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5 Equal Pay

Learning Objectives

After completing this chapter, the reader will:

• understand the reasons why women still lag behind men in terms of pay.

• understand the differences in the gender gap in pay in various countries.

• understand the differences among equal pay legislation, comparable worth legislation, and pay for performance compensation.

• understand the relationship between equal pay and negotiation skills.

Introduction: the Pay Gap

A report by the American Association of University Women (AAUW) showed that, just one year out of college, women working full-time earn 80% of what their male colleagues earn, when they work in the same field (American Association of University Women, 2007). Ten years after graduation, the pay gap widens: by that point, women are earning 69% of what their male colleagues earn. Even after controlling for hours, occupation, parenthood, and other factors known to affect earnings, one-quarter of the pay gap remains unexplained. In addition, the AAUW report showed that college-educated men have more authority in the workplace than do their female counterparts and are more apt to be involved in setting employee pay.

Over the course of her life, a young woman graduating from high school will make $700,000 less than a young man graduating from high school. A young woman graduating from college will earn on average $1.2 million less compared to a man with the same college degree. The difference increases as women and men gain further credentials; over the course of her life, a woman with an MBA, law degree, or medical degree can expect to earn $2 million less than a man receiving the same degree at the same time (Women’s Policy Inc., 2007). In fact, on average, in the US, women with master’s degrees still make less than men with bachelor’s degrees (US Census Bureau, 2005).

Although over time women have made progress in reducing salary differences, these statistics show that they still lag behind men (see Figure 5.1). This is true at every level of the wage hierarchy, and within races. For example, in the US, Asian women earn 81% of what Asian men make; white women earn 80% of what white males earn; African American women earn 89% of what African American males make; and Hispanic women earn 88% of what Hispanic males earn (US Bureau of Labor Statistics, 2007). The wage gap in the US increases as women grow older, as they earn more degrees, and as they gain more experience. Between the ages of 16 and 24, women earn 95% of what men earn; between 25 and 34, women earn 88% of what men earn; but between the ages of 45 and 64, women earn 73% of what men earn. In all of these comparisons, full-time working men of the same age group were measured against full-time working women of the same age group (US Bureau of Labor Statistics, 2007).

[Insert Figure 5.1 here]

[caption]Figure 5.1 Median Usual Weekly Earnings of Full-Time-Wage and Salary Workers in Constant (2007) Dollars by Sex, 1979–2007 Annual Averages (source: US Bureau of Labor Statistics. (2007). Highlights of Women’s Earnings in 2006. US Department of Labor, September, p. 4).

Women earn less than men in many areas, from service-related jobs to management and professional occupations. The gap becomes greater in professions that pay more and in professions or jobs that are stereotyped as “male,” such as higher-level management roles and production, transportation, and materials-moving jobs. The gap between women and men is lowest in traditionally female occupations such as administrative support – secretaries, typists, receptionists. Technological change sometimes results in men entering traditionally female occupations as their traditional male occupations become obsolete. Men entering such traditionally female job classifications often have to accept the prevailing wage, which is determined for a largely female population. If they did demand more, they simply wouldn’t be hired, because women are available for these jobs at the prevailing, lower wage rate.

Table 5.1 Median Weekly Earnings by Occupation

Source: US Bureau of Labor Statistics, Highlights of Women’s Earnings, September 2007, extracted from pages 11–14.

The Rate of Progress

In the US, in spite of the EEOC and the many bills in state and federal government that try to remedy inequalities, the progress toward equal pay between men and women has been slow. The data in Figure 5.2 show that, between 1960 and 1965, the pay increase for women was barely noticeable, most likely due to the fact that the Equal Pay Legislation was launched in 1964 and the EEOC founded shortly thereafter. From 1965 to 1970, women did not make any progress relative to men, and again from 1970 to 1975 the pay gap remained unchanged. In 20 years since the Equal Pay Act was passed, women’s earnings advanced by only 4.6% relative to men’s earnings. Even from 2000 to 2005, when much progress might have been expected due to media attention to inequalities and women’s advances in education, there was only modest improvement: a 3.7% gain over five years. Clearly, the Equal Pay Act has only had a marginal effect on the gap in earnings between men and women.

A report in 2002 by the US General Accounting Office (GAO) noted that women’s pay relative to men’s in certain industries had declined from 1995 to 2000, and in other industries had increased (Dingell & Maloney, 2002). In seven out of 10 industries, the pay gap had widened between male and female managers. For example, in the entertainment and recreation services industries women earned 83% of male managers’ pay in 1995 and 62% in 2000. In communications, female managers’ pay fell compared to males’ pay from 86% to 73%; in the finance, insurance, and real-estate sectors, female managers’ pay fell from 76% to 68%; and in professional medical services, women’s pay went from 90% to 88%. One reason for the pay decline in these areas could be due to the use of automation in these job categories and a general trend toward de-skilling in these industries. The GAO also found that in only one of the industries, medical services, women accounted for a greater number of managers than men. This is the only industry studied where management and administrative jobs are lower status than professional, non-managerial jobs. Furthermore, in only five out of the 10 industries did women hold a share of management jobs in proportion to their share in the industry. In public administration, hospital services, and educational services, pay rates for women relative to men went up slightly between 1995 and 2000.

