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New Report Reveals the Importance of Compensation Transparency

By Melissa J. Anderson

Another report has revealed just how much income varies by gender and ethnicity – but this one adds a another dimension. How much of a difference does it make to earn a college degree? How much compared to your colleagues of another race or gender?

The Georgetown report, “The College Payoff: Education, Occupations, Lifetime Earnings,” measures the impact – in dollars – of educational attainment degree on career potential. But, the report shows, a college degree is not the path to income equality. The authors, Anthony P. Carnevale, Stephen J. Rose and Ban Cheah, of the Georgetown University Center on Education and the workforce, write:

“The findings are stark: Women earn less at all degree levels, even when they work as much as men. On average, women who work full-time, full-year earn 25 percent less than men, even at similar education levels. At all levels of educational attainment, African Americans and Latinos earn less than Whites. For example, African Americans and Latinos with Master’s degrees have lifetime earnings lower than Whites with Bachelor’s degrees.”

The data shows that educational attainment increases someone’s earning potential significantly – but some groups benefit significantly more from earning a degree than others.

Gender and Ethnicity

For example, the study shows, that women who earn a bachelor’s degree make over $650,000 less over the course of their lifetime than men with a bachelor’s degree. Similarly, males with professional degrees make over a million dollars more than women with a professional degree. The researchers only compared the earnings of people who were regular, full time, full year employees who hadn’t taken career breaks, they said. The study adds, “The smallest gender gaps for the ‘typical’ worker can be found at the Associate’s degree (38%), Master’s degree (34%), and Doctoral degree (27%) levels.”

To put it another way, in order to earn as much as a man with a bachelor’s degree a woman has to earn a doctoral degree. Men who attended some college but didn’t earn a degree still make more than women with a bachelor’s.

But the income disparity is not only about gender. Whites have typically earned more than people of other races/ethnicities, but according to the research, Asians (particularly those with high degrees) now earn a comparable amount over their lifetime.

On the other hand, the study continues, “Latinos, meanwhile, have median lifetime earnings 34 percent lower than Whites across the board. African Americans make 23 percent less than Whites. A similar gap (22%) exists for Other Races/Ethnicities (Native Americans, Pacific Islanders, and others).”

And, that gap doesn’t necessarily decrease with educational attainment – according to the study, Blacks with professional degrees still earn 23% less than Whites with professional degrees. The income gap for Latinos is smaller than that of Blacks.

What can we do?

Really, the report’s finding, that within peer groups, individuals are earning disparate amounts of money, for doing relatively similar work, shouldn’t come as a surprise. The wage gap isn’t a new issue, and comparing these disparities by educational attainment only goes to show that it still exists, and earning a higher degree isn’t a good way to work around it.

But as non-white non-male employees recognize that the wage gap exists and likely affects that negatively, employers will have to face some tough questions.

How much are they really paying each employee? How much compared to their peers? Can you break that down by race or gender?

Nicki Gilmour, Founder and CEO of Evolved People Media believes the solution to this issue is more transparency around compensation. In a recent article, she wrote:

“This has nothing to do with having children or taking time out. Apples for apples, women are paid less for no other reason than they are women. But because most firms don’t make it policy to track (or at least make public) data regarding pay, promotion, or performance reviews on a large scale, it easy to to continue this cycle of inequality. If they were required to publish this data alongside gender, then perhaps we would see that pay gap shrink.”

As the public clamors for more transparency around executive compensation, firms can expect to see compensation transparency grow to become an issue at every level of their workforce. Performing an internal compensation audit may be a good way to get a handle on their own corporate wage gap, and correct imbalances before they get out of hand – before public, shareholder, or governments put pressure on companies to make that gap public knowledge.

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