Income inequality is a global phenomenon. Fair wages for fair work is front-and-center in global economies. The Jaune Gilet (Yellow Vest) movement for economic justice began in France in October 2018 and led to widespread disturbances, riots, and strikes by the organized and non-organized workforce. It continues today. This year, job level, qualifications, and experience based fair wage has been deemed the number-one issue. Everyone wants to be paid fairly, but why is fair pay the top concern, and by such a large margin? American workers are told the economy is doing well, yet real wages for hourly workers are still almost negligible while worker productivity has grown.
Meanwhile, income inequality is reported to be at a 50-year high, with persisting racial and gender pay inequity. More Americans are feeling left behind by the American capitalist system. Just Capital recently completed an evaluation of companies for fair wage at industry and job levels, while accounting for experience and qualifications. They evaluated for three metrics:
- Fair Pay Percent: a comparison of the company’s wages to industry peers’ by job title. For example, a company with 10 titles that has the highest wage for each title among peers will receive a score of 1. Scores are represented as percentiles, where a score of 1 indicates the 100th percentile for wages by title and industry and a score of 0.5 indicates the 50th percentile for wages by title and industry.
- Fair Pay Rating: a score based on a company’s own employees’ views on overall compensation, factoring in bonuses and benefits.
- Wage Violations: an examination of whether the company has been found guilty of wage violations under federal law.
The results of this evaluation is available at their website. It is clear that companies actively engaged in addressing income inequality out-compete their peers by a significant margin. A recent CNBC interview by Paul Tudor Jones of Just Capital and Dan Schulmann, CEO Paypal, provides a fascinating example of Paypal’s progress in this area. Not only do they address income inequality, but also provide financial literacy to their employees to ensure they are able to better handle their finances. Dan Schulmann described how Paypal undertook a comprehensive study to determine employee net disposable income by location and address raising basic wages as necessary. They also offered employees equity to the employees and financial management coaching.
The top companies in this report follow similar practices in facing and addressing income equality and their performances are remarkably better than their peers without focus in this area. This should be a lesson to all global business leaders.