[Insert Figure 5.2 here]

[caption]Figure 5.2 The Wage Gap Over Time (source: US Census Bureau, 2006).

The Global Case for Equal Pay

As in the US, a pay gap between men and women exists in all of the European Union countries. Although in the United Kingdom women have a large percentage of managerial jobs compared with other EU countries, there is still a pay gap of 21.1% between men and women. Austria and the Netherlands have an even greater earnings gap between men and women; Austria’s pay gap is 25.5% and in the Netherlands it is 23.6%. The Scandinavian countries do marginally better than Central European countries: Denmark’s equal pay gap is 17.7%, Sweden’s is 17.9%, and Finland’s is 20% (Eurostat, 2009). In a comparative study of 40 countries, more politically left-leaning governments, such as those in Scandinavian countries, reduced the pay gap more than politically right-leaning governments (Polachek & Xiang, 2006). Such governments are predisposed to enact legislation about equal pay because they are more committed to equalitarian outcomes, while right-leaning governments generally do not favor government intervention in matters of pay.

In Eastern and Central Europe, women’s wages are at least 20% lower than men’s rates of pay. In economies that have moved from central planning to market capitalism, such as Russia and the Czech Republic, the wage gap has widened since 1989. During the period of state central planning and communist rule, the pay gap between men’s and women’s wages was lower than it is today. Prior to 1989, trade unions were very strong in the former Czechoslovakia, while today, fewer than 21% belong to unions (International Trade Union Confederation, 2008). This lack of union activity is most likely one reason for the increase in the pay gap, which in 2007 was 23.6% (Eurostat, 2009). The pay gap in formerly communist countries is particularly disconcerting since, according to the traditional free-market view, market forces will be the best mechanism for creating a fair labor market. The widening of the wage gap in countries with transition economies is of special concern against the backdrop of the steep decline in real wages, which makes women who are often trying to support families vulnerable to the risk of poverty (Stepson, 2000). Moreover, in the Czech Republic and Lithuania, the wage gap is largest for the most well-educated women; in Lithuania, female social workers earn 50% of what their male counterparts earn. The overall wage gap in European economies tends to be greater in the private sector than in the public sector, and women in transition economies have been affected more by manufacturing plant closings and economic recessions (Stepson, 2000).

The pay gap statistics represented in Figure 5.3 do not take into account job classification – the statistics are undoubtedly influenced by both lower, middle, and high level job classifications, and the variation in pay for women and men in different industries.

Many managerial jobs in EU countries include such fringe benefits as a company car, cell telephones, retirement benefits, and expense accounts. When women are segregated into lower-level jobs, they miss out on both additional salary and these types of fringe benefits or “perks.” Data on pay differences among managers in the EU countries indicates that earnings gaps are the widest the more senior the position. Furthermore, the gender pay gap increases with age, education, and years of service. In the 50–59 age group, the gap is more than 30% compared with 7% in the under-30 age group. Those women with higher education earn 30% less than men, whereas those with lower-level secondary education earn 13% less than men. The wage gap increases as one gains more experience; it is as high as 32% for women workers with more than 30 years of experience (Eurostat, 2009).

[Insert Figure 5.3 here]

[caption]Figure 5.3 Gender Pay Gap in EU Countries (source: Eurostat, http://epp.eurostat.ec.europa.eu/tgm).

Note

The unadjusted Gender Pay Gap (GPG) represents the difference between average gross hourly earnings of male paid employees and of female paid employees as a percentage of average gross hourly earnings of male paid employees. The population consists of all paid employees in enterprises with 10 or more employees.

Differences in Labor Statistics across Countries

The differences in labor statistics in European countries can be influenced by any number of factors. Each European country has different rules for how wage statistics are monitored; for example, in Finland any company with 30 or more employees must evaluate pay equity in a yearly workplace equality plan, while in Germany wage statistics are required if the company has five or more employees. In France, gender equity statistics must be reported to work councils or shop stewards in companies that have 50 or more employees. Companies are required to have annual negotiations on gender equity. In Denmark, companies must compile wage statistics for 10 or more employees. In Switzerland, if the pay gap between men and women is higher than 5% in any organization or company, the institution is required to conduct further analysis and take corrective action if needed (Harriman & Holm, 2007). In general, the monitoring and reporting activity has positively influenced gender equity; those countries with stricter reporting and monitoring regulations have smaller pay gaps between men and women.

In addition to monitoring activity, signing on to international conventions in favor of equal pay measures makes a difference. The International Labor Organization (ILO) held a session on gender equality in which over 100 government members voted to endorse the concept of equal remuneration between men and women for work of equal value (2009). Weichselbaumer and Winter-Ebmer compared 67 countries and found that those nations that had ratified such international conventions supporting equal pay had a significant positive effect on narrowing the pay gap in their countries (2002).

