Racial Wage Gap

What organizations need to do to deliver fair and competent pay to employees

Conversations on racial and gender pay discrimination in the workforce have gained momentum in light of the growing understanding of the need for pay equity. In 2018, contentious court cases and worker protests surrounding perceived pay discrimination cases emerged from the likes of Google, Nike and Oracle. New equal pay laws and a competitive talent market have further driven pay inequity into the light of day. As the rallying cry for workplace equality escalates, an organization's commitment to addressing gender and racial bias is becoming paramount. The less talked about the racial wage gap is an important metric in identifying pay inequity and provides measurable differences in pay between white men and people of color. 

We define the racial wage gap as the cents on the dollar that men or women of a certain racial/ethnic group earn compared to white men. As white men tend to out-earn men and women of color and are better represented at higher job levels, they make a useful reference group to investigate disadvantages in the workforce. 
 
One way to report the racial wage gap is with an uncontrolled measurement. This reports the median income of men or women of a certain racial/ethnic group compared to the median income of white men, without holding employment characteristics equal. Such a measurement often shows the overall disparity of the number of high-level, high-earning jobs held by white men compared to men and women of color.
 
The racial pay gap can also be a controlled measurement. This measures the workers of the same employment characteristics, such as job title and qualifications. This way, we can provide a true test for determining if a group receives equal pay for equal work.
 
PayScale collected data from 1.8 million profiles between January 2017 and February 2019 utilizing its online salary survey. Data was analyzed to report on the racial wage gap for both men and women of color. In comparison with white men, the analysis included those who identify as American Indian and Alaska Native, Asian, black or African American, Hispanic, and Native Hawaiian and Other Pacific Islander. These samples are limited to those with at least a bachelor’s degree, in order to make the strongest comparison possible. The results reveal the bleak and nuanced inequity of different racial/ethnic groups of men and women.

Women of color have larger racial wage gaps than their male counterparts. 
 
Black women have an uncontrolled pay gap of $0.74, a figure shared by Native American and Hispanic women. These women earn 74 percent of dollars earned by a white man. Pacific Islander women see a slightly improved uncontrolled pay gap of $0.79, white women $0.80 and Asian women $0.93. 
 
Black men earn $0.87 for every dollar earned by a white man, this is the largest uncontrolled pay gap for men of color and thirteen percent above the largest uncontrolled pay gap for women. Native American and Hispanic men both see uncontrolled pay gaps of $0.91, while Pacific Islander men have an uncontrolled pay gap of $0.95. One of the most dramatic differences in earnings relative to white men is the uncontrolled pay gap of Asian men, which is $1.15. Median earnings for Asian men are 15 percent higher than that of white men. 
 
Asian workers are the only racial/ethnic group to outearn white men. Furthermore, Asian women are the only women of color in this sample to match earnings with their male counterparts. The controlled pay gap for Asian men and women is $1.02. This figure actually shows that Asian men and women with the same job characteristics outearn white men by 2 percent. This does not mean that Asian individuals are impervious to workforce discrimination, especially since the demographic group “Asian” covers many different ethnic groups that are not treated equally in the workplace. As we detail below, the opportunity gap shows the inherent biases set against Asian workers.
 
The largest controlled pay gap among both men and women is seen by African Americans. Black women earn $0.97 for every dollar earned by a white man with the same job and qualifications. Black men, $0.98. The median pay for white men in our sample is $72,900, thus the controlled median pay for black men is $71,500. For black women, $70,800. This suggests a $1,400 pay disparity for being a black male, and a $2,100 pay disparity for being a black female.

The uncontrolled pay gap is driven, in part, by the underrepresentation of people of color in higher-level, higher-earning positions. The opportunity gap is a measurement of this disparity. One way to measure the opportunity gap is to determine how each racial/ethnic group of men and women break out into different job levels, compared to white men. If a group has a higher percentage of workers in individual contributor roles, it indicates that this group has a harder time climbing the corporate ladder into higher-level jobs with more pay and influence.
 
With the exception of Native American men, who match the rate of white men, men, and women of all racial/ethnic groups have a higher percentage of workers in individual contributor roles than white men. Women of all groups have higher percentages of workers in individual contributor roles and a lower percentage of workers in manager roles than their male counterparts. Also, no group of women have a higher percentage of workers in manager roles than white men; however, Native American and Pacific Islander men have higher rates of being in manager roles than white men. 
 
A striking observation within this sample is that Asian men and women both have significantly higher rates of holding individual contributor jobs than other groups. This points to the particular biases Asian Americans face in the workforce, often working against the “model minority” notion that they are obedient, soft-spoken and “followers”. These unfair perceptions may create cultures where career advancement becomes more difficult for Asian workers. 

When men and women of color do successfully climb the corporate ladder, the racial wage gap can change for a given job level. Among men of color, African Americans consistently have the largest uncontrolled and controlled pay gaps at each job level. The only male racial group that does not match dollar for dollar to a white man at some job level, controlled or otherwise, is black men.
 
Asian men consistently surpass the earnings of white men at each job level, controlled or otherwise. Asian women also fairly consistently outearn white men, the only job level where white men outearn Asian women is at the individual contributor level - holding all employment characteristics equal. Asian women are also the only group of women to outearn their male counterparts at some level. The controlled pay gap for Asian women at the Director level is $1.05, for Asian men it is $1.04. This is the only case where the racial wage gap is larger for men than it is for women within a certain racial group. 
 
The uncontrolled pay gaps for women are dramatically larger than those of men. The average uncontrolled pay gap of all job levels and racial groups is $0.79 for women and $0.98 for men. This deficit narrows with the controlled pay gap, but women still see larger pay gaps than men with the exception of Asian women in director-level jobs as noted above.
 
The racial wage gap for women, with a few exceptions, generally widens as women climb the corporate ladder. Women in executive-level roles have a wider pay gap than women in individual contributor level roles do. Black men are the only male group to follow this trend.

In the wake of our findings, it’s a good idea to take stock of where these systemic workplace issues can surface. Biases can arise in many workplace decisions, such as performance reviews, pay increase decisions, employee referrals, and hiring choices. An organization should proceed with care and intention when making these decisions and ultimately establish community standards to ensure an equitable process.
 
These results are also a reminder to businesses and HR leaders that addressing workplace inequality remains a highly relevant practice within any organization. Delivering fair and competent pay to employees is not only the right thing to do, it’s a strategy that can be used to distinguish an organization in a highly competitive talent market.