April 13, 2023

Your Geography-Based Pay Scale A Little Racist – Here’s What You Should Do Instead

US map with pins
This article was first published by Danielle DeRuiter-Williams on Medium.

Over the last 3 years we have seen the rise of remote work as a result of the COVID-19 pandemic and almost simultaneously an increased pressure for companies to prioritize equity, diversity and inclusion in the wake of the uprisings during summer 2020. While momentum has begun to slow around corporate equity, diversity and, inclusion efforts (many DEI jobs have been the first to go in tech layoffs) — remote work is seemingly here to stay.

In an effort to acknowledge the difference in cost of living in different parts of the country, companies have begun creating different pay scales depending on where you are located. While well-intended, the impact of this practice may be further entrenching geographic economic inequities and as well as racialized wage disparities within companies and it has everything to do with the echos of slavery and Jim Crow in this country.

It has been the case since slavery that Black Americans are most heavily concentrated in the South. Even after hundreds of thousands of Black southerners fled the oppressive hold of Jim Crow for what felt like more freedom in the North and out West, 56% of Black Americans still call the South home (with the Midwest tied with the Northeast — primarily as a result of Chicago and New York City — at 17%).

The cost of living in the South (with the exception of outliers such as Miami and Washington, DC.) is still remarkably lower than the rest of the country. While the cost of living may be lower in the South, earnings are also notoriously low even in larger cities — especially for Black Americans (where I live in New Orleans, where Black people comprise 59.22% of the population, the median income in 2021 for Black residents was $30,292, while Hispanic households were at $60,358 and White households at $83,727). For comparison Black New Yorkers are earning a median income of just over $75k, though we know this doesn’t go as far in New York City.

Not only do Black Americans earn less than their white counterparts in just about everywhere in the country but they also pay more for the similar markers of success such as homeownership where they are shouldered with higher interest ratesauto-insurance, and even car repairs. These impacts are compounded when Black-owned homes in predominantly Black neighborhoods are appraised at lower values. Not the mention the fact that in order to compete for jobs, Black Americans have to attain higher educational status than their white counterparts (white high-school drop outs are as likely to get hired as a Black worker with a college degree).

Additionally, white workers have higher earnings in good jobs at every level of education than Black workers. Additionally, because of the lack of intergenerational wealth due to slavery, redlining, and even predatory lending — Black Americans carry significantly higher rates of student loan debt, in fact:

  • Black and African American bachelor’s degree holders have an average of $52,000 in student loan debt (which is on average $25k more than their white counterparts).
  • 45% of this debt is from student loans for graduate school.
  • 40% of Black graduates have student loan debt from graduate school while 22% of White college graduates have graduate school debt.
  • Over 50% of Black student borrowers report their net worth is less than they owe in student loan debt.

So what does all this mean? Black people earn less, their money doesn’t go as far (thanks to interest rates), they are generally concentrated in places with both a lower cost of living but also ones with depressed wages (and fewer worker protections) and they often have to take out more loans to attain higher levels of education to be able to compete for good jobs.

So how does this relate to the inequities inherent in geography-based salary ranges? I’ll give you real-life example: I was recently reading a job description for a senior Diversity, Equity, and Inclusion role at a company (I am always interested in what the market is doing for these roles) and read the salary information for the role (good practice to include by the way) but immediately noticed the ranges differed for geography and unsurprisingly, cities with a larger Black population (Houston for example) had a much lower range than San Francisco.

A couple of caveats — it’s not required, though ideally, these roles would hire People of Color (for a variety of reasons I won’t share here) and while of course that person doesn’t need to be Black, if the intention is to increase Black hiring and retention (as many companies have explicitly stated post-summer of 2020), you’re much more likely to find the candidate you’re looking for living in a place like Houston (where there are 520,835 Black residents to San Francisco’s 45,446).

In my work as an equity, diversity and inclusion consultant and organizational development strategist, I’ve often given guidance to companies to build relationships with networks in southern cities with a greater concentration of Black residents (especially those with a diverse and strong economic base) — because again, you are more likely to find qualified Black folks to hire in this locations, it’s a numerical reality.

What I didn’t tell them to do was hire Black folks from a place like Memphis and then pay them 20% less than you would if you hired them in San Francisco.

Here’s the problem:

  • You are perpetuating a racialized wage gap.
  • You are further entrenching regional economic disparities.
  • You are contributing to the economic headwinds that even highly educated Black Americans experience (because of historic and persistent racism — both institutionalized and interpersonal).
  • Over time, paying Black people less than what they’re worth erodes lifetime earnings because your past salary often influences your next salary.
  • Black dollars do not go as far because of the factors I outlined above, regardless of their geographic location, if anything else, there should be a premium on Black pay (reparations anybody?!).

Here’s what you should do instead:

  • You clearly have the money to pay the full pay scale, do that.
  • Conduct salary analysis within and across geographies and roles, and disaggregate by race. Use that data to create pay parity. It is highly likely that you will reveal salary inequities that will be impossible to justify if you say you are committed to DEI.
  • If your business model is predicated on paying some people less and some people more for the same work then you need to go back to the drawing board. Unless, you’ve decided to incorporate a reparations pay scale in which case…good for you.

Geography-based pay scales are a classic case of intent vs. impact but one that companies can and should remedy as it is counterproductive to stated commitments to Diversity, Equity, and Inclusion.

This article was first published by Danielle DeRuiter-Williams on Medium.
Danielle DeRuiter-Williams

Equity, Diversity & Inclusion Specialist and Organizational Development Strategist