Opening Remarks

Shortchanged: Why Women Get Paid Less Than Men


Shortchanged: Why Women Get Paid Less Than Men

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Lilly Ledbetter discovered she was underpaid one spring evening in 1998 at the start of her overnight shift as a manager at the Goodyear Tire & Rubber (GT) plant in Gadsden, Ala. She checked her mailbox as usual and found an anonymous note. On it was scribbled her monthly pay along with the pay of three men who started the same year she did and had the same job. The men were earning 15 to 40 percent more. “My heart jerked as if an electric jolt had coursed through my body,” she wrote in her 2012 memoir, Grace and Grit: My Fight for Equal Pay and Fairness at Goodyear and Beyond. Ledbetter had worked at Goodyear for 19 years but was never quite sure she was being paid unfairly. “I was like a wife nursing a nagging suspicion that her husband’s having an affair.”

Pay discrimination is a silent offense. Women know when they’re being harassed and abused, of course, and they can often tell if they’re being discriminated against in hiring and promotion—all they have to do is count the men with lesser skills and credentials doing jobs they still aspire to. But in many workplaces, discussing pay is frowned upon; in some, it’s a dismissible offense. So, like Ledbetter, women often don’t know when they’re getting paid less than men. So they don’t complain. So the problem continues.

President Kennedy promised America would put a man on the moon and would stop pay discrimination against women. One of those happened. The Equal Pay Act that Kennedy signed in 1963 prohibited “discrimination on account of sex in the payment of wages by employers engaged in commerce or in the production of goods for commerce.” Yet nearly half a century later, in the first three months of 2012, women still earned only 82.2 percent of what men earned. That’s comparing the “usual median weekly earnings” of full-time employees. Comparing annual pay of full-time, year-round workers, women earned only 77 percent of what men earned in 2010.

The latest hope for closing the gap died on June 5, when Senate Republicans filibustered a bill to make it easier for employees to share information about their pay. Three days later a federal judge in San Francisco said he was “seriously concerned” that lawyers for 45,000 female employees of Wal-Mart Stores (WMT) in California haven’t shown enough evidence to file a sex-discrimination class action. There has been progress toward gender parity since Kennedy’s day, but for many women, not enough.

The gender pay gap, around 40¢ to the dollar in the early 1960s, shrank rapidly in the 1980s and early ’90s. It has narrowed by only 4¢ since 1994 and less than 1¢ since 2005, even though younger women have caught up to and surpassed men in education. What’s more, pay difference actually grows as a woman’s career progresses, adding up to hundreds of thousands of dollars on average over a lifetime. Catherine Hill, head of research at the American Association of University Women, found that among college graduates, the pay gap grew from 20¢ on the dollar one year after graduation to 31¢ by the 10th reunion.

Only some of the pay gap is the result of discrimination by employers. Men crowd into high-paying fields like engineering, while women dominate lower-paying fields like education and social service. And women are more likely than men to fall off the career track when they have children. They take time off and lose skills, or they opt for less-demanding jobs so they can spend more time at home. Most fathers, in contrast, manage to skate through parenthood without the slightest harm to their careers. Employers could offer family-friendlier policies on leave and flextime, but they can’t be blamed for dads who don’t do enough around the house.

In a 2009 report commissioned by the Department of Labor, Consad Research of Pittsburgh concluded that all but 5¢ to 7¢ of the wage gap could be explained by factors other than outright discrimination. “It is not possible now, and doubtless will never be possible, to determine reliably whether any portion of the observed gender wage gap … can confidently be attributed to overt discrimination against women,” the contractors wrote.

However, other researchers do detect gender bias. In a 2007 article for the Academy of Management’s journal Perspectives, Cornell University labor economists Francine Blau and Lawrence Kahn wrote that even after adjusting for education, experience, race, industry, and occupation, women brought home just 91 percent of what men did. And they said that figure may understate the pay gap due to sex discrimination if women have been excluded from higher-paying opportunities. “There is evidence that although discrimination against women in the labor market has declined, some discrimination does still continue to exist,” they wrote.

Lilly Ledbetter didn’t need dueling statistical analyses to tell her she was underpaid once she saw how much male managers at the tire plant were getting. Winning a judgment was the problem. A jury found it was “more likely than not” that she suffered pay discrimination, but the Supreme Court turned her down on appeal because she didn’t complain within 180 days of when she was first underpaid. The Lilly Ledbetter Fair Pay Restoration Act, the first law President Obama signed upon taking office in 2009, fixed that for future plaintiffs by treating each undersized paycheck as a fresh, punishable offense.

The bigger problem remains: If there’s no tipster stuffing notes in their mailboxes, women don’t know they’re underpaid. The Paycheck Fairness Act, which passed in the House in 2009, would fix that deficiency by preventing companies from retaliating against workers who inquire about pay gaps. It would also allow for punitive damages; close some loopholes that employers have used to justify pay gaps; and require employers to submit salary data that would make it easier to detect violations. The Senate GOP’s June 5 filibuster of the bill played into the hands of Democrats seeking women’s votes, as did defensive quotes from Republican senators. Marco Rubio of Florida said he didn’t think the bill would accomplish its purpose, and “reads more to me like some sort of welfare plan for trial lawyers.” (Wisconsin passed a similar law in 2009 and saw no boom in litigation, according to its Department of Workforce Development.)

A lack of good data impedes progress on fair pay. Nationwide statistics can’t prove that any particular woman has been treated unfairly, while individual cases are too idiosyncratic—an employer can usually cite some justification for why she got less than the guy in the next cubicle. For potential plaintiffs, the ideal would be to have reams of detailed data about every company’s pay by gender, job title, and so on. But that would be a paperwork nightmare, and few companies would willingly expose themselves that way.

By grouping employees in different ways, expert witnesses in lawsuits brought against Boeing (BA), Wal-Mart, and Novartis (NVS) have drawn opposite conclusions about whether discrimination exists. In 2006 the Bush administration discontinued a program started by the Clinton administration to collect data from federal contractors (who account for 25 percent of the civilian workforce) on the grounds that the data weren’t useful. The Obama administration is looking into restarting data collection for contractors to detect patterns of discrimination but still faces opposition from employer groups. “Will the usefulness justify the burden?” asks Rebecca Springer, an attorney at Crowell & Moring, a law firm that represents defendants in Equal Pay Act lawsuits.

Fair question. And yet solutions exist. Labor economist Marc Bendick Jr. argues that fears about excessive paperwork are overblown: Just a small amount of easy-to-supply data would be enough, he says, to flag companies that bear further investigation. Employers’ attorney William Doyle Jr. of Morgan, Lewis & Bockius would encourage employers to investigate their own practices by promising that their findings could not be used against them in court. Both ideas have merit. Doing nothing amounts to preserving a code of silence that continues to hurt women. Just ask Ledbetter, now 74, who never got a settlement from Goodyear and recently had to scrape money together to replace a busted air conditioner. “Trust me,” she says, “I have learned how behind women and their families are, and it’s getting this nation dragged down.”

Coy_190
Coy is Bloomberg Businessweek's economics editor. His Twitter handle is @petercoy.
Dwoskin is a staff writer for Bloomberg Businessweek in Washington. Follow her on Twitter: @lizzadwoskin.

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Companies Mentioned

  • GT
    (Goodyear Tire & Rubber Co/The)
    • $22.11 USD
    • -0.47
    • -2.15%
  • WMT
    (Wal-Mart Stores Inc)
    • $76.12 USD
    • -0.35
    • -0.46%
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