Wage Inequities

Conceptual Overview

The impact of wage inequities goes beyond the individual level, influencing organizations and society as a whole. To understand wage inequities, a review of their three primary sources is required. First, disparities can arise from unequal pay by a single employer for the same work. This is termed within-job wage discrimination. Second, unequal access to high-paying jobs, occupations, or organizations arising from biased recruiting, hiring, promotion, and termination can lead to wage inequities. This is termed allocative wage discrimination. Third, disparities can arise through devaluation of a specific job category dominated by a demographic group. This is called valuative wage discrimination.

Within-job wage discrimination is perhaps the easiest to identify. When two employees at the same company are equally qualified and productive and yet are paid differently, the case is clear. Generally such disparities are easy to document and illegal in many countries. As such, they are becoming less common. Within-job wage discrimination is less easily documented when job qualifications are ambiguous or productivity is subjectively measured. Some countries still allow within-job wage disparity for members of different groups. But the trend worldwide is toward eliminating this difference.

Allocative wage discrimination occurs when different groups are segregated into different jobs, occupations, or organizations that have differing pay. Such discrimination is illegal in many countries. Allocative wage discrimination can occur at several stages of the employment relationship, including recruiting, hiring, promotion, and termination. For instance, elite organizations that disproportionately target members of certain groups through recruiting practices that build applicant pools can end up hiring disproportionately from that targeted group. Similarly, if human resource offices encourage members of certain groups to apply for lower rated jobs within an organization, the resulting distribution across jobs in that organization can lead to allocative wage discrimination. Allocative wage discrimination at the earlier stages of the employment relationship, such as recruiting and hiring, can be difficult to document for reasons of ambiguous criteria and lack of data. Thus, even if the practice is illegal, it can and does persist worldwide. Allocative wage discrimination at the termination [Page 1628]stage is a bit easier to document and subject to wrongful termination lawsuits in many legal regimes. Thus, organizations are increasingly focusing on reducing inequities in the termination stage.

Valuative wage discrimination is potentially the most difficult to document. It consists of differing pay for occupations that require similar qualifications but that have differing proportions of specific dem graphic groups. It is most frequently discussed in the context of the gender wage gap. When female-dominated occupations receive lower wages than occupations with similar requirements dominated by men, there is a case for valuative wage discrimination. Comparable worth initiatives are designed to address this form of wage inequality. However, it is extremely difficult to document, and it is frequently explained away as the result of simple market forces of supply and demand. Some argue this is the largest source of wage inequities in the modern organizational world.

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