The ILO, as well as researchers, cites several reasons for the differences in wage rates among European countries. When a pay gap is small, it is often achieved by only a small number of well-educated women at the top of the labor market. In other cases, progress has been made in low-level occupations such as clerical work, where the gap may be only 3–8%. However, the gap remains highest for female professionals. The gender gap in earnings may be larger in European countries where there is more overall inequality (Blau & Kahn, 2000, 2007). For example, in the United Kingdom the dispersion in the data gives more room for gender inequalities, whereas in Portugal, for example, female employment is probably lower overall and fewer women are pulling down the distribution. The salary distribution is most likely more compressed in Portugal and therefore there is less of a gap in earnings between men and women. Blau and Kahn found that those countries with more compressed male wage structures (a narrower distribution of male earnings) were associated with lower pay gaps. Finally, collective bargaining by unions has been shown to have an overall positive impact by reducing the gender pay gap.

As in Europe, women in Asian countries experience a pay gap. A survey by the Ministry of Health, Labour and Welfare in Japan uncovered several apparent inequalities between men and women. Women graduates earned anywhere from 20% to 40% of men’s pay when they earned the same university degrees as the men. In Japan, many women, in spite of advanced qualifications, are in support roles, while men are employed in career track positions. The same situation has occurred in South Korea; in 2000, women with university degrees earned 74% of men’s earnings with the same qualifications.

The ILO contends that the reasons for pay disparity among men and women worldwide are complex, and that these disparities are obfuscated by the different methods of reporting wages and jobs. To understand and begin to rectify these reporting difficulties, more information is needed about the distribution of women by their level of earnings, the hours they work, their educational level and qualifications, their access to overtime pay and bonuses, their occupational group, and whether or not they work part-time.

Explanations for Wage Disparities between Men and Women

Lack of Human Capital

There are several theories about why women are paid less than men. Human capital theory (discussed at length in Chapter 2) suggests that women may be paid less than men because they haven’t attained the level of education and experience that men have acquired. Thus, they have built up less human capital than men and are consequently less productive. Therefore they receive a smaller total return since their initial investment is lower. In developed nations, this theory is seriously undermined by the rate at which women are gaining educational qualifications at both the undergraduate and graduate levels, and the fact that the wage gap increases as women gain educational credentials. However, it is possible that some women have less experience than men because they have interrupted their careers for several years when taking care of young children.

Many women decide to take time out from full-time work to devote time to their families, especially if they have young children or if they have elderly parents. In a study of women architects, over half of the participants said that they chose alternative forms of working, including time taken out with children, time for sporting activities, and part-time work (Caven, 2006). The pay gap of lawyers can also be influenced by hours worked; a study of women and men lawyers showed that women worked and billed fewer hours to clients than men. In some cases, the difference in wages can be explained by career breaks that women take and men don’t take. Over the decades, women have taken time away from work to raise children, although the percentage of women taking time out is decreasing; in statistics from the US Current Population Survey, Blau and Kahn report that each child under one year of age lowered women’s labor supply by 41% in 1980, 29% in 1990, and by 26% in 2000.

When women take time out from a full-time career and then try to reenter the workforce, they pay a stiff price. Women lose an average of 18% of their earning power when they take a break from work. When they spend less than one year away from their jobs, they experience an 11% cut in their salary upon their return to work. If they spend three or more years away from work, they find a 37% reduction in their pay when they return to work (Hewlett & Luce, 2005).

The question remains as to whether this reduction in earnings is really a fair reflection of what women are worth. If women intend to return to work with the same employer after they take time off, they would be wise to negotiate the terms of their reentry before they leave so that they are not penalized upon their return. Staying active in their field while on leave is important for women because it will help demonstrate to their employers that their skills have not degraded in their absence.

Personal Preference

Another theory suggests that women choose lower-paid occupations and remain in them because of personal preference for these occupations. Occupations such as nursing, teaching, and childcare are low paid compared to other occupations and tend to be occupied disproportionately by women. According to a wage study undertaken for US Senator Tom Harkin, about half of working women work in an occupation that is 70% female while half of working men work in jobs that are 29% female. The higher proportion of “female” jobs are in fact paid less than the “male” jobs. A related explanation for the wage disparity between men and women suggests that women choose positions in industries that are, as a whole, low-paid ones. For example, many women work in retail or healthcare, lower-paid industries rather than the male-dominated oil production or hi-tech, higher-paid industries.

Some believe that women’s average rates of pay fall behind men’s because of women’s role in the family. On average, married men make more than unmarried men make; by contrast, married women make less than single women make. It appears that just being married, especially with children, is an income liability for women. This may be because women fall behind in pay if they decide to take time off to raise children, or perhaps because they choose less-challenging work in order to balance their family obligations with work ones.

Social Role Theory

This theory suggests that men and women adhere to gender roles that they have acquired early in childhood. These roles are shaped by societal expectations of both men and women that direct them to behave according to a particular gender role (Eagly, Wood, & Diekman, 2000). Thus men behave assertively and women more passively; men are the key breadwinners and women with young children are more apt to stay at home. These societal expectations may have an effect on pay in the workplace in several ways. First, employers may offer men more money because they see them as the key breadwinners. Second, men will act more assertively and they will likely negotiate for more pay. Employers will expect men to negotiate and act assertively as this is a natural aspect of their gender role. Finally, although to their disadvantage, women will naturally fall into their gender role, and not act as assertively as men do. Social pressure and the enduring nature of gender roles over time will make it difficult for women to act outside of their gender role (Vogel, Wester, Heesacker, & Madon, 2003).

