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99 Percent Pay Parity Is Far From Perfect

Banks have a long way to go before they can claim they've fixed the gender pay gap.

Bridge the gap.

Photograph: Bloomberg

This post originally appeared in Money Stuff.

Good news!

JPMorgan Chase & Co. said Friday that its female employees earn 99 percent of what male employees make globally, making it the fifth large U.S. bank to disclose an adjusted gender pay gap of around one percent.

So the average woman at JPMorgan makes just 1 percent less than the average man at JPMorgan? Hahaha no, quite the opposite, quite the opposite:

The new disclosures anticipate the looming deadline for all companies employing more than 250 people in the U.K. to publish their unadjusted gender pay gap numbers for their British employees -- a requirement that will include the big U.S. banks.

While the recent spate of voluntary disclosures have highlighted very small adjusted discrepancies, JPMorgan seemed to be warning employees that its U.K. filing may paint a different picture.

“The bare numbers, excluding these types of factors, will show a gap between the pay of men and women,” the firm wrote in its memo. “But we have found that employees are paid appropriately when taking into consideration their business area, their experience and the work they do.”

No, what JPMorgan's numbers show is that if you use JPMorgan's methodology for determining what pay is appropriate for a given business area, type of work and amount of experience, then men are paid 100 percent of what is appropriate and women are paid 99 percent of what is appropriate. "As a growing number of financial firms reveal whether men and women are compensated equally, they have clustered around 99 percent parity, after adjusting for factors such as job role, seniority and locale." It is a suspicious number. Really if you are doing the adjusting, you should get to 100 percent. If JPMorgan decided, based on her role and seniority, to pay a woman $500,000, and also decided, based on his role and seniority, to pay a man $800,000, then surely it also decided that she is getting paid 100 percent of what is justified by her role and seniority and that he is getting paid 100 percent of what is justified by his role and seniority. Therefore she gets paid 100 percent as much as him, as adjusted. No? Obviously if some third-party validator was doing the adjusting, you might expect its adjustments for role and seniority not to coincide with how JPMorgan pays for role and seniority. But JPMorgan is doing the paying, and it is also doing the adjusting. Why did it conclude that its own pay decisions were wrong? By 1 percent? Why did every other bank conclude the same thing?

One suspects that the answer is that if the banks all said "our women are getting paid 100 percent as much as men" then everyone would think they were lying. Especially when they also have to announce the much larger unadjusted pay gaps: so far 33 percent for Lloyds Banking Group Plc, 37 percent for Royal Bank of Scotland Group Plc and about 50 percent at Barclays. But 99 percent is as close as you can get to 100 percent while still quietly confessing that you pay women less. This way JPMorgan's head of human resources can say "We know we can always do more, and we will," and sound like she's being contrite about that 1 percent gap. (And not the much larger actual gap that takes into account the smaller number of women in senior positions.) If the adjusted number was 100 percent then how would they know they had to do more?

Really some bank should announce that the number is like 103 percent -- that its women, adjusting for seniority and role and so forth, are slightly overpaid relative to its men. The fact that they don't do this -- that the numbers are always slightly under, never slightly over, 100 percent -- is a good indication of how embarrassed they are about the whole adjusting process.

Incidentally I do not mean to pick on JPMorgan here; in many respects they are better than average. Here is a story about how Marianne Lake, JPMorgan's chief financial officer, "is one of the most senior women on Wall Street," is "on the bank's short list of possible successors" to Jamie Dimon, and has become "an even more likely contender" after a recent executive reshuffling. 

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    To contact the author of this story:
    Matt Levine at mlevine51@bloomberg.net

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    Brooke Sample at bsample1@bloomberg.net

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