Financial Equity and Security
Black Americans have been crippled by financial inequity and insecurity and the businesses that create jobs and make decisions regarding wages and benefits have a responsibility to make amends as part of any larger push for racial justice. While the economy appeared to be strong by many measures going into the first months of 2020, the reality was that almost all of the wealth generated in the stock market during the technology boom that played out in the years before the Covid-19 pandemic flowed to white families, with The New York Times reporting that Federal Reserve data has confirmed that typical black households had just one-tenth the wealth of typical white households. In an Economic Letter issued in September 2017, the Federal Reserve Bank of San Francisco reported a sizable gap between the earnings of blacks and whites that has risen over time and that by 2016 the average black male worker earned just 70% of the hourly wage of the average white male worker and the average black woman earned about 82% of what the average white woman earned. The moral and economic arguments for eliminating the shocking disparities described above in the wages paid to African Americans and other people of color should be clear. Companies are legally obligated to have fair pay practices and Article 23(2) of the UN Universal Declaration of Human Rights provides that everyone, without any discrimination, has the right to equal pay for equal work. As such, one of the first steps that a company needs to take in an effort to address racial inequalities and injustice is to commit to pay equity and paying a living wage. In addition, companies should commit to an employee emergency relief fund or low-cost loan program, paid parental and sick leave, full health care coverage for all workers and supporting efforts to improve public health and achieve equity and universal coverage in health care and programs to assist workers with caregiving responsibilities.
The following is an excerpt from the chapter on Racial Equality and Non-Discrimination just released on the website of the Sustainable Entrepreneurship Project.
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Black Americans have been crippled by financial inequity and insecurity and the businesses that create jobs and make decisions regarding wages and benefits have a responsibility to make amends as part of any larger push for racial justice. While the economy appeared to be strong by many measures going into the first months of 2020, the reality was that almost all of the wealth generated in the stock market during the technology boom that played out in the years before the Covid-19 pandemic flowed to white families, with The New York Times reporting that Federal Reserve data has confirmed that typical black households had just one-tenth the wealth of typical white households. In an Economic Letter issued in September 2017, the Federal Reserve Bank of San Francisco reported a sizable gap between the earnings of blacks and whites that has risen over time and that by 2016 the average black male worker earned just 70% of the hourly wage of the average white male worker and the average black woman earned about 82% of what the average white woman earned.[1] In the same month, The Washington Post reported data from the U.S. Census Bureau that confirmed that African Americans were worse off financially in 2016 than they were in 2000 and that African Americans were the only racial group the Census Bureau identified as being left behind (i.e., White, Asian and Latino households had seen at least modest income gains since 2000). In its 2019 article explaining research on the racial wage gap for men, PayScale summed up the situation succinctly[2]:
“Fifty-five years after the Civil Rights Act banned pay discrimination on the basis of race, equal pay for equal work is not yet a reality. Across the board, we’ve found black or African American men see the largest pay gaps relative to white men. This large disparity in income translates into large and persistent gaps in wealth. This in turn manifests into large and persistent gaps in resources and opportunities for advancement.”
African American workers are not alone; in fact, the available data confirms that the country has what CBS News described as “ a job-quality problem that affects nearly half the population” noting in December 2019 that studies have found that 44% of U.S. workers were employed in low-wage jobs that pay median annual wages of $18,000 and that most of those workers were adults in their prime working years (i.e., 25 to 54). While their medium hourly wage of $10.22 per hour was almost $3.00 per hour above the federal minimum wage, it fell well below what was generally considered to be a “living wage” in many parts of the country.[3] Of course, this was the situation before the Covid-19 pandemic and things have only worsened: even the low-paying jobs have gone away and fewer than half of black adults in America still had a job.
Financial inequality among African Americans can be found regardless of their level of education. Many have argued that the key to improving the situation of blacks in the workplace is to provide access to better education; however, Brooks argued in The New York Times that this has not led to equality, pointing out that while the percentage of young black adults with a high school diploma had increased from 54% in 1968 to 92% in 2020 and the percentage of young African-American adults that had completed college had also increased from 9% to 23% during that same period the gaps in income and wealth between white and black families remain as large as they were over 50 years ago.[4] Brooks also cited statistics showing that black college graduates earned about 21% less per hour than white college graduates as of 2017 and that while the value of the assets of college-educated whites increased 86% from 1992 to 2013 their black counterparts saw the value of their assets fall by 55% during the same period. According to Brooks, increasing educational opportunities for African-Americans has not only failed to reduce economic disparities but has also not been effective in reducing social disparities, noting that college-educated blacks continue to face racial discrimination on a regular basis in the workplace.
