The Equal Pay Rabbit Hole: Finding the Strength to Navigate an Uneven Playing Field

By Kim Stephenson  

No one would dare to claim that equal pay for equal work is wrong. And yet, it seems unequal pay is everyone’s lived experience, as evidenced by the fact there’s an International Equal Pay Day advocating for change.  

If everyone agrees, then why are we surrounded by pay inequality – whether over gender, age, or other factors? And what can we as individuals hope to do about it? 

In this four-part series, I’ll aim to answer these questions from a practical, evidence-based Financial Psychology perspective. First, let’s examine the psychology behind the current status quo. 

Our Perception of ‘Fair’ 

One of the most prevalent investigations into attitudes to fairness and self-interest is ‘The Ultimatum Game’, such as explored by Gaertig et al., 2012. The simplest version is as follows: 

Person A has a sum of money to divide between themself and Person B. They can offer Person B as much or little as they choose. However, both parties only receive the money if Person B accepts the offer. 

In classical economic theory, Person A will offer the minimum amount possible, maximising their own profit. And Person B will accept, because accepting the minimum offer is better than refusing the offer and receiving nothing. That’s the theoretical, logical option – but not the one people usually adopt either in terms of the offer or acceptance. 

Of course, there are many reasons people don’t act in a purely theoretical way in real life (Sigmund, 2007; Barkow et al., 1992). But what influences them to make their decisions is debated. On an individual level, several factors affect our perception of fairness, such as: 

For example, culture influences personal views, not just of what is ‘fair’, but also whether it’s appropriate to ‘punish’ selfish actions (Oosterbeek et al, 2004). On a broader scale, the local environment and organisation we work in affect group perception of what is seen as an equal exchange. And that’s just when dealing with money. 

Equal Pay: More Than Money 

Making pay ‘fair’ and ‘equal’ isn’t as simple as balancing everyone’s salaries. Especially because, in exchange for our time and effort, employers usually offer more than a simple wage that could theoretically be levelled across the board. Consider for a moment how these factors complicate the matter of ‘equal’ pay: 

This doesn’t even touch on the various benefits many companies offer, such as medical cover and pension support, and their monetary value. 

Complicated as these matters are, companies make these decisions in economic and financial terms. Often, the psychology involved isn’t even considered.  

For appropriate psychological factors to meaningfully inform policies on ‘equal pay’ would be a huge endeavour. The research required needs not just significant time and money, but a willingness on everybody’s part to listen to alternative views, construct reasoned arguments, and debate controversial questions, such as whether the function of a society is to provide the greatest good for the greatest number, or to give added support to the unfortunate minority at the expense of the majority. Even after doing so, the subjective nature of the topic would still leave grey areas and exceptions. 

All of this to say, while it would be wonderful to give generic, sound advice on providing equal pay, it’s beyond me – or I suspect anyone – at present.   

What Can We Do Now? 

When I was asked to write something about equal pay from the Financial Psychology viewpoint, I realised that I couldn’t cover it directly. Instead, my hope is that I can suggest practical ways individuals can make the best of the hands they’re dealt, by: 

However, that left me with the question of whether by increasing resilience, I’m enabling bad practice: ‘Let’s not worry about changing the organisational environment to be fairer and healthier, just make people more resilient instead!’ I’m sure many professionals who work to support wellbeing, resilience, and coping strategies have felt similarly.  

So let me be clear, things need to change on a systemic level. But that change will take time, will, and effort. In the meantime, my hope is that this series of articles will allow people to be happier and more comfortable with their finances now, irrespective of their fairness. Doing so in the knowledge that when people are happier and more content, they are in a better position psychologically to agitate for the necessary changes to the system.  

Heart, Head, and Hands 

Therefore, in this article series, I will cover three ways to make the best of your financial situation. These are: 

Join me throughout the month of September as I explore the Financial Psychology theories, frameworks, and models behind each of these themes, and explain practical ways to apply their lessons. 

About the Author 

Kim Stephenson spent 12 years as an Independent Financial Advisor, working with professional and high-net-worth clients. In 2000, he qualified as an Occupational Psychologist, serving as Secretary of the Division and a Chartership Supervisor. Repeatedly asked for advice on finance, he perceived a common delusion that money is both a worthy life goal and inherently complex. Subsequently, he has contributed to three books and provided talks, articles, and consultancy about the synergy between positive and traditional psychology with finance and behavioural science. A frequent radio guest and occasional television contributor, he specialises in financial psychology and developing more helpful attitudes and behaviours around money.