers can also be interpersonal, unconscious, and reinforced by social norms. Think of that stereotypical example of a team that communicates only in sports metaphors and raunchy jokes.

How can employers improve pay equality?

To improve pay equality, you need to create policies that cultivate a diverse and inclusive corporate culture.

Here are some ways you can promote equal access to opportunities:

• Intentionally recruit more diverse candidates
• Create clear career paths and performance goals to remove bias from the promotion process
• Offer benefits that support equitable participation, such as flex hours and remote work

What is pay equity?

Pay equity means equal pay for work of equal or comparable value. To put it another way, pay should be free from discrimination based on protected characteristics.

Protected characteristics are aspects of a person's identity that are protected from discrimination. They include things like race, religion, sexual orientation, and disability status. In the US, these are called protected groups or protected classes. In Canada, they're called prohibited grounds.

The specific legislation will vary, but pay equity is required by law.

While equality is a more philosophical concept, pay equity is specific and quantifiable. You can measure it and you can correct it. Sounds simple, right?

Well, that depends on how much you remember from your college stats class.

How can employers run pay equity analysis?

To run a pay equity analysis, you'll need to determine whether employees who are doing similar work are being paid equitably. You'll group jobs into job classes based on their similar requirements, responsibilities, skills, effort, and working conditions.

You'll gather compensation data and demographic data for all your job classes.

Then you'll run a regression analysis to determine if there's a statistically significant pay gap between men and women doing similar work.

Equal Work vs. Work of Equal Value

You may have noticed the careful language with which pay equity is defined. We talk about employees doing "similar" work, not necessarily the "same" work. That's because there's a difference between "equal work" vs. "work of equal or comparable value".

Let's continue to use the gender gap as a lens to explore this idea.

Equal pay for equal work means that if a man and woman are doing the same job, they should be paid the same. That's a good first step. In the US, that became a pay equity law way back in 1963.

Things have evolved a lot since then. Nowadays, pay equity is trying to solve for equal pay for different jobs that have equal value to the company.

The Ontario government defines this well:

Under Ontario's Pay Equity Act, "pay equity" requires an assessment of all jobs in an organization and an unbiased comparison of the work done by women to the work done by men in order to determine whether the women are being compensated equitably. For example, the receptionist for a company may be as valuable to the organization as the warehouse shipper-receiver. The Pay Equity Act requires an employer to compensate work done by female job classes at least equally to work done by comparable male job classes.

The specific legislation that applies to your company may be different, but the general idea is to standardize the way that a job is assessed so that it can be compared to other jobs. Instead of comparing paramedics only to other paramedics, now you can compare their pay to nurses, police, or firefighters to close the pay gaps across an entire organization.

What the pay gap really means

Every year, the US and Canada recognize Equal Pay Day. This day symbolizes how far into the new year women have to work to earn what the average man earned the previous year. 

In the US, that date was March 15, 2022. 

Equal Pay Day in Canada is even later - April 12, 2022 - which means that the gender pay gap is even larger. The average woman has to work an extra 3.5 months into 2022 to make as much as the average man did in 2021.

You will often hear that for every dollar that a man earns, a woman earns around 80 to 88 cents. That is absolutely true, but there are actually two kinds of pay gaps.

The uncontrolled pay gap

This is the raw number. The one you hear on the news. It compares the median salary for all men and all women who are full-time salaried workers in the US, across all jobs, ethnicities, and seniority levels. The bad news is that, in 2022, the uncontrolled pay gap was about 18% or $0.82.

The uncontrolled pay gap is sometimes called the "opportunity gap" because it represents all the systemic barriers and differences in the opportunities available to men and women.

This way of breaking down the numbers reveals that we still have a long way to go to achieve equality.

The controlled pay gap

This is the number that compares apples to apples. It measures the gap in pay for men and women doing the same work by controlling for compensable factors.

Compensable factors are the criteria that you use to determine the salary for a job or employee. They are things that you can and should use to differentiate pay, like education, experience, seniority, and managerial responsibility.

The controlled pay gap is what pay equity measures and tries to reduce. It does not account for the bigger social factors that impact pay, such as men being overrepresented in more senior and highly paid roles. It is a statistical analysis of one very specific thing: the pay gap between men and women doing the same work with the same qualifications and experience.

Pay equity legislation requires that this gap should be zero, but it is not. In the US, the controlled pay gap has been hovering around around 1% or 2% for years. And this inequity is actually the most optimistic of the numbers. The controlled pay gap for other protected groups, such as people of colour, is much larger.

Understanding the difference between the uncontrolled and controlled pay gap is really important because it proves that our efforts and legislation are having a major impact. When employers identify the factors that we can control, and intentionally set policies to achieve pay equity, we do come closer to achieving fairness.

The wage gap and intersectionality

We've been using gender as our lens so far, because a lot of legislation focuses on gender and it's a good entry point to this discussion.

Zooming out, there are a lot of different wage gaps and they overlap.

There is a racial wage gap. On average, men of colour are paid less than white men, even when controlling for title and qualifications.

There is a queer wage gap. Statistics here are harder to come by here. According to the Center for American Progress, the controlled pay gap between gay or bisexual men and straight men is 10% to 32%.

There are intersectional wage gaps. Women of colour are paid less than white women. Black women are paid less than Black men. Queer Black men are paid less than straight Black men.

Looking at the controlled pay gap between these groups reveals that the most basic element of fairness - equal pay for equal work - is not yet a reality for many people.

The big takeaway

Now that we've learned about the difference between pay equality and pay equity, we can truly understand the extent of the problem.

There are big inequalities in our society that you can address with policy changes that encourage inclusion and diversity. The uncontrolled gap is large, the reasons are complicated, and we still have a long way to go.

There are also specific inequities that we can address by paying fairly based on compensable factors and removing bias from the process. The controlled gap is smaller, but it shouldn't exist at all, and your company can achieve that by implementing a standardized and equitable compensation strategy.