Rather than freely choosing an occupation, women are socialized at a young age to prefer “female occupations” that do not pay well rather than male ones that offer more opportunity and remuneration. Guidance counselors and school teachers may even channel women into “female”-oriented careers. A study by Cassirer and Reskin found that men attach greater importance to promotion than women mainly because of where they are situated in the organizational hierarchy; men are more likely than women to be in jobs that encourage workers to expect and hope for promotion (2000).

Entitlement Theory

Some evidence suggests that the pay gap between men and women is the result of women having lower expectations about the value of their work, thus they make fewer demands for higher pay. Having these lower expectations is part of what women have learned as their appropriate gender role. Several studies have found that women may differ from men in their sense of entitlement – what they believe they deserve to make for equivalent work. In a study by Martin (1989), male and female business college seniors were given the same information about what previous graduates had earned in recent years. The sex of the graduates was not given. The current male and female students were then asked what they expected to earn at their first job after graduation. On average, the amount the female students said that they expected to earn was about $2,000 less than what their male counterparts expected to earn. An experimental study suggests that women feel they have to do more work than men to warrant the same remuneration (Major, McFarlin, & Gagnon, 1984). At the outset of this experiment, women subjects were told that they would earn the same amount as men for a task set by the examiners. Yet during the experiment they worked longer and accomplished the task more accurately than the males.

Fischlmayr (2002) found that the underrepresentation of female international managers compared to male international managers was due, in part, to women’s own behavior. When women were asked to consider international assignments, they behaved according to stereotype, and often deferred to their husband’s career. If their husband did not want to relocate, the women decided not to accept an international assignment. In addition, women underestimated the value of their own work roles; many believed that they were not ready to accept an international assignment, citing their need for more experience. In a recent study, female managers were three times more likely than men to underrate their boss’s opinion of their performance (Taylor, 2009). The effect of underrating one’s performance is greater the older the woman; women ages 49–65 underrated their performance more than younger cohorts of women. Taylor proposes several reasons for this underrating phenomenon. First, women do not receive as much reciprocity from their organizations as males do. For example, they are less likely to have received attention from their organization in the way of additional training. Second, they are less likely to have received feedback about their performance, so may assume that their bosses undervalue it. Third, older women may have actually experienced some discrimination or known other women who have experienced unfair treatment. These older women have spent more time working in workplaces in which discrimination was more likely. Their early careers would have been during the beginnings of the feminists movement when few women were in management roles. All of these factors could influence how women think their bosses view their performance.

The effects of women’s underestimation of their value can have far reaching consequences. Both male and female employers may expect women to accept a lower wage than men and, therefore, offer a lower wage. In experimental research, subjects charged with distributing money to men and women offered more to men because they believed that women would be willing to accept less (Solnick, 2001; Solnick & Schweitzer, 1999). When asked about women’s pay, 48% of managers, 28% of compensation specialists, and 45% of union officials indicated that women’s willingness to work for less than men was either a “very” or “extremely” important cause of the gender pay gap (Rynes, Rosen, & Mahoney, 1985). Women who feel that their bosses undervalue their performance will likely be reluctant to ask for more money or more responsibility.

In addition to gender socialization and entitlement theories, there are other explanations for the phenomenon of women undervaluing their work. First, rather than comparing themselves to men, women may compare themselves to other women who also make less money than men, and men may compare themselves to other males (McFarlin et al., 1989; Major & Forcey, 1985). Second, men may make different (and higher) evaluations about what they think their individual contribution is worth. In several studies, women have reported lower aspirations for pay than men. These lower expectations for pay certainly influence negotiation outcomes (Barron, 2003; Zetick & Stuhlmacher, 2002). If women are not given direct feedback about their work, they may be less confident about its value and therefore unwilling to value it highly. When compared with men, women are less sure of their worth and less apt to feel that they are entitled to more than others. They believe that they need to prove themselves on the job more than men do before they deserve a greater salary than others (Barron, 2003). When women are given external feedback about their work, they tend to place a higher value on it.

Clearly, women’s own self-perceptions, often shaped by societal expectations, may hinder their career prospects, and ultimately the amount of money they make. (The effects of socialization on men and women are discussed in detail in Chapter 2.)

Negotiation Skills

The evidence from several studies points to women professionals and managers negotiating lower salaries than their male counterparts (Bowles & McGinn, 2005; Dreher & Cox, 2000; Gerhart, 1990).

Some of this pay gap is due to women’s tendency to avoid salary negotiation altogether because they find it distasteful. (Of course, the reason for their attitude toward negotiation is likely influenced by their gender role.) Women are socialized to find negotiation distasteful and they have not grown up practicing it. They may have been brought up to believe that negotiating is too aggressive for women, and even potentially damaging to their careers, if they push too hard or make too many demands. On a more subtle level without specific reference to careers, in general women are encouraged by parents, friends, and the media to be agreeable rather than combative. Some scholars suggest that women effectively advocate for others without incurring costs to their careers, but gender-linked stereotypes and norms prevent them from successfully advocating for themselves. Women have learned that the costs of self-advocacy are too high (Wade, 2003).

