Diversity IX: Google’s wage discrimination

Last year, Google was accused by the US Department of Labor of discriminating against female employees as far as salaries are concerned. This is surprising, as Google is known for being a company which is overtly committed to, what they call, “equal pay practices.” It is also striking that the accusation came without any supporting data.

Eileen Naughton, Vice President of People Operations, wrote a memo explaining how Google determines wages. In general, this is how it works:

First, they determine what the compensation should be for a person at a certain job level, with a certain role, at a certain location, with a certain job performance. That determines the basic compensation for a person in a certain job category. The salary can be adjusted a bit by an employee’s manager, provided that the manager can provide a legitimate rationale. This procedure is blind with respect to gender.

Then, for every job category they compare the average of the compensation of men and women. If they find that there are statistically significant differences between the genders, they adjust the compensation at a group level, regardless whether this favors men or women. As Naughton states, they tend not to find any gender pay gap, so in practice such adjustments need not be made. They also do a similar comparison based on race, and no race pay gap is found either. (I do wonder why they do not also do an analysis for nationality, age, physical ability, level of education, height, and other attributes that are said to influence salary, but perhaps they get to those in the future.)

Overall, I do not fault Google for doing such an analysis. As a high-profile tech company, they tend to bear the brunt of the accusations regarding sex and race discrimination, and it is only wise that they have their defenses in order. It just gives me an uneasy feeling that the last step of their comparison methodology, adjusting salary based on which group one belongs to, is rather discriminating.

Considering how they set up their compensation plan, where they determine objectively what a person should earn with a certain job level, role, location, and performance, regardless of race, gender, or other personal attributes, there cannot be differences between the sexes by definition. So it is no wonder that their comparison procedure never finds them. The whole comparison feels completely superfluous.

The problem is what happens when their procedure does find some differences. Where did these come from? Evidently these point out that either an error was made somewhere in the original determination of earnings, or that the individual adjustments that managers make — with legitimate rationales, mind you — end up rewarding on average one gender a bit more than the other. If this then leads to an increase of the salaries of one gender, that amounts to gender discrimination.

For suppose you are a woman who does a good job but not so exceptional that her manager proposes to give her a slightly higher reward, and you are surrounded by women who do get their salaries positively adjusted. If this then leads to an average difference between the salaries of the sexes, you will see all the men who perform exactly like you getting their salaries increased, while yours stays the same. Basically, you are punished because some other members of “your group” perform exceptionally well.

In my view, Google’s initial determination of earnings, based purely on what an individual does within the company, with some individual adjustments possible for exceptional performance, is the ultimate meritocratic way of rewarding employees. Doing a check at a group level, partly to ward off accusations and partly to see if the system works as intended, is only smart. Incorporating a step that bluntly adjusts salaries at a group level if the check points out that there are significant differences between certain groups, rather than finding out how these differences came about, is just discriminatory.

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