This week we're going to talk about the Equal Pay Act. The Equal Pay Act was originally started in 1938. So some background information, the Equal Pay Act, which is part of the Fair Labor Standard Act of 1938, and was later amended as part of the Fair Labor Standards Act and is administered and enforced by the Equal Employment Opportunity Commission and it prohibits sex based wage discrimination for men and women in the same establishment.
So it has to be the same establishment and performed jobs that require substantially equal skill, effort and responsibility under similar working conditions. For pay, that means all pay in benefits: salary, stock bonuses, benefits, travel allowances, anything considered pay is considered equal according to this.
Now there are some reasons where employers can pay differently and some of these are like merit based and tenured base. For example, if one employee has been with you for eight years and another one for two years. You are able to pay that person with eight years more money based on tenure. Then you have some kind of performance based reviews. Someone's knocking out 1000 widgets an hour and another person's knocking out 100 an hour. That's another reason, so different reasons.
The Equal Pay Act has been around since 1938 and we still can't get this right. I think there are many factors for that. One reason is this, and this my own personal opinion. You have two people, male and female, that are for a hired a job. They have exact same criteria, everything's the same. They're both offered 50,000 a year. Stats show that 95% of the time the male is going to say, "Well, this isn't enough for me. I can add more value," or whatever the case will be, and he'll negotiate, instead of 50,000, 60,000.
Where stats show that 95% of the time the female will basically say thank you and just take the $50,000 salary. So right off the bat because of men being more aggressive, it's a $10,000 pay raise for doing nothing. A year goes by, they're both doing a great job. They both get a 5% pay raise, obviously 5% of 60,000 is more than 5% of 50,000 and then you just acerbate this across the years.
There's a couple of people who are trying to change this. I know a couple of founders and I don't know if I agree with their methodology. But at least they're doing something. I know a couple of founders and their philosophy is they don't negotiate salaries. Whatever the salary they offer, that's it. Another thing I think would help is salary transparency. Which I know a lot of companies are against. But more transparency in your company, the better it's going to be for everyone.
Also, on the employee side, you have to understand too, there's a thing called labor markets. For example, if you have a job at a nonprofit or small business. You're not going to get paid the same as someone working at Amazon or Microsoft or Boeing.
Fort the Equal Pay Act. It basically says a lot of things have to be equal. I think it will be rare if everything will be equal if you hire someone. Like even the scenario I gave. Very rarely will everyone have the same criteria. Even with recent college graduates, they're going to be differences. One might have a higher grade point average, one might have two internships. I mean, there are various things that change in there. But I think we do need to do a better job with equal pay. I know there's a lot of tech out there trying to solve this challenge too. A lot of AI in HR trying to solve this.
So the Equal Pay Act. Various challenges going on right now. Thank you for your time today. You have any questions, reach out to me at firstname.lastname@example.org. Thanks for your time and remember to be great every day.