Babcock and Laschever conducted several studies about women’s attitudes toward negotiation, the likelihood of their negotiating, and the effects that poor negotiation have on their overall incomes (2003). They found that women straight out of college do not negotiate the salary for their first job. Because salary differences become compounded over time, by not negotiating their first salaries they sacrifice over half-amillion dollars over their lifetime. Women have salary expectations between 3% and 32% lower than men for the same jobs. Furthermore, women are less likely to ask for prestigious job assignments or volunteer for opportunities that will give them more visibility. In a sample of 21 studies on negotiation outcomes, men negotiated better monetary outcomes than women. Although the effect was small in this meta-analysis, over time women would stand to lose significant earnings because annual salary raises are determined as a percentage of one’s current salary (Stuhlmacher & Walters, 1999).

The willingness to negotiate for salary is linked to one’s beliefs and attitudes. In the Babcock and Laschever studies, when women were asked to describe what negotiation was like, they responded with “going to the dentist,” whereas men described negotiation as “winning a contest.” The authors contend that women don’t negotiate hard because they want to be “nice,” have been brought up to be less aggressive than boys, and simply fear conflict.

Sex Discrimination

Sex discrimination provides a further explanation for unequal pay. Once women find their way into corporations, they may encounter glass ceilings, or barriers because of their sex (rather than because of other factors). Opportunities for financial rewards may be limited if those in power discriminate against women employees.

No doubt, the causes of women’s unequal pay compared to men’s are complex and multi-causal. For instance, a woman’s salary may be due in part to her personal preferences which are linked to societal expectations of her, or her manager may treat her differently than equally qualified males.

Rectifying unequal pay situations requires that individuals have correct information about pay rates and job responsibilities so that they can make comparisons among jobs. The next section deals with the difficulty of uncovering such information about rates of pay.

The Problem of Transparency

How can female employees know whether they are underpaid compared to others if organizations keep pay rates secret? This secrecy is especially prevalent in private, nongovernmental enterprises. Some corporations forbid employees to discuss their pay and many do not publish the pay ranges for job categories. Even if pay ranges are publicized, rarely do employees know what individual job-holders make. This lack of transparency makes it difficult for women to find out whether or not they are underpaid.

Bowles and McGinn (2005) compared salaries of male and female job candidates in industries that were low-ambiguity industries versus high-ambiguity industries. The researchers termed industries as having “low ambiguity” when the candidates were well informed about how much to ask for in salary negotiations and “high ambiguity” when candidates had little if any information about salaries. In the low-ambiguity industries, there were no significant differences between the salaries accepted by men and women, but in industries with high ambiguity, women accepted salaries that were on average 10% lower than men’s salaries.

Women clearly do better in situations where they have access to information. Without knowing the entire landscape of jobs and pay rates, women will find it difficult to know with whom to compare themselves. Many compensation situations allow for degrees of flexibility by managers, where the rules about who gets what are not well known. Consider how employees receive annual bonuses: managers have latitude in giving annual bonuses to employees and often these payments, which are in addition to basic salary, are secret. Unless employees share information with one another, or the company publishes salary information, it will be difficult for employees to know whether or not their share is fair.

The usual solution to this “lack of transparency problem” is collective action: women may bind together to uncover pay rates, conduct the statistical analysis necessary to compare women’s pay rates and job tasks to men’s pay rates and job tasks, and put pressure on employers to change pay rates when they are unfair. The US Department of Labor reports that unionized women earn 31% more than non-unionized women workers, female African American union members make 32% more than non-unionized African American women, and female Hispanic union members make 47% more than Hispanic women who are not members of a union (AFSCME, 2007). Unions can often secure fairer job conditions and pay equity for women at the bottom of the wage hierarchy. In Canada, the increase of union participation by women in the 1980s had a significant, positive effect on the wage gap. Doiron and Riddell (1994) found that union participation increased female earnings more than male earnings. Moreover, union participation prevented a further 7% gap in earnings between men and women. In other words, the gap between men and women in non-union jobs was 7% higher than the gap between men and women in union jobs.

In spite of the fact that unions generally improve wages, managers – whether men or women – rarely see themselves as part of union movements.

Equal Pay for Equal Work

In the US, the Equal Pay Act requires that pay be equal for equivalent work in the same establishment. In its first nine years of enforcement, the US Equal Pay Act did not cover professional, white-collar jobs. As a result there was no incentive to undertake job evaluation, for the purposes of pay equity, for managerial positions. In 1972, Congress enacted the Educational Amendment, which changed the Fair Labor Standards Act to expand the Equal Pay Act to cover these professional workers.

In considering equal-pay cases, it is up to courts to determine whether two jobs are similar enough for comparison by evaluating the skill, effort, and responsibility that the two job-holders possess. By law, the jobs under consideration have to be identical or very similar. This creates a problem for those pursuing an equal-pay claim, especially if their jobs are highly specialized, as they may be the only one in their organization performing the job. At the labor entry point, jobs are very similar – a factory worker or a call-center employee has many colleagues performing the same set of tasks. But the more education and training employees have, the more likely it is that their jobs will be different from all other jobs in the organization, and therefore not covered by the Equal Pay Act. For instance, two managers, by virtue of the fact that they manage different parts of the firm, are conducting dissimilar jobs; a manager of an accounting department performs different tasks to a manager of a human resources department.

