WASHINGTON — President Barack Obama proposed a new rule Friday that would require every large company in America to report employees’ pay based on race and gender, an effort to reduce longstanding pay inequities for women and minorities.
The new policy, already drawing criticism from some business leaders, would order companies with at least 100 employees to add salary numbers on a form they already annually submit that reports employees’ sex, age and job groups. The pay information would alert the EEOC to companies with significant wage disparities, which could result in hefty fines.
“Oftentimes, folks are doing the same job and being paid differently,” Obama said in a speech at the White House. “The goal is to help businesses who are trying to do the right thing get a clearer picture of how they can ensure their employees are being treated fairly.”
During the updated data collection process, officials would not publicly name employers or employees, said Jenny Yang, chairwoman of the Equal Employment Opportunity Commission, which published the proposed rule with the Department of Labor. If the agency files a discrimination lawsuit as a result of the findings, however, companies would appear in public record.
For instance, if a firm’s data shows typical female managers earn 25 percent less than typical male managers, the government may launch an investigation – and, lawyers say, workers who take discrimination complaints to the EEOC would have extra ammunition if company numbers supported their case.
Since the White House established its Equal Pay Task Force in 2010, Yang added, the agency has collected from firms more than $85 million in employee-relief checks.
The EEOC also intends to turn the aggregated data into an annual salary report, showing the average pay for workers in different sectors and industries across the country, starting next year. The information, Yang said, would help managers assess how they set pay and inform employees during the negotiation process. If the new policy is approved the by Office of Management and Budget and enacted by its September deadline, the first report would be published a year later.
“Pay discrimination goes undetected because of a lack of accurate information about what people are paid,” Yang said at the White House conference. “Collecting this pay data would help fill a critical void we need to ensure American workers receive fair pay for their work.”
The proposal expands on Obama’s 2014 executive order that required all federal contractors to submit similar salary data by gender and race. The measure also abolished gag rules that prevented those contractors from discussing their pay.
Detractors say the policy change would create an unnecessary government overreach. Roughly 67,000 employers would have to take on the extra paperwork.
Randy Johnson, senior vice president of Labor, Immigration, and Employee Benefits for the U.S. Chamber, said that, though the organization supports equal pay for equal work, the new rule would place an unnecessary burden on employers while providing no “meaningful insight.”
“Clearly the administration has embarked on one more fishing expedition to support a political agenda divorced from the facts,” Johnson said. “Sound bites don’t make sound policy.”
David Cohen, president of DCI Consulting Group, a consulting firm that leads business’ pay-equity studies, said the proposal is undermined because it will compare pay of workers with vastly different jobs, markets and abilities. The summarized data will be reported across 10 broad job categories — “professionals,” for instance, range from doctors and nuclear engineers to social workers — that could muddle the results.
“If the goal of this report is to raise awareness, that we’re the government and we care deeply about this wage gap … that’s great,” he said. “If the goal is to use this report as a predictor of discrimination, it will fail.”
Civil rights attorney Debbie Katz said the new rule would be more than a symbolic call for wage equality. Workers who take their discrimination cases to the EEOC, she said, would have objective numbers to back them up.
“You’d have a much stronger argument if your company is being reckless with the law and the numbers show that,” she said.
Proponents of the measure say it would crank up the pressure on companies that wish to appear socially concious.
“This is simply designed to improve voluntary pay efforts because they’re not going to want their sheet to look too bad,” said economist Heidi Hartmann, president of the Institute for Women’s Policy Research, an advocacy organization in the District. The proposed policy, she said, would “allow enforcement agencies to look at it, and it will allow researchers to get at it. It’s definite progress.”
Federal law has prohibited pay discrimination since 1963. But in the United States, women on average earn 79 cents for every dollar paid to men. The gap widens by race, with black women earning 60 cents and Hispanic earning 55 cents to every white man’s buck.
Economists say the disparities stem from a complicated blend of social forces. Women, for example, concentrate in low-paying jobs, according to the Bureau of Labor Statistics, while male-dominated fields, like finance and technology, tend to pay more. Mothers also tend to take more time off work than fathers to care for children, delaying professional growth and promotion opportunities.
Discrimination, though, may drive a significant chunk of the wage gap, said Francine Blau, a Cornell University economist who studies the phenomenon. In a study released this month, Blau and her colleagues used national data that includes labor market experience to break down the 79-cent figure.
A woman’s career decisions, they found, represent about half the gap. Industry choice accounts for 17.6 percent, occupation choice makes up 32.9 percent and region drives 3 percent. Thirty-eight percent, she said, is left “unexplained.”
“Discrimination is not necessarily overt or conscious,” Blau said. “It could be subtle. People have stereotypes about males and females, and they can creep in during hiring or promotion decisions.”
One famous example of gender bias manifested in a 2012 study, which collected feedback from science faculty members at six large universities on ficticious application materials of senior undergraduate students applying for a laboratory position. Participants rated male applicants as significantly more competent than the identical female applicants, and offered the men higher starting salaries.
Gathering and reporting who makes what at a company could inspire employers to fix uneven work environments, said Secretary of Labor Thomas Perez. Bosses in corner offices may not be aware that men in their company may take home heftier paychecks than their female counterparts.
“When you’re looking at your data, it’s going to force you to confront your reality,” said Perez said at the White House announcement. “Leadership is the willingness to look at yourself at the mirror and say were not perfect.”
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