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In other words, some employers are falling short on not just their compensation practices but their DEI promises.
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"The fact that the gap is really pronounced for these workers, specifically women and people of color, is linked to a pernicious history of societal biases, unequal labor market policies and discriminatory hiring practice that we've seen contribute to these disparities by gender, race and ethnicity," says Kavya Vaghul, co-founder and chief product officer at the Living Wage Institute. "Things like occupational crowding, which is defined as crowding out of marginalized workers from higher paying jobs, and the systemic devaluation of work, predominantly the type of caregiving work shouldered by women and disproportionately women of color, all are continuing to add to the problem."
Notably, service industries suffered the highest living wage gaps — the same industries that tend to have a disproportionate share of women of color. For example, only 31% of hospitality and 36% of retail workers make a living wage. In contrast, professional services, an industry still underrepresented by women of color, scored the highest, with 81% of workers making a living wage.
"Finding this disproportionate impact on women and women of color is particularly troubling, especially because they typically have the higher burden when it comes to caring for their families," says Jason Rahlan, vice president of corporate responsibility and sustainability at Dayforce. "We knew there was a problem disproportionately affecting certain groups, but the report demonstrates the size and scale of the problem. These aren't living wage gaps — they're living wage chasms."
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Vaghul and Rahlan hope employers will use this report to pave a path toward closing living wage gaps at their own companies. Living Wage Institute's living wage calculator is also available to the public. While Vaghul and Rahlan sympathize with the fact that many companies are working on tighter budgets this year, they stress that living wages are good business.
Rahlan points to another Dayforce report, which found that workers making less than $50,000 a year are significantly more likely to rate their wellness as poor or very poor. They are more likely to suffer from anxiety, stress and depression, and are more likely to skip out on healthcare services and medication.
"There's a very clear connection between a worker's level of income and the risk they face of suffering negative health outcomes," says Rahlan. "Companies should continue to be focused on their employees' well-being, and make sure that they're living lives of health, fulfillment and dignity."
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Vaghul advises employers to first assess which employees are suffering from a living wage gap and then make a plan to close it, keeping in mind the rate of inflation. This doesn't mean she expects companies to automatically change their wages, but instead, chart a course where raises and benefits like childcare subsidies and transit stipends can work to close the gap by a certain year. There's no one-size-fits-all strategy when it comes to compensation, but ensuring financial stability should be a universal goal, stresses Vaghul.
"When workers experience financial instability, companies are experiencing volatility in things like employee retention, attendance, engagement and performance," she says. "All of which adds risks to an employer's operational efficiency, and ultimately, their revenue."