The moral and economic arguments for eliminating the shocking disparities described above in the wages paid to African Americans and other people of color should be clear. Companies are legally obligated to have fair pay practices and Article 23(2) of the UN Universal Declaration of Human Rights provides that everyone, without any discrimination, has the right to equal pay for equal work. As such, one of the first steps that a company needs to take in an efforts to address racial inequalities and injustice is to commit to pay equity, a process that should begin with a wage equity audit and then continue with appropriate adjustments, reviewed and updated on a regular basis, to achieve and maintain fair and equitable pay throughout the organization. If adjustments are required, they should be made quickly and will often require a re-assessment of the person’s actual duties and responsibilities and perhaps a promotion. In addition, if adjustments to the wages of large groups of employees are required, it is important to explain the reasons to other employees who may not be included because they are already being paid fairly. However, problems will not be fully eradicated until the company has dug deeper to identify and address the root causes of unequal pay by taking the following steps recommended by Miller in a 2018 article in the HR Daily Advisor[5]:
- Provide better training for hiring teams to reduce or eliminate the ways pay discrimination gets into the hiring process.
- Implement ways across the organization to create fair pay scales or pay grades for each role, where pay is based on the position, the level of responsibility in the role, and the level of experience.
- Set the pay before anyone has even applied, thus reducing the chances of inadvertently paying some candidates less based on their salary history rather than based on the pay that is appropriate for the job.
- Assess other reasons why the pay gap existed in the first place, and put policies in place as needed (e.g., are employees who have taken a leave of absence less likely to received raises or promotions once they return).
- Consider making pay structure at least somewhat more transparent, which forces everyone involved in pay decisions to be more careful about acting fairly.
- Be clear about the requirements for getting a raise or promotion, and be consistent in using the established guidelines.
- Consistently conduct wage audits and compensation assessments to find issues and fix them before they become worse.
In addition to pay equity, companies need to commit to financial equality and security for all of their workers. This involves several steps, beginning with making sure that the company is paying at least a living wage to all of its employees. There are a number of different definitions of a living wage, and various ways to calculate the living wage; however, it is useful to refer to the definition adopted by the founding organizations of the Global Living Wage Coalition that included Fairtrade International, GoodWeave International, Rainforest Alliance, Social Accountability International and UTZ: “… a living wage is the remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events.”[6]
A living wage is a basic human right: various articles of the UN Universal Declaration of Human Rights provide that everyone who works has the right to just and favorable remuneration ensuring for him or her and his or her family an existence worth of human dignity, and supplemented, if necessary, by other means of social protection and the right to a standard of living adequate for the health and wellbeing of him or her and of his or her family, including food, clothing, housing and medical care and necessary social services. According to the Living Wage for Families Campaign (“LWFC”) in Canada:
“All of society pays the price for low wages: parents lose out on time with their families and communities if they work multiple jobs, children growing up in poverty experience more health issues and are at greater risk of quitting school, and we all pay for higher health care and social service costs.”[7]
In spite of the arguments in favor of a living wage, it has remained a contentious concept and adoption has been slow.[8] Living wage requirements have been mandated in some jurisdictions around the country; however, critics focus on the projected additional costs to employers from increasing their payrolls. Advocates of the living wage have pushed back. For example, the LWFC argued that employers committed to paying a living wage enable their workers to participate fully in their community, spend more time with family and friends and focus better on their work without having to worry about how to pay their bills. The LWFC also surveyed the research on paying a living wage to identify evidence for specific benefits to companies and their workers including lower overtime, absenteeism, and turnover rates, as well as higher rates of employee training; improved staff recruitment and retention; improved staff performance, increased productivity and higher staff morale; more focused staff, which is particularly important when workers are being asked to perform dangerous or highly specific work; improved company reputation and profile; and stronger local economies since low-income earners tend to spend more of their money locally, thus strengthening small and community-focused businesses.
