Paycheck inequality is a problem that won’t go away, although some progress is being made on the state government front.
“Pay equity has become a focal point this year,” said Matt Gotchy, executive vice president of marketing at Trusaic, a leading HR and compliance technology company. “Different states like California and Illinois are taking matters into their own hands by passing laws that essentially require organizations to prove they compensate fairly.”
Other states are getting involved, too.
“This year we saw the first-ever Mississippi Equal Pay Act, which takes effect in July,” Gotchy said. “It was the last state in the U.S. to pass its own law independent of the federal Equal Pay Act of 1963, so we’re seeing a telling of the times.”
Despite the progress that’s happening to help achieve pay equity, there’s still a long way to go. According to the World Economic Forum it will take another 136 years to close the global gender pay gap.
“That’s an incredibly long time for a very basic human right,” Gotchy told TheStreet. “It also proves that the current methods for closing pay disparities aren’t working fast enough.”
The issue of "pay gap" compensation equality is further exacerbated by factors like race and ethnicity.
“In fact, data from the 2019 American Community Census Survey shows that Hispanic women face the largest wage gap at 51%,” said Gotchy said. “Pay equity affects everyone – we all know someone directly impacted by wage inequality. The longer the issue goes unchecked, the more we all suffer.”
Measuring Pay Inequality By the Price of a Burger
To help everyday Americans better understand the issue of pay inequality, Trusaic has leveraged an iconic fast-food sandwich - The McDonald’s (MCD) Big Mac - to let anyone know where they stand, salary-wise, on income inequality.
In a word, the company’s Big Mac Pay Gap Index offers people a new way of understanding what the pay gap means for personal income and buying power. The Trusaic index uses the price of a Big Mac, adjusted for your personal pay gap, to see what you actually pay for the burger.
For instance, men earn on average 18% more than women. Consequently, they face no gender pay gap, so the real cost of a Big Mac for them is the same as the average U.S. menu price - $6.05.
For women, however, the average real cost of the Big Mac is not $6.05 but $7.38, due to the gender pay gap they experience based on industry paycheck data.
“The pay gap can seem a kind of abstract and remote idea – something that doesn’t affect most of us, or, if it does, we’re not too clear how,” Gotchy said. "The Big Mac Pay Gap Index uses an iconic burger, that everyone knows, to show in a more concrete and vivid way what the pay gap really means for ordinary Americans and how it impacts their – our – lives and daily buying power.”
Two Factors Drive the Big Mac Pay Gap Index
According to a company statement, the Big Mac Pay Gap Index is inspired by two older ideas.
The pay gap. The first is the pay gap itself – as in the gap between the average earnings of, say, different genders; or different race and ethnicities; or both combined.
The Big Mac Index. The second is the Big Mac Index, the well-known currency comparison tool, first developed by The Economist in 1986 as an offbeat guide to the buying power of different currencies – based on the cost of a Big Mac in various countries.
The Big Mac Pay Gap Index blends these two ideas to create a vivid new way of understanding the pay gap.
“It applies the same approach to not just the gender pay gap but also to other pay gaps: the race/ethnicity pay gap and the combined gender and race/ethnicity pay gap,” the paper noted.
With the combined gender and race/ethnicity pay gap, for example, Asian men are, on average, the highest earners and so the only class for which the real cost of a Big Mac equals the menu price.
“For every other such class – including White men – the real cost is proportionately more,” Gotchy stated. “For Hispanic women, who, on average, face the biggest pay gap, the real cost of a Big Mac is $12.35 – over double the menu price of $6.05.”
Here’s the formula used to calculate the real cost of a Big Mac price for any career professional.
• Step 1: The index uses pay gap data to assign a pay gap % to each demographic/identity.
• Step 2: It uses this pay gap % to calculate the “buying power” of each demographic. If the pay gap they face is, say, 16%, then their buying power is 0.84 or 84%.
• Step 3: It calculates the real cost of a Big Mac for each demographic by dividing their buying power by the (U.S. average) menu price of a Big Mac ($6.05).
If You’re the Victim of Paycheck Inequity, You Have Options
While tools like the Big Mac Pay Gap Index are useful in getting a real-world look at income inequity, there are also ways career professionals who are experiencing pay discrimination, wage theft, or not being paid market rate for their work, can address paycheck inequality on the job.
“If, for example, someone is interviewing for a role and wants to make sure that the salary offered is market rate, there are a variety of online tools to research like Glassdoor and Indeed,” said Jaime-Alexis Fowler, founder of Empower Work, an equitable workplace services organization in San Francisco. “Or, if someone is worried they’re being paid differently for the same work at the same company, there might be internal actions they can take like speaking with their manager and HR to understand how salaries are determined.”
It's also important to know that discussing salaries at work is protected by law,” Fowler said. “Employees can ask other employees about their salaries. Your right to discuss wages has more information at National Labor Relations Board along with a hotline to call."
