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Obama targets gender pay gap with plan to collect companies’ salary data

A history of the long fight for gender wage equality. (Video: Daron Taylor/The Washington Post)
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This story has been updated.

President Obama laid out new rules Friday that would require every big company to report salary data based on race, gender and ethnicity, setting up the federal government to actively police pay disparities that have resisted other efforts at reform.

Armed with that data, the Equal Employment Opportunity Commission could crack down on companies paying women less than their male counterparts with investigations and lawsuits. Any lawsuit would cause the company to be publicly named. The same would be true of pay disparities between minorities and whites.

The move does not need congressional approval and will be reviewed by the Office of Management and Budget.

Obama took swings at reducing pay gaps early in his administration. But the average compensation between men and women has barely budged over the last seven years. Women saw 77 cents for every dollar that men made when Obama came into office. Today, that ratio stands at 79 cents for every dollar earned by men.

"The notion that we would somehow be keeping my daughters … any of your daughters out of opportunity, not allowing them to thrive in any field, not allowing them to fully participate in every human endeavor, that's counterproductive," Obama said.

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Business groups swiftly condemned Friday's move, blasting the policy as a government overreach into how pay is set in the private sector.

Randy Johnson, senior vice president of Labor, Immigration, and Employee Benefits for the U.S. Chamber of Commerce, said that, though the organization supports equal pay for equal work, the new rule "would place unnecessary and onerous burdens on employers while providing no meaningful insight."

Kelly Kolb, a vice president of the Retail Industry Leaders Association, said the information would be difficult to gather and could become "attractive fodder for those intent to mislead."

Companies would report the salary data on a form they submit annually to the EEOC. On the updated form, employers would have to identify the race and gender of employees and report their W-2 earnings for a 12-month period, including tips, taxable benefits and bonuses.

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. But if the agency files a discrimination lawsuit as a result of the findings, companies would appear in public record.

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The EEOC intends to publicly release the aggregated data in an annual salary report, showing the average pay for workers in different sectors and industries across the country. The information, Yang said, would help managers assess how they set pay and inform employees during the negotiation process. The EEOC hopes to collect the data by September and publish the first report 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."

Detractors say the policy change would create an unnecessary government overreach. Roughly 67,000 employers would have to take on the extra paperwork.

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 also say it will crank up the pressure on companies that wish to appear morally correct.

“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.”

The EEOC recorded 26,027 sex-based charges and 21,073 race-based charges in 2014, the most recent year statistics are available.

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.

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."