In spite of the intent of equal-pay laws to provide fair remuneration, there is usually enough room for interpretation so that employers can advance arguments against the equality of the work and so rebut demands for equal pay. For example, if extra duties are assigned to one job-holder over another, then that individual can be paid more. If male employees have more seniority and more experience, then that may provide a basis for higher pay than newer female employees in the absence of any difference in the value of their work.

Moreover, if men and women do not do the same or even similar jobs, it may be impossible to apply the Equal Pay Act even when they make the same economic contribution to output.

Performance-Related Pay

In an effort to deal more fairly with employees, to motivate employees to be more productive, and to recognize individual achievement, performance-related pay was instituted in major corporations beginning in the 1980s. Before then, it was not uncommon to pay employees based on seniority; career advancement was predictable and raises were given annually to employees at the same percentage level. Still the preferred method of determining raises in many corporations, performance-related pay allows managers latitude in deciding the percentage raise to assign each of their direct reports. Managers give those who perform well the highest raises, and those who don’t perform well receive lower raises, or no raise at all. Corporations use performance-related pay to attract and retain the best and brightest employees, because high-achievers are attracted to firms where their individual effort is recognized and rewarded. When objectively implemented, the principle of pay for performance serves both organizations and employees well. Jobs in which performance is based on an objective measure, such sales performance, or those with measurable financial targets, such as many jobs in the financial sector, are better suited to pay for performance systems than jobs with more ambiguous, or difficult to measure goals.

Problems arise when pay for performance is subject to interpretation and therefore potential bias. Rubery (1995) contends that the trend toward performance-related pay systems poses a potential threat to the achievement of gender pay equality because, as discretion in pay determination increases, there is no clear relationship between earnings and job grade or classification. Performance-related pay provides fewer opportunities to monitor pay trends and may mask inequalities in the workplace (Elvira & Graham, 2002; Reskin, 2000). Individualized pay becomes a private matter between employee and employer, which reduces the transparency of the labor market. If women are unjustly underpaid, this lack of transparency makes collective responses by women to correct pay inequities unlikely.

Organizations often separate the performance-evaluation discussion from the assignment of pay raises. Many make this separation because they wish to facilitate feedback about performance and employee development, without the more difficult subject of pay raises. However, when performance evaluation and decisions of pay are conducted as two separate processes, and when there is a lack of accountability for these processes, the likelihood of gender bias increases. Castilla (2008) conducted a study in which he analyzed personnel data from a large service organization. He found that different salary increases were given for observationally equivalent male and female employees with the identical performance rating. The subjects in Castilla’s study were in the same job in the same business unit, with the same supervisor, and with the same level of education and experience. Castilla reports that this pay discrimination occurs in one of two ways: either the supervisor assigns a rating and recommends a pay raise that is later changed by the human resources (HR) department, or the supervisor recommends a raise to the HR department that is lower than what was warranted by the performance evaluation. The reward bias, therefore, can be introduced either by the manager or by the HR department. However, interviews with HR managers suggested that the bias is most often introduced by the manager who is recommending the amount of pay increase (not the HR department). The HR department did not have the time to carefully review the thousands of salary proposals that they received from managers, so they simply approved the managers’ recommendations. As reported by this study, in organizations with performance-related pay systems, those responsible for pay decisions may not be accountable for their actions, nor is the compensation system transparent to all employees.

Comparable Worth – Equal Pay for Equal Worth

Comparable worth is part of an attempt to deal with the problem raised for pay equity by the fact that men and women rarely do identical jobs – especially at higher levels. Comparable worth or pay equity (as it is referred to in Canada) is the practice of assigning equal pay to jobs that involve the same level of skill and responsibility, and are deemed to be of equal value, even though they are different jobs. For example, in a comparable worth case in the United Kingdom, a court ruled that a woman who was a Director of Human Resources (HR) for a retail clothing chain should be paid the same amount as a man who was a Director of the Buying Unit for the same company. The female HR director successfully proved that her job, although different from his, had equal value to the organization. In court, she argued that her job of hiring and selecting employees, instituting health and safety rules in all of the stores and offices, and conducting risk assessments was of equal value to the buyer’s job of selecting clothing and other merchandise for the stores (Reeves, 2000).

Comparable worth is a controversial concept. For that reason, it is not a concept employed in US equal-pay legislation.

Proponents argue for its use as part of Title VII of the Civil Rights Act of 1964, which makes discrimination based on sex, race, color, or national origin illegal. In Canada, comparable-worth legislation has been adopted in six of the ten provinces. In these provinces, generally if 60% of a job category is held by women, comparable-worth principles must be applied to it to ensure that the job category is valued fairly compared to equivalent jobs held by men. In these comparable-worth situations, the criteria used to evaluate jobs are skill, responsibility, effort, and working conditions.

