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The Gig Economy Pay Gap: Why Employers Should Care

Posted on June 4th, 2018 Read time: 4 minutes

By:  Trevor Foster, VP of Finance and Innovation  Terri Gallagher, President & CEO of Gallagher and Consultants 

Published By: Innovation Enterprise 

The developing gig economy represents a shift in the way we work, but it brings with it a relic of the old economy: pay inequality for women and minorities. While the move away from traditional salaries toward project-based pay might help close the gap, the fact is that these groups still make less than their white male peers — and this can hurt an employer’s bottom line.

Although pay inequality sounds like a worker issue, business leaders have a major stake in the matter. Barring any ethical or moral considerations, when firms discriminate against women and minorities in hiring or setting salaries, they’re practically gifting that talent to competitors that pay fairly. The companies that do hire and pay fairly, meanwhile, have less competition in recruiting the most talented workers, and they’re doing their part to increase the long-term productivity and efficiency of the economy. That, in turn, creates a better environment to run a business.

Ultimately, corporate myopia might make legislation to protect gig workers a necessary part of the solution. But right now, companies utilizing contingent workers are in the driver’s seat. They not only have an opportunity to do the right thing, but they also have a chance to protect and grow their talent pool, brand, and existing team now and into the future.

An Uber-Difficult Problem

The good news of the gender- and race-based pay gap is that it might be partially solvable by something contingent workers are already doing: commoditizing low-skill gig work via technology.

Although Uber, the poster child of the gig economy, is still struggling to close the gap between the earning rates of men and women drivers, the ride-sharing firm’s 7% gap is about one-third smaller than the 11% gap of the broader economy. While technology can’t solve systemic sexism or address the cultural norm of women doing the lion’s share of childcare, Uber’s algorithm does not take gender into account when assigning rides or calculating per-ride pay.

Over time, algorithmic decision-making might help gig companies like Uber root out gender- and race-biased pay decisions. Skilled contingent workers, however, often set their own pay rates and select their own jobs. To recruit and retain women and minority developers, writers, strategists, and other consultants in contingent roles, gig companies must more actively encourage pay equality.

Seeking Equality for Skilled Workers

For better or worse, most skilled gig workers must negotiate their own pay. That puts women, in particular, at a disadvantage. Research from Robert Half discovered that only 34% of women negotiate their salary, compared to 46% of men. Women desire (and deserve) equal compensation, but securing it requires a degree of assertiveness that might make some women uncomfortable. Aside from its “unfeminine” cultural baggage, negotiating pay requires a certain level of economic security that men, as a whole, have over women.

Some groups are working to change that. In Boston last year, more than 1,700 women attended the city’s free salary negotiation workshops. After completing the courses, 87% of attendees were able to identify an appropriate target salary, while 40% initiated conversations with their managers about their value to their employers.

Clearly, women and minority contingent workers can learn to negotiate their pay with potential employers. But for more women and minority contingent workers to feel comfortable doing so, gig employers must play their part.

Creating a Fairer Gig Economy

Fortunately, companies that employ gig workers don’t need to lobby Congress or pay non-competitive rates to improve pay equality. They can:

1. Give gig workers tools to strengthen their skills

Particularly among an audience of women and minorities, discuss the value of advanced training and educational opportunities to light the path toward more lucrative contracts. Many women and minority workers want to make more money, but they feel trapped by the high price of higher education. Particularly in IT, micro-certifications are gaining steam as an avenue for leveling up one’s skills without the costs of going back to college.

Additionally, consider hosting sessions, as the city of Boston did, that help women and minorities learn to set fair rates. The reason the venture capital world only gives 3% of funding to women, for example, isn’t that women and minorities have little to offer; it’s that society isn’t as tolerant of the ways in which they pitch themselves and their services. There are women VCs, for example, who understand the viability of more female-focused products and businesses and are, therefore, more likely to fund them. Helping women and minorities acquire the skills they need to advance their careers will help them effectively communicate their value to white men as well.

2. Root biases out of your culture and processes

As a buyer of gig talent, ensure the gig platforms and workforce solutions you utilize treat talent equally. Commit to companies and systems that publicize their own efforts to encourage pay equality. Use blind tests to compare the value of work without letting personal impressions slip into the mix.

Cultures that value people for their skills rather than their race or gender encourage pay equity. Uber doesn’t know yet why its pay gap exists, for instance, but publicizing the issue implies that it intends to eliminate the gap.

3. Publish pay rates

Nothing promotes equality like transparency. Publish pay rates — both for advertised and completed jobs — and keep data on the demographics of the people who work those gigs. Check out Hired.com’s report on tech salaries to see what transparent compensation reporting looks like.

Below-market rates prevent some brilliant people from adding their talents to the pool of gig workers. If they see people like them making good money using the same skills they have, they’re more likely to offer their services to the companies that need them most.

 

The pay gap is a stubborn survivor of the traditional working world. As the gig economy plays musical chairs with the broader economy, the companies that comprise it have a chance to put women and minorities in better seats. But to close the gap, we all must confront entrenched norms and start thinking big — just like the gig economy taught us to do.

 

Check out this published article on Innovation Enterprise. 

 

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