Opinion: don’t mind the pay gap

Paul Lewis
Aug 04, 2017

Unequal pay will persist until there’s equal access to the top jobs.

‘If they don’t pay you what you want, will you leave; and if you leave do they care?’ This often-repeated mantra in my first job during bonus season explains a lot about the recent pay furore in the wake of BBC salary revelations. It might also provide a handy guide for senior executives and employers alike, when approaching top salary negotiations. Aiming for pay equality—the subject of so much current debate—is not the issue. Instead, executives should be clear in their own minds how much they are really prepared to work for, and why. It may be lower or higher than the norm.

When top salaries are negotiable (as opposed to lower-paid jobs with fixed rates and hours), the insistence on pay equality creates distorted expectations. Few of us would accept the principle of equality if it meant taking a pay cut. And we don’t mind offering varying pay rates to, say, our gardeners, babysitters or even freelance journalists, according to what they will accept.

In permanent jobs as well, many factors, not rooted in corporate bias, contribute to pay disparities: from the job interviewee who skilfully switches from unbridled passion to icy toughness when pay is broached, to the long serving staff member who has profited from compounding annual pay rises.

Just walk away

But a more important factor determining pay premiums or discounts is the employee’s ‘walkaway’ price—i.e. the point where a job applicant will genuinely turn down a desirable position over salary. Your current or future employer will probably not try to second guess the many personal reasons why you set the limit where you do; only whether it is genuine or a bluff. For example, the company would never suggest you get less money because you have a well-off spouse, even if this is indeed the reason you end up accepting a less generous deal. It’s for you, not the company, to make that decision.

Similarly, you may accept a pay discount in order to work for a prestigious company. However, the brand’s social value is highly subjective—not everyone will value it the same way. Alternatively, you might place a premium on family time and will only forgo this for much more money. Others want to work with clever or pleasant colleagues. Research suggests that a congenial working environment may be equivalent, in happiness terms, to a 40% pay rise. But some would prefer the extra money to extra happiness.

‘A large factor determining pay differences is your ‘walkaway’ price—i.e. the point where you genuinely turn down a desirable job offer over salary.’

Another major issue to consider, and which is often used to explain part of the gender pay gap, is the ‘breadwinner’ factor. A journalist friend, who had always disliked public relations, recently asked me to write him a reference for a job in PR. I congratulated him heartily. I deduced, correctly, that his wife must be pregnant. He couldn’t buy a nice family home on a journalist salary and was preparing to leave his low-paying journalist job. This was no bluff. Eventually, his employer relented and paid him what he needed to stay. Had he been single or his partner wealthy, he would surely have accepted the newspaper’s initial low offer.

Call my bluff

Applying the ‘walkaway’ principle, as opposed to the ‘equality’ principle in your pay negotiations (even at the risk of huge resentment should the truth ever emerge) assumes, however, that you have somewhere to walk away to. For women, not mention ethnic minorities or those from working class backgrounds, the options at senior levels are limited. The FT reports that average earnings for the five female FTSE 100 chief executives is around half the equivalent for their 95 male counterparts. Adding to potential ‘internal’ motivational barriers, the tiny number of senior positions held by women may well have affected their walkaway price. Having overcome substantial bias to land the top job, they will be less willing to leave over pay. By contrast, and especially in knowledge-economy jobs where performance is hard to measure, pay and promotions appear to favour those who ‘look the part’ at least according to the white, male, middle-class bosses who typically make the decisions.

Equal access to the top jobs may be the biggest obstacle to equal pay. Some even view it as a temporary cost of smashing the glass ceiling. As the sour joke goes: ‘Women. Like men, but cheaper.’

Paul Lewis

Editorial Director at Headspring