August 13th is Black Women’s Equal Pay Day. The calendar day is reflective of the median earnings of Black women compared to white men according to the U.S. Census and changes each year to show how much longer Black women have to work to earn what white men did in the previous year. That means to make the same amount that a white man made in 2019, a Black woman must work an additional 226 days in 2020.
Last year, Black Women’s Equal Pay Day was August 22nd. 2020 shows a tiny bit of improvement over 2019, but the incremental change does not signify real progress. Although Black women’s pay has moved a little closer to equal this year, it was trending worse in previous years and still falls significantly short of equal.
Pay inequity and the racial wage gap can no longer be ignored. 2020 has been a year of paradigm shifts and cascading socioeconomic stressors, from Covid-19 driving unemployment to almost 15 percent in April to nationwide protests over police violence. For Black Americans, 2020 has been especially significant as the nation has turned to face almost 400 years of systemic racism that began with the transatlantic slave trade in the 17th century and continues to sow discrimination and social injustices in the present day.
Why Pay Equity Matters for Racial Equality
Compensation is an intrinsic part of social justice for Black Americans. By definition, slaves were not paid for their labor. Much of the prosperity of America was built on this economic system, the justification for which required the dehumanization of Black people and the propagation of myths that slavery was good or largely benign. Because of the pervasive racist beliefs needed to rationalize this economic system, emancipating slaves did not result in Black people enjoying equal citizenship and earning fair and competitive wages. Instead, the socioeconomic progress of Black Americans was met with systemized resistance to deny them occupation, housing, education, the right to vote, and safety under the law in addition to fair wages. The Civil Rights Movement of the 1960s made discrimination on the basis of race illegal, but making reality match the letter of the law is still a work in progress today.
The importance of equal pay isn’t just about paying people fairly for their work. It’s also about addressing occupational segregation and the overall income inequality that is responsible for generations of racial wealth gaps by creating more opportunity for Black people to secure higher paying jobs. As a whole, Black Americans are shockingly and disproportionately less wealthy than white Americans. According to the Samuel Debois Cook Center on Social Equity at Duke University, the median Black household holds just 10 percent of the wealth of the median white household. That means that for every one dollar white Americans have, Black Americans have only 10 cents. Black Americans also constitute 13 percent of America’s population, but hold less than three percent of its wealth.
The disparity in wealth for Black women is more pronounced. The intersectionality of race and gender creates overlapping and interdependent systems that combine to further disadvantage Black women. When it comes to compensation, Black women have less opportunity and also earn less pay for equal work when compared to white men, white women, and Black men.
Measuring the Gender Pay Gap
The connection between opportunity and earnings is why PayScale measures both the uncontrolled and controlled gender pay gap in our annual Gender Pay Gap Report, which was released March 31, 2020 for Women’s Equal Pay Day.
The uncontrolled gender pay gap shows what women make when comparing the median salaries of all women to the median salaries of all white men. This measurement reflects the opportunity women have to earn higher wages. In our Gender Pay Gap Report for 2020, we found that all women make 81 cents for every one dollar a white man makes. This 19-cent gap represents lost earnings due to the types of jobs that women occupy compared to men, which tend to pay less.
We also analyze the controlled gender pay gap, which is where we compare the salaries that women make against the salaries that white men make for the same jobs. This is supposed to be equal pay for equal work, but the controlled gender pay gap for all women is 98 cents. Although 98 is close to 100, a 2 percent gap is still statistically significant and signifies that even when all other factors are equal, women are still being paid less than men for the same jobs.
PayScale’s annual Gender Pay Gap Report breaks down the uncontrolled and controlled wage gap by racial minority as well. For the 2019 data reflected in this report, Black women made 75 cents for every dollar a white man made. For Black Women’s Equal Pay Day, and in recognition of the importance of the 2020 protests over police violence and system racism, we have updated this data through August of 2020 with specific focus on Black women to show the progress we have yet to make.
Black Women Make 76 Cents on the Dollar Compared to White Men
According to PayScale’s compensation data, Black women in 2020 make 76 cents for every dollar what white men make when comparing the median salaries of all Black women to the median salaries of all white men (uncontrolled). When we compare the salaries that Black women make against the salaries that white men make for the same jobs (controlled), we find that Black women make 97 cents for every dollar that white men make.
This is less than what both white women make and also what Black men make. Black men make 88 cents for every one dollar that white men make when data are uncontrolled and 98 cents to every dollar that white men make when data are controlled. This is better than what white women make but is still not equal.
When comparing what Black women make compared to Black men, we find that Black women make 87 cents for every dollar that Black men make when data are uncontrolled and 99 cents for every dollar that Black men make when data are controlled. This shows that Black women experience unequal pay in comparison to Black men in roughly the same ratios that Black men experience unequal pay compared to white men. For the controlled gap, Black women do slightly better and for the uncontrolled gap, they do slightly worse.
How Long Will It Take for the Pay Gap to Close?
Black Women’s Equal Pay Day is intended to build awareness so that we can close the pay gap. The pay gap for Black women has improved over the last five years, but not significantly. The uncontrolled pay gap has crept up by a single percentage point while the controlled pay gap as stalled without any visible progress in the last three years.
If we go deeper into the data, we find that 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.
Meanwhile, the average yearly improvement of the uncontrolled pay gap was $0.011. To achieve pay parity with white men, where the uncontrolled pay gap of $0.76 for Black women improves by $0.011 each year, would require 21.5 years.
