A Hot Labor Market Won’t Burn Down The Structural Barriers Holding Women (and the Economy) Back
Welcome to my weekly Q&A roundup. (Scroll down to find the Q&A.)
If this is your first time here, welcome. I spend a fair amount of time speaking at events and conferences. At the end of my presentations, I leave space for audience members to ask questions—tough questions, brave questions, you name it. The level of candor and curiosity always inspires me, and I want to share that sentiment with you. So each week, I pick one question that I believe others would find most instructive and publish my response to it here.
The purpose of this weekly tradition is transparency and inclusion.
Transparency: a behind-the-scenes look at my day-to-day.
Inclusion: bringing others along on the journey.
Is the Great Resignation tipping the balance of power in favor of women?
The Great Resignation might be altering the power dynamic (temporarily) in the workforce, but to say it’s tipping the balance of power in favor of women would be an overstatement. Before I explain why, let’s get up to speed on labor market activity from the past few months.
The Great Resignation Is An Umbrella Term For These Trends
19+ million Americans quit their jobs between April and August 2021
The August quit rate rose to 2.9%, representing nearly 4.3 million workers total
The pace of women’s resignations (in 2021 compared to 2020) is 17% higher than the pace of men’s resignations
The percentage of LinkedIn members who have changed their profile jobs shot up 54% YOY
All this energy in the labor market produces heat. And this heat, ostensibly, bodes well for marginalized and underrepresented employee groups. So it makes sense why you asked if the Great Resignation (Great Reshuffle, Great Rethinking?) tips the scales in favor of women. And we are certainly seeing some preliminary evidence of the scales tipping.
Bright Spots For Labor During The Great Resignation
Q3 2021 saw the largest increase in salaries in at least the last two decades: pay grew 1.5% (up from 0.9% in Q2) while benefits bumped up 0.9%.
Job switchers in September enjoyed a 5.4% pay raise—the biggest jump in nearly two decades. Meanwhile, job stayers received a 3.5% pay raise.
Companies across the US are raising their minimum wage. Most notably, Starbucks announced they would raise their hourly minimum wage for baristas to between $15 and $23.
Some of the biggest gains have come to the lowest-paid workers. Service and hospitality workers saw an 8.1% pay raise compared to a year earlier. Retail workers saw their wages jump 5.9%.
However, we need to take these numbers with a grain of salt. Because there’s much more to the labor market than the “unprecedented” gains reported in the headlines.
Headlines Often Hide Inequities
Pay for retail workers shot up 5.9% compared to last year. That’s great for women who make up 56.5% of the retail labor force, but these wages still sit well below the national average.
A retail salesperson working full-time would have earned $35,301 in 2018. That’s $13,264 less than the national median earnings average of $48,565. Any wonder why 10.1% of retail workers compared to 6% of all workers live in poverty?
And we can’t forget about inflation. At 5.4%, inflation wiped out the wage gains and eroded the spending power of workers by 1.2% compared to last year. That means inflation-adjusted compensation is now lower than it was on the eve of the pandemic.
Here’s another inequity lost in the hustle and bustle of today’s labor market: tech salaries grew last year—and so too did the gender pay gaps of tech workers. New research shows the gap between men’s and women’s tech earnings widened by $5,500 from 2019. To add fuel to the fire, eight in ten women who are looking to return to the workforce post-pandemic want to transition into a STEM profession.
Yet pre-pandemic, “slow salary growth” was one of the top three reasons women gave for leaving their STEM jobs. (The number one reason women gave for leaving was “lack of career growth.”)
On top of these trends, we still must contend with formidable structural barriers holding women back from fully participating in the economy.
A Hot Labor Market Won’t Burn Down Structural Barriers
Mainstream economic thinking sells the idea that strong labor markets eventually tip the balance of power in an equitable and market-friendly manner. The optimist in me wants to believe it, but the researcher in me sees the faults in this line of thinking.
A hot labor market can (and does) produce more favorable working conditions for employees, but there’s one problem. It won’t correct the structural imbalances that hold women and the economy back. Structural imbalances such as:
1. Information asymmetries
How are promotions awarded? How is pay determined? (Fewer than 20% of private companies practice pay transparency.) How is employee conduct handled? What about disciplinary action? How is performance assessed? Many companies keep these decisions opaque. Information asymmetry breeds bias, and bias leads to equity gaps in the employee lifecycle. But workers have a hard time proving inequitable treatment because they lack access to company data. It’s a vicious cycle.
2. Forced arbitration
The use of arbitration in employee contracts increased 17% between 2019 and 2020. Today, nearly 40% of US employees are covered by binding arbitration clauses in their employee agreements, and almost 80 of the 100 largest employers require it. When an employee faces discrimination or harassment at work, their case must be resolved through private, not public, proceedings. Forced arbitration effectively silences workers in the face of inequity. Owen Diaz—the former Tesla worker who was awarded $137 million after enduring racism at work—won his case because he was a contractor, not an employee. As a contractor, Diaz wasn’t bound by a mandatory arbitration clause that most Tesla employees are bound by.
The risk of retaliation also silences workers from speaking up in the face of inequity. Up to 99.8% of all sexual harassment survivors don’t report their cases out of fear of retaliation. The data corroborates the fear: 68% of sexual harassment cases included a retaliation charge, and 64% of people who filed sexual harassment charges lost their jobs after filing the complaint. The fear of retaliation reinforces survivorship bias. Companies may think they have safe and equitable workplaces because few people come forth to file complaints. However, the absence of complaints can often reflect the fear and inequity of the culture, not the safety of it.
4. Occupational inequity
The average pay within an occupational category is inversely related to the percentage of women in that occupation. This relationship holds even after controlling for factors such as education and experience. Economists call this the “devaluation effect” and evidence for it abounds. In California, for instance, officials overtly lowered the salaries of women-dominated jobs during initial salary structuring in 1931. And yet, 60 years later, the devaluation effect continued to rob (mostly) women of wages. From 1973 to 1993, workers in these jobs were underpaid $1.6 billion.
5. Reporting laws
The responsibility to report inequity falls on the shoulders of workers. In other words, the subjects of inequity are responsible for fixing a system they didn’t break. Not only is this wrong, but information asymmetry and fear of retaliation complicate the process of reporting inequity. Employees must risk their economic security if they choose to speak up. And if they choose to speak up, they will have a difficult time proving inequity because evidence rests with those in power.
While the Great Resignation is changing the playing field for some workers, it won’t remove the structural barriers that prevent equitable participation in the labor force. We need a combination of public policy and corporate commitment to remove those barriers. They won’t remove themselves.
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© 2021 Katica Roy™, Inc.