Arguments Against Comparable Worth

Opponents of comparable worth argue that only the market can determine the value of jobs, and that if women occupy lower-paying jobs, this is simply a reflection of the labor market exerting forces of supply and demand, rather than the discrimination of employers. In a competitive economy, an economically efficient market sets the wage rate equal to the employee’s “marginal productivity” (the amount of revenue added by the employee), and individual employers and employees cannot influence the wage rate. If women are paid less than men for comparable jobs, then this is a matter of oversupply of potential workers in certain job categories, which drives their pay downward. Moreover, opponents of comparable worth suggest that when discrimination does exist, the inefficiencies it produces will be eliminated in the long run. The market will penalize discriminators because they will miss the opportunity to attract many good employees, pay too much to less-efficient ones, and be penalized by customers who prefer lower prices and perhaps even goods made by non-discriminating firms. This free market view holds that in the long run all wage differences reflect real differences in productivity, and that unfair or inequitable wage differences will be eliminated by market forces’ persistent drive for efficiency. This argument justifies large CEO salaries and attendant benefits as fair because the market mechanism determines the correct amount of money – the efficiency-wage – that will attract the best, most-qualified individuals to managerial jobs. Since good managers are extremely scarce, the argument holds, companies must pay large salaries to attract and retain them. During the financial crisis of 2009, this was the argument used to justify bonuses for AIG managers and others.

Opponents of comparable worth further argue that women are free to choose occupations and jobs that have a higher market value. Finally, they argue that the concept of comparable worth is too complicated and too vague to be implemented practically. Even when feasible, the investment in scrutinizing jobs and overhauling current pay systems is too high. Such efforts take time, money, and people resources.

This view about the efficiency of wages dominated the 1990s and 2000s, and led to a decline in comparable worth initiatives in the US. Federal and state courts have routinely struck down comparable worth cases. “[Former Chief Justice] Rehnquist voiced the worry that if courts entertained claims of between-job wage discrimination, it would lead courts into the analytical quagmire of trying to determine what male and female workers in various jobs should be paid” (Nelson & Bridges, 1999, p. 46). The courts are more likely to intervene in clear-cut equal pay cases between two people in the same job. Because of the difficulty of winning a comparable-worth case, the number of such cases brought before the courts has been small compared to equal-pay cases. It has been difficult to prove intentional discrimination on the part of employers in the face of what defendants argue are free-market forces. For these reasons, comparable-worth cases virtually disappeared after the 1990s.

Arguments For Comparable Worth

Supporters of comparable worth argue that labor markets are frequently inefficient. These inefficiencies make wage rates a poor indicator of one’s productive worth. To begin with, some labor markets involve a small number of buyers – the employers – and a large number of sellers – job-seekers. Therefore, the employers can often set the price of labor, rather than it being set by an equilibrium between job-seekers and employers. Employers exercise their market power to set prices and wage rates, and to select employees without real competition with one another. Within a single organization, managers have a great deal of leeway and discretion in setting the pay of their employees. For example, before Sears had a centralized compensation system, salaries for headquarters’ positions were determined by group merchandise managers, while salaries for retail positions were decided by store managers. Managers had little if any information about company-wide pay practices and were given great latitude in the determining pay of their workers (Nelson & Bridges, 1999).

Failure of the market to produce efficiency in allocating resources, including labor, has always been accepted as a reason for governmental regulation of the market. Advocates of comparable worth hold that the inefficiencies of the labor market provide an adequate basis for establishing laws promoting comparable worth.

In addition, those who are in favor of judging jobs based on comparable worth claim that, in general, women’s jobs are undervalued by society when their roles are measured by wage rates.

Before the 1990s, comparable worth in the US was taken more seriously. In 1984, one study compared the approaches to comparable worth taken by compensation specialists in 360 small, medium, and large companies. When asked whether or not comparable worth was an issue of concern within their organizations, 54.4% answered that it was a concern to them (60% in the large organizations, 51.3% in medium, and 43.9% in small companies); however, these specialists reported that the concern of top management about the issue was significantly smaller: 18.3% (24.8% in large organizations, 15% in medium, and 4.9% in small companies) (Mahoney, Rynes, & Rosen, 1984). Those in top management who were attentive to the comparable-worth issue were concerned about it for two reasons: first, they wanted to ensure company compliance with equal-pay laws and, second, they wished to estimate the potential costs to the company of shifting their compensation policies to encompass comparable worth. When asked how the earnings gap should be addressed, compensation specialist indicated that the most effective way would be for women to prepare themselves for non-traditional, male-dominated occupations where the pay is higher.

If comparable worth is difficult to establish and unequal pay claims without merit unless jobs are the same, why not use Title VII of the Civil Rights Act to fight unequal pay claims for dissimilar jobs? The reason is simple. The law requires that in order to be illegal discrimination against a class of employees, a practice must be the result of the specific individual motivation of an employer to discriminate on grounds of sex. This makes it almost impossible to use Title VII to combat inequalities in pay and gives employers wide latitude to continue policies of unequal pay. An employer may always cite as reasons for such practices beliefs about human capital, or impact on production costs, or some other business reason in order to explain an individual hiring decision or wage-differential. Motivations are notoriously difficult to establish in law.

Comparable-Worth Evaluations

Other countries have had more interest than the US in evaluating the comparable worth of different jobs. In Switzerland, a system called EVALFRI has classified healthcare workers, primarily a female professional group, and paid them according to their value to the organization. Moreover, a recent International Labour Organization statement approved by over 100 governments supports comparable worth:

Respect for this principle [equal pay for equal value] is essential, because of the sex segregation in the labour market. Efforts need to be taken so that the principle is understood and applied, as appropriate. Job evaluation on the basis of objective and non-discriminatory criteria are one way to implement equal pay for work of equal value.

