The difference between mean and median: A Pay Equity Perspective

Under the EU Directive 2023/970, companies are required to report the mean (average) pay gap to enhance pay transparency and address gender pay differences. In addition, article 7.1. requires employers to disclose the mean salary for males and females in jobs of equal value to the employees. While the mean provides a broad view of salary distribution, it can be distorted by extreme values, such as high executive salaries, which skews the interpretation of the typical pay patterns. Rather, it can be argued that the median, reflecting the midpoint of earnings, might better capture the pay of an average worker, offering a clearer picture of pay equity. Companies must carefully analyze these measures to present transparent and meaningful pay data that aligns with the Directive's goals.

A Primer on Calculating the Mean and Median

The mean (or average) is calculated by dividing the total sum of all values in a dataset by the number of entries. For pay reporting, this means summing all employees’ wages and dividing by the number of employees. While seemingly comprehensive, the mean is often skewed by extreme outliers, thereby inflating the average and masking the realities faced by the majority of workers.

In contrast, the median identifies the middle value in an ordered dataset, splitting the data into two equal halves. Unlike the mean, the median is less influenced by extreme values, making it a more stable and representative metric for evaluating pay equity.

The implications for salary comparisons

To explore how the mean and median reveal different aspects of pay equity, consider a hypothetical department of 20 employees: 12 men and 8 women. The mean salary for men is €60,000, significantly higher than the mean salary for women, which is €49,000. This disparity suggests an overall gap in average earnings between the two groups. However, looking at the median salary offers a different perspective. Both men and women have a median salary of €50,000, indicating parity at the midpoint of their respective salary distributions. This contrast highlights how the mean can be influenced by outliers, while the median provides a clearer picture of typical earnings.

A Potential Employee Reaction

Under the EU Directive 2023/970, employees have the right to information, allowing them to request salary data for transparency. In this scenario, a female employee earning the median salary of €50,000 could request the average pay data. Upon learning that the mean salary for men is €60,000, she might perceive this as evidence of inequity and demand a pay adjustment to match the mean salary of her male colleagues.

However, the demand, while understandable, overlooks a critical nuance: the median salary accurately reflects parity at the middle of the distribution, and the higher mean for men is driven by a single high earner whose salary is an outlier rather than a norm. Without context, this misinterpretation of the mean could create unnecessary conflict or misaligned expectations.

This example underscores the risks of using the mean salary as a standalone metric. While the mean highlights structural inequities, it can also mislead employees who lack full context, potentially resulting in unrealistic salary demands. For companies adhering to the EU Directive, it’s essential to communicate salary data responsibly. Offering employees context about both the mean and median can help avoid confusion and foster a clearer understanding of the company’s pay structure.

Own the narrative

The EU Directive 2023/970 requires companies to report pay data, with the mean salary as a focal point. To avoid misunderstandings, companies should take control of the narrative and provide context to the reported figures.

Communicate with Clarity

1. Explain the Metrics: Highlight the differences between the mean and median, emphasizing how the median better represents typical employee earnings.
2. Address Employee Concerns: Anticipate questions about disparities in mean salaries and clarify how factors like outliers or role distribution impact the data.
3. Show Commitment to Equity: Use reporting as an opportunity to showcase initiatives to address pay gaps and demonstrate a focus on fairness.

Emphasize the Median

Companies should prioritize the median salary in their messaging, stating that it reflects the pay of a typical employee, free from distortions caused by extremes. A clear explanation, such as "We focus on medians to ensure fairness," can foster trust and alignment among employees.