This is how leaders can end economic inequities, for good

In response to widespread civil unrest from the death of George Floyd, businesses and citizens have made much-needed calls for the reform of police practice, as well as for changes to our justice system. But these alterations are only two of many steps we need to take to alleviate the economic and social inequities that pervade our nation and lie at the heart of systemic racism.

Recently, corporate leaders have been publicly committing themselves to hiring more Black and brown employees, alongside more women, as part of newly formed and reimagined diversity and inclusion programs.

But in a climate in which there may be more layoffs and workforce reductions than workforce expansions, we cannot depend on new hiring alone to level the playing field. If you are struggling with what you can do, here are five changes leaders can take immediately to help achieve economic equity and reduce systemic racism in your workforce.

Reward the lowest-paid workers

Whenever raises are given out or salaries are reset, first reward those people at the bottom of your workforce with the largest difference. Closing the wage gap comes down to concentrating efforts between workers at the top and bottom. This seems like a simple change, but often what workers don’t realize is C-suiters and other individuals on the upper edge of the salary scale often receive pay bumps which are a higher percentage of their salary than lower-wage workers.

According to the Center on Budget and Policy Priorities, “The years from the end of World War II into the 1970s were ones of substantial economic growth and broadly shared prosperity.” But, since 1979, those in the top 1% saw income gains of 218%, while those in the bottom 60% saw their wages increase by only 33%—a chasm that negatively affects both middle-class and low-income Americans.

Commit now to ensure that the wages of those at the top of your salary ladders are frozen until workers at the bottom have closed the gap to 60% (roughly the level of disparity from 40 years ago). Furthermore, as you move toward the future, commit to keeping this wage gap at 60% or less. Some may be concerned that freezing executive salaries will affect your ability to attract great talent, but, frankly, with the unemployment rate at 11%, there are plenty of talented executives looking for new jobs.

Raise the minimum wage within the next two years

Despite calls to raise the minimum wage, many states require substantially less than what is needed to support a family. For example, Georgia mandates just $5.15 per hour, more than $2 below the federal mark of $7.25, and 21 states require less than the exceedingly low federal standard.

Currently, only seven states and D.C. have committed to raising their rates to $15 an hour. As a result, we are seeing low-wage workers, particularly Black and brown people and women (many of those who are now considered essential workers), working two and three jobs and are still unable to make ends meet.

One of the best and easiest things you can do to combat inequity is to increase within two years the minimum wage to $15 per hour for all your employees, including part-time and contract workers. This simple change has recently been adopted by such companies as Amazon, Disney, and Target, and should be done by all employers.

Importantly, workers in the restaurant industry need special, new rules, for in many states their minimum wage is substantially less than for other workers. The federal standard is only $2.13 an hour, and in some states, such as Idaho, Delaware, and Michigan, the minimum for tipped workers is under $4.00 per hour. Waitstaff at your local eateries have been particularly hard hit by the pandemic. If they have a job at all, these workers are likely to see substantially fewer hours and lower tips as we recover from the pandemic. Like all other workers, tipped restaurant workers deserve a $15 an hour minimum wage and must be allowed to keep any tips above that amount.

But adjusting your minimum wage to $15 an hour is just the beginning. Many employees, particularly those in large companies or who are part of industry associations, have been actively lobbying against such changes in Congress, in state legislatures, and local county councils. McDonald’s recently pledged that their lobbyists would no longer work against minimum wage increases—so, if the “Golden Arches” can do so, so can you.

Do an audit of salaries by race and gender and address arising problems

It is clear that salaries vary considerably by race and gender. A 2019 Payscale study found that Hispanic or Latino men earn $0.91 for every dollar earned by a white man. Black men fare worse, earning $0.87 for every dollar a white man earns. And for women, it is significantly worse. According to a 2018 report from the American Association of University Women, white women in the U.S. on average earn 79% of what white men make, Black women earn 63% of what white men make, Native American women bring in 57%, and Hispanic women take in the lowest percentage, at 54%.

The best way for a company to ensure that they are not perpetuating these inequities is to conduct a yearly salary audit to insure equity and make upward adjustments in all categories where a disparity is found. More and more companies are undertaking yearly audits. According to a 2019 survey from WorldatWork, “Gender pay gap and broad pay-equity analyses are becoming standard practice for large companies.”

In a recent book, Marc Benioff, the CEO of Salesforce, describes his extensive effort to close the wage gap, and the commitments he made to ensure the gap does not return. More companies need to make similar efforts, both to discover the gaps by race and gender within your company and to commit to equalizing pay when disparities are found.

Make all salary scales transparent

Recent studies show that when salary levels are transparent, i.e., when all workers know what their peers are being paid, the gender disparity in wages decreases significantly. Academics posit that when there is ambiguity about the salary level, men will assume that the offer is low and will negotiate for more. In contrast, in the absence of evidence, women assume that the offer is fair and comparable to their male colleagues.

Alternatively, even if women understand the disparity, they fear that they may lose their job or suffer other consequences if they attempt to negotiate. This same principle is likely holding back all disempowered workers, including Black and brown men who do not want to ruffle feathers and ask for what they are worth in fear of losing a new opportunity.

But the solution doesn’t need to be complicated. Companies should publish their salary scales and make clear to all new hires what the pay scale is and the likely progression as employees rise within the system.

Helpful websites such as GlassDoor, PayScale, and LinkedIn Salary allow employees to share salaries anonymously and discover the market rate for their job. Moreover, states such as California and Colorado currently have laws in place prohibiting employers from penalizing their employees when discussing their compensation.

Offer benefits integral to maintaining employee health productivity

If the pandemic has taught us anything, it is the value of good workplace benefits. Healthcare coverage for all workers, including contract and part-time workers, and sick time are no longer mere extras. When companies audit their salary levels, they also need to review the benefits they provide and who receives them. All workers, especially those who are risking their health by working in public settings such as hospitals, grocery stores, bars, and more, whatever their job titles or status, must be provided basic healthcare benefits and sick time to ensure that they can continue to work productively.

But now, many companies have asked their employees to work from home. As a result, companies can take this time to examine their entire benefit packages—paying special attention to whether workers are all receiving equitable benefits. You must examine who is receiving the most assistance. Is it those at the top or the bottom of the salary scale? Are you providing opportunities for flexible work time and locations, adequate retirement packages, life, disability, and long-term care insurance? And can money you previously spent on employee transportation and bonding be reallocated to ensure safer working environments or help with caring for family members?

If a company can rise to the challenge, these five suggested changes will help reduce the wage gap and ensure all your workers receive wages that make it possible to support themselves and their loved ones.

Kathryn Kolbert is a Vote Run Lead board member and the founder and former director of the Athena Center for Leadership at Barnard College. She currently consults on executive management and program development with nonprofits, universities, and startups.