- Closing pay gap. In 2022 and 2023, the race-based U.S. pay gap was the smallest it’s ever been for both Black men and Black women, according to data analyzed by Syndio.
- What’s causing the change? The Council of Economic Advisers reports a change in the jobs occupied by Black workers since the beginning of the pandemic, as Black workers have increased their representation in higher paying professions.
- Performance ratings. Analytics can help employers more accurately assess performance ratings for bias, helping ensure that they are promoting people for their contributions, regardless of race.
Recent research analyzing Bureau Labor Statistics (BLS) data found the pay gap for Black workers in the U.S. is closing for the first time this century.
Syndio, a Seattle-based workplace equity analytics provider, found that in 2022 and 2023, the race-based U.S. pay gap was the smallest it’s ever been for both Black men and Black women. At the end of 2023, for example, weekly earnings for full-time workers were up 24% for Black men and 17% for Black women when compared to the end of 2021.
Meanwhile, the median earnings of white workers rose much more slowly in that same time period: 10% for white men and 11% for white women.
Still, the median Black worker makes 21% less than the median white worker, according to a New York Times report.
“A closing pay gap for Black workers is welcome news and may in part be due to a ‘happy accident,’” said Chris Martin, labor economist at Syndio.
While post-pandemic wage growth has been uneven, it happens to be stronger in occupations that disproportionately employ Black workers, he explained. For example, Syndio found 17.2% of cooks are Black (vs. 12.8% of all workers — meaning representation of Black workers is 34% higher than their baseline), and the three-year wage growth for cooks was 28.4%.
Factors Driving the Change
Another factor is a change in the jobs occupied by Black workers since the beginning of the pandemic, as identified by the Council of Economic Advisers (CEA).
The first is increasing pay levels in occupations heavily occupied by Black workers. The second, as represented. For example, Black workers have increased their representation in the professional and business services and transportation and utilities industries, while reducing their representation in the leisure and hospitality category.
“My research has shown that Black workers have historically been in jobs associated with lower levels of analytical skills, which has held them back,” said Brian Levine, a partner and pay equity leader at Merit Analytics Group.
However, he has seen in recent years increasing return to analytical and managerial skills, which might be related to Black workers shifting to occupations that require those skills.
“A focus on equity in access to opportunities and required training is clearly important if we are to see further occupational shifts that reduce pay race-based pay gaps,” Levine said.
Implement Clear, Consistent Policies
Martin said that while pay inequity has been unlawful for 60 years, issues can still creep in due to unconscious biases or community-based differences in labor market dynamics.
“Organizations need to make sure they have clear policies throughout the employee lifecycle and are consistently testing that the impact of those policies is supporting workplace equity,” he said. “Organizations should also be proactive and leverage analytics to streamline how this data is tracked, measured and improved.”
Martin said performance bias greatly affects promotion rates across race and gender. By harnessing analytics, employers can assess performance ratings for bias before they promote. This helps ensure that they are both promoting people for their contributions and that succession planning is accomplishing its key objectives.
“Organizations can influence pay equity directly by setting goals and implementing programs to ensure they are hiring, developing, promoting and retaining Black workers at similar rates to their white peers,” Martin said.
Next Steps
To continue narrowing the racial pay gap, employers must define fair pay commitments and priorities, so they are aligned with the organization’s overall compensation strategy, said Mariann Madden, North America pay equity co-lead at WTW.
“Equally important is that they are aligned with an organization’s vision, mission and values as well as CSR [corporate social responsibility], ESG [environmental social and governance] and DEI [diversity, equity and inclusion] initiatives,” she said.
Madden said the next step for employers is to analyze, assess and evaluate a compensation structure and its management. This includes a quantitative analysis, such as conducting a pay equity analysis (using a multivariate regression model), as well as a qualitative evaluation of pay and talent management practices.
“It’s important to look for patterns and trends where you are treating one demographic group differently from another in terms of how pay and career decisions are made,” she said, adding that this analysis, assessment and evaluation is something employers should be doing regularly.
“Your roadmap should be informed by your commitments and priorities, as well as the results of these checks,” Madden said.
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