The Black Women’s Pay Gap Widens at the Job Level
Over the course of a career, Black women experience a widening wealth gap. Although Black women are undoubtedly paid more as they progress from individual contributors to managers to directors to executives, the difference in their pay for their job level compared to white men as a percentage widens.
At the uncontrolled level, Black women executives are paid only 92 cents for every dollar that white male executives make. At the uncontrolled level, Black women executives make only 63 cents for every dollar that white male executives make. Likely, this is influenced by the types of opportunities available to Black women and the companies and industries where Black women are executives. These companies may be smaller or pay their executives less because they are in less lucrative industries.
Black Women Stand to Lose Over $1 Million in a Lifetime
The outcome of the pay gap for Black women is reduced lifetime earnings. This can be difficult to calculate because compensation changes over time for an individual, but to roughly illustrate the concept, let’s assume the average Black woman starts working at age 22 and retires at age 62, a career of 40 years.
If we increase the median pay earned by Black women by 3 percent every year for 40 years – the standard annual increase given according to previous research – we find that Black women earning a median salary of $56,900 in 2020 would accumulate a lifetime earnings of $4,290,000 over a 40 year career. The average lifetime earnings of white men is $5,620,00. The difference of $1,330,000 would require her to work 2020 23 times over to catch up with white men’s lifetime earnings.
For the controlled group, when Black women’s job characteristics are similar to men’s, Black women’s 2020 median pay increases to $72,500 and lifetime earnings increase to $5,460,000. This is a difference of $160,000 from white men’s lifetime earnings. A Black woman with the same job and qualifications would still need to repeat 2020 2.2 times to catch up to white men’s lifetime earnings.
What Can You Do to Close the Gender and Racial Pay Gap?
It has been 56 years since the Civil Rights Bill of 1964 was passed to prohibit discrimination on the basis of race, color, religion, sex or national origin. It has been 57 years since the Equal Pay Act of 1963, which made it illegal to pay men and women differently for equal work. And yet, there is still a racial and gender pay gap.
To address pay inequity by race or gender, organizations should conduct pay equity analysis to know if they are paying people of color or women statistically less than white men. Racial or gender-based pay disparities can happen even in very progressive and well-meaning organizations. Talent pools can be limited. Unconscious bias can creep into hiring processes. Merit increases can be reserved for people who are more confident to apply for better positions or self-advocate for raises, which can exclude women and people of color from advancing.
Organizations also need to address the source of the problem. This requires a thoughtful and deliberate approach to people strategy that takes diversity and inclusion into consideration and controls for unconscious bias in the hiring and rewards process. For example, you could identify your top roles and set goals for representation of women and people of color within those roles. You also need to build a culture that incentivizes recognizing and reporting systemic problems that disadvantage women and people of color in obtaining higher paying positions, particularly problems that may be invisible to you. You also need to provide tools and incentives for people in the organization to address the problems you uncover and meet the goals you have set.
2020 offers some additional assistance. Thanks to the normalization of remote work as a product of social distancing, many organizations have realized that employees working remote can be highly productive. Many organizations are therefore looking at expanding permanent remote work opportunities, which means they can diversify the workforce by hiring people from geographical locations with more diverse populations. Of course, you will still want to make sure that you get pay right for remote employees.
Another practice that has been found to close the gender pay gap specifically is pay transparency. This means being more forthright with managers and employees about how you set pay for positions within your organization. Of course, pay transparency first requires that you have a mature approach to compensation planning. If you are not using multiple sources of validated salary data and compensation software for your planning processes, you will need to correct that. Once you are confident that your compensation structures are both fair and competitive, you can improve pay communications and be transparent about your processes for setting pay, which has shown to result in equalizing pay regardless of race and gender.
Ensuring fair and equal pay is an imperative this year, especially for Black American women and other women of color who still endure a statistically significant pay gap. It is 2020. Black women shouldn’t have to work 226 extra days – or more – to earn what white men do.
Methodology
This analysis for Black Women’s Equal Pay Day leverages 170,000 profiles collected between August 2018 and August 2020 from PayScale’s online salary survey, providing information about their industry, occupation, location and other compensable factors. They also reported demographic information, including age, gender, and race. We leveraged this sample to provide insights into the controlled and uncontrolled racial gender pay gap.
For analysis by race, we look only at those with at least a bachelor’s degree. All gender pay gap numbers reported are relative to 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.
Uncontrolled Gender Pay Gap: Median pay for men and women are examined separately, and the difference in the median is reported as the uncontrolled gender pay gap. Variables such as years of experience and education are not controlled for. This provides a picture of the differences in wages earned by men and women in an absolute sense.
Controlled Gender Pay Gap: This is the amount that a woman earns for every dollar that a comparable man earns. That is, this is the pay difference that exists between the genders after we control for all measured compensable factors. If the controlled pay gap is $0.97, then a woman would earn 97 cents for every dollar that a man with the same employment characteristics.
Controlled Median Pay: To illustrate the gender pay gap, we calculate this estimate of what the typical woman would earn if she occupied the same position as the typical man.
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 hire.
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 a 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.
Find out more about PayScale’s methodology.
For more about the gender pay gap for Black Women’s Equal Pay Day, view PayScale’s complete Gender Pay Gap Report.