The responsibility to protect human rights such as a living wage lies primarily with states and governments may accelerate the adoption of laws and regulations that would apply to the businesses in their jurisdictions. However, it is far from clear that states will be able and willing to assist businesses with adjusting to the new requirements. As such, companies must take the initiative in planning to fulfill their living wage commitments. While not necessarily true in all instances, larger businesses presumably can increase wage levels of their lowest paid workers to a living wage without impacting the “bottom line” and costs of products and services to consumers through transfers of income from senior personnel. In fact, public companies are facing enhanced scrutiny regarding their internal pay gaps and are required to compute and disclose their “CEO pay ratio”, which compares the compensation earned by average workers to their CEOs. As for small businesses, the LWFC recommended that following:
- Embed the living wage as part of the company’s ethos and link it to the nature or quality of the product or service offered by the company, the company’s wider social responsibility activities and strategy and to the company’s worker training and skills development strategies
- Develop an internal communications plan that facilitates understanding of the living wage policy throughout the workforce and builds support at all levels of the organization
- Publicize the company’s living wage policy to demonstrate to all of the company’s stakeholders the commitment that the company is prepared to make to poverty reduction and the enhancing the dignity and wellbeing of all of its workers
- Plan for small initial costs when wages are raised but also long-term savings and increased revenues from the benefits mentioned above including increased staff productivity and being able to offer high product or service quality
Companies should strive to supplement the wages paid to employees by offering them competitive benefits including health insurance (medical, dental and vision), vacation, sick leave, paid time off, paid volunteer time, sabbaticals, retirement plan including company contribution/matching, wellbeing programs, profit sharing, transit benefit allowances, tuition or student loan contribution and disability insurance. Designing a competitive benefits package should be seen as a form of employee engagement focused on improving the experience of employees in the workplace and in other aspects of their relationship with the company. Offering generous benefits to employees demonstrates a commitment to their current and future wellbeing and can have a profound positive impact on the lives of employees and their families. Companies that are known for providing good benefits will also find it easier to recruit and retain the best talent. In addition, a healthy and happy workforce can improve the company’s “bottom line” through gains in motivation, productivity, loyalty and innovation. However, benefits are expensive item for companies, particularly small businesses, and require careful financial planning. Moreover, once a benefit is made available it is difficult to take it away. Adding to the complexity is the need to take into account the preferences and needs of multiple generations working alongside each other in the typical workplace.
When assessing their benefits offerings to employees companies need to be mindful of several areas and issues that have historically been problematic for people of color:
- Leave Policies: Companies should commit to paid parental and sick leave through direct company financial support and/or advocacy for governmental funding, recognizing that people of color face disproportionate challenges in affording unpaid time off from work to care for children and other family members.
- Health Care Coverage: Companies should commit to full health care coverage for all workers and supporting efforts to improve public health and achieve equity and universal coverage in health care in order to ensure that workers keep more of their paychecks and people of color are better protected against the tragic impacts of health-related challenges such as the Covid-19 pandemic.
- Caregiving: Companies should commit to programs to assist workers with caregiving responsibilities by implementing flexible work schedules and allowing for telecommuting, thus making it easier for workers to care for children and other family members, and providing on-site child care, all of which can ease stress on workers and help attract a broader and diverse pool of candidates. Companies should also strive to provide their employees with stable scheduling in order to avoid disruptions to their incomes and lives.
Finally, companies need to address one of the painful byproducts of the long history of pay inequities: the lack of savings and access to personal credit that is rampant within the African American community. These issues were laid bare by the economic fallout from the Covid-19 pandemic, which included widespread unpaid furloughs and outright terminations of people of color. Companies need to commit to employee emergency relief fund or low-cost loan program that workers can access to cover emergency expenses, realizing that a significant percentage of Americans, particularly people of color, do not have sufficient savings to cope with the unexpected and are often forced to deal with “payday lenders” that charge outrageous predatory fees or run up high interest credit card debt.
[1] M. Daly, B. Hobijn and J. Pedtke, “Disappointing Facts about the Black-White Wage Gap”, Federal Reserve Bank of San Francisco Economic Letter (September 5, 2017), https://www.frbsf.org/economic-research/publications/economic-letter/2017/september/disappointing-facts-about-black-white-wage-gap/
[2] J. Gruver, “Racial Wage Gap for Mena”, PayScale (May 7, 2019), https://www.payscale.com/data/racial-wage-gap-for-men
[3] Almost Half of All Americans Work in Low Wage Jobs, CBS News (December 2, 2019),
[4] D. Brooks, “Moderates Failed Black America”, The New York Times (June 19,2020), A27.
[5] B. Miller, “How to Fix Unequal Pay”, HR Daily Advisor (July 6, 2018), https://hrdailyadvisor.blr.com/2018/07/06/fix-unequal-pay/
[6] https://www.globallivingwage.org/about/anker-methodology/
[7] Living Wage for Families Campaign, http://www.livingwageforfamilies.ca/resources_for_employers
[8] A. Werner and M. Lim, “The Ethics of the Living Wage: A Review and Research Agenda”, Journal of Business Ethics, 137 (2016), 433, https://link.springer.com/article/10.1007/s10551-015-2562-z
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