A persistent political argument used to support all kinds of policy changes is that American women earn 82 cents for every dollar a man earns. On March 24, you may have noticed that the national media and feminist activists proclaimed “Equal Pay Day,” the day that every year, women’s pay is supposed to catch up with their male colleagues.
But is that 82-cent pay gap calculation true?
Robin Shea, partner at the law firm Constangy Brooks Smith & Prophete, has serious doubts about it, as do others who have studied the issue in depth, without applying such ideological blinders. As Shea points out, the accuracy of the 82-cent figure depends entirely on the assumptions you start with.
PayScale, a compensation management software and data services company, investigated the issue by distinguishing between an uncontrolled pay gap and a controlled pay gap. Uncontrolled is used in a statistical sense and gives the figure of 82 cents that you hear about all the time.
It compares the average salary of all women in the labor force with the average salary of all men in the labor force. That’s it. In 2020, all women were earning an average of about 82 cents for every dollar averaged by all men. This difference is qualified as uncontrolled because it does not take into account other factors likely to affect the different levels of remuneration, with the exception of gender.
According to Shea, the controlled gap is the most significant. “There is still a gender pay gap when using controlled numbers, but it is considerably smaller than the uncontrolled gap. When you control for other factors that might affect pay, women earn about 98 cents for every dollar men earn. “
What factors does this analysis control?
• The type of position held (eg CEO versus receptionist).
• Industry (eg heavy manufacturing versus restaurant and hotel versus healthcare versus teaching in K-12 schools).
• Full time versus part time.
• The number and duration of career breaks.
• The number of years of activity.
Other factors examined include the person’s education level and location (urban vs. rural, Mississippi vs. California). “It all affects a person’s salary,” Shea notes.
These observations did not go unchallenged, but the objections are only convincing if, for example, you are ideologically inclined to believe that it is sexist for women to suffer a pay differential based on being absent for having and raising children, which may require participating in full-time rather than full-time jobs.
Isn’t that sexist because it’s less likely to impact men? “It depends on your values,” says Shea. “If family is important to you, it can be a privilege rather than an injustice. If career advancement is your priority, then it may be an injustice. Either way, it’s not your employer’s fault.
Ultimately, the out-of-control wage gap number of 82 cents is a poor basis for policy making, she argues. “I believe in government statistics that when you compare all women to all men without any further control, women earn 82 cents for every dollar men earn. But we shouldn’t be focusing on this “out of control” group, where there might be a million out of the way explanations that have nothing to do with illegal discrimination. “
On the other hand, she believes that the two-cent discrepancy resulting from the application of statistical controls, although much smaller than the 18-cent discrepancy, still needs to be corrected.
“Is it due to discrimination? Perhaps, if all other explanations have been ruled out. But a two-cent discrepancy will be much easier to correct than an 18-cent discrepancy. And initiatives by some states (for example, banning salary history questions) and some advocacy groups and career coaches (for example, encouraging women to negotiate their wages) can go a long way in closing this small gap. still unexplained. . “
If you’re an employer operating in California, New York, and several other states, you are already familiar with the approach Democrats have taken with the Paycheck Fairness Act (PFA), currently under consideration by the House of Representatives. If enacted, this law would ban employer restrictions on discussions of salary information and would not allow employers to use a job seeker’s salary history to set their starting salary. (This also applies to racial and ethnic minorities as well as female workers.)
Congress previously attempted to address this problem in the Equal Pay Act of 1963 (EPA), which prohibits employers from discriminating against workers on the basis of sex in terms of wages.
This law recognizes four positive defenses for employers who charge different rates of pay to men and women. This includes pay systems based on seniority and merit, and systems that determine earnings based on the quantity or quality of output.
The fourth is a general defense that allows for a pay gap if it is based on a factor other than gender. “If passed, the ATP would dramatically reduce this key defense and force employers to demonstrate that the pay gap is a matter of business necessity,” notes lawyer Christa Richer Cook of the law firm Bond Schoeneck & King.
The bill puts weight on employers to show that the factor underlying a pay differential is not based on or derived from a gender pay differential; is linked to the job and meets the needs of the business; and recognizes the entire difference in the amount of compensation involved.
What’s also concerning is that the legislation would create an opening for EPA-based class actions and impose punitive damages for the first time. It will also change the methodology of the Office of Federal Contract Compliance Programs (OFCCP) to identify wage discrimination, which will have a direct impact on companies that are federal contractors and subcontractors.
At present, the salary comparisons used to determine discriminatory differences must be carried out within a single “establishment”, which at this stage is defined as the same physical place of business. Under the PFA, this would expand to include employees working in the same county or a similar subdivision of a state. This would significantly increase the risk of litigation for employers, as employees could compare their salaries to those of other workers based on geographic factors alone, say lawyers at Hall Benefits Law.
More than a dozen states have passed pay equity laws in recent years, the toughest being California, New York State, and most recently Colorado. Other states with similar statuses are Maryland, Illinois, New Jersey, and Washington. In fact, employers in many states are already dealing with pay equity comparisons that are no longer contained in a single location or facility, but can take place not just within a county, but across an entire state.
The clear trend at the state level – perhaps replicating at the federal level – is to allow potential plaintiffs to examine larger swathes of a business to allege wage disparities, note attorneys Matthew Gagnon and Benjamin Han of the law firm Seyfarth Shaw.
As a result of these state-level legislation, employers must take action to protect themselves, Cook says. Pay equity demands often result from employers failing to have a standard process for setting and reviewing wages, she observes. Given the significant potential liability, Cook advises employers to conduct privileged pay equity audits (i.e. conducted by attorneys) to identify and resolve pay disparities based on gender and race.