(2009 International Labour Conference, Provisional Record, 98th Session, ILO, Geneva)

In its efforts to implement equal pay for equal value, the ILO has worked with the Portugeuse food and beverage sector. In one establishment, women pastry chefs were making less money than the men who sold the pastries at the front of the shop. By assessing the value of these two jobs, the women’s pay was readjusted so that it was higher than the male sales clerks’ pay. In another case, women hospital workers recording patient information and instructions were paid less than male parking lot attendants in the same hospital. It was successfully argued that the value of the women’s jobs was higher than the value of the men’s jobs. An error on a patient chart could be far more serious than a mistake parking a car (Hodges, ILO Presentation, July 28, 2009).

Fair Job Evaluation

Instead of comparing jobs two-by-two as comparable worth requires, job evaluation is the process of assessing the contribution of all the jobs in an organization for productive value. Job evaluation has been used in organizations to promote fairness in pay. A recent ILO publication provides a system for conducting gender-neutral job evaluations for the purposes of establishing pay rates (Chicha, 2008). Organizations should first set up a pay-equity committee comprised of equal numbers of men and women, including representation from female-dominated job categories. Second, evaluators should be sensitive to potential biases in the measurement of job qualifications, effort required in the job, degree of responsibility of the job holder, and prejudices around work conditions. For example, interpersonal skills are often dismissed as a requirement for jobs typically occupied by women, yet nurses need empathy, and secretaries need good verbal communication skills and command of written language. In terms of the physical demands of a job, men are often given credit for lifting heavy objects and for outdoor work (in construction, for example). Nurses are also required to lift patients, cashiers are required to stand for long periods, and seamstresses deal with taxing, repetitive work and noise. Women are often not given credit for the responsibilities they have; administrative assistants need to keep sensitive information confidential and primary school teachers are responsible for the safety of children. Traditionally, responsibility has been evaluated based on whether an individual manages other adults or manages materials or a budget – activities that men have done more than women.

The Pay Check Fairness Act

Some members of the US Congress have deemed the Equal Pay Act inadequate to address pay inequities between men and women. They have initiated two bills that seek to implement comparable-worth analyses: the Pay Check Fairness Act, introduced by Senator Tom Daschle (D-SD) and Representative Rosa DeLauro (D-CT), and The Fair Pay Act, introduced by Senator Tom Harkin (D-IA). Both bills were designed to close loopholes in the Equal Pay Act that make it relatively easy for employers to circumvent the law, and both were offered as amendments to the Fair Labor Standards Act (of which the Equal Pay Act is a part). To date, neither bill has been passed. The Pay Check Fairness Act has several features that would strengthen equal-pay legislation.

Although the Equal Pay Act allows for back-pay awards, it does not allow a plaintiff to recover compensatory or punitive damages. Without this extra stick, employers may be more willing to fight a case and prolong it, given the fact that the risk of losing may not be very high. The Pay Check Fairness Act proposes to allow plaintiffs to recover compensatory and/or punitive damages.

The Equal Pay Act is also silent on the issue of improving information about pay. The Pay Check Fairness Act would require employers to provide the EEOC with information about pay by race, sex, and national origin of employees. Furthermore, the act would prevent employers punishing workers for sharing pay information with one another. It also directs the US Department of Labor to set up guidelines to help employers share information regarding pay rates for different jobs.

The current Equal Pay Act makes it difficult to proceed with a class action suit, where employees from a particular firm come together to sue an employer. The Equal Pay Act requires employees to “opt in” to a suit, placing the onus on employees to find out about a legal action and request to be part of it in writing. The Pay Check Fairness Act calls for the opposite; a class of employees would be part of the class unless they “opt out” of it in writing.

Under the Equal Pay Act an employer can assert that a male is paid more than a female in a comparable job because of “factors other than sex” (see Section 3, D1). A seniority system, merit pay, and the quantity and quality of production are three examples given as factors other than sex. As discussed earlier in this chapter, these factors can reflect previous conditions of injustice. The Pay Check Fairness Act attempts to eliminate these loopholes by allowing only non-sex-related factors such as education or relevant job experience.

Under the current law, a wage comparison can only be made between two employees in the same “establishment” (see Section 3, D1). However, employers of large organizations, with subsidiaries or divisions, may claim that the two jobs are not part of the same “establishment,” therefore the Pay Check Fairness Act eliminates this rule. Finally, the Pay Check Fairness Act calls for more education and training of EEOC and US Department of Labor employees, and the establishment of an award to recognize employers who eliminate pay disparities.

Further Reading and Suggested Websites

The National Committee on Pay Equity website: www.pay-equity.org/day.html.

For a history of pay inequity and the wage gap: www.infoplease.com/spot/equalpayact1. html.

Babcock, L. & Laschever, S. (2003). Women don’t ask: Negotiation and the gender divide. Princeton, NJ: Princeton University Press.

Blau, F.D. & Kahn, L.M. (2000). Gender differences in pay. The Journal of Economic Perspectives, 14(4), 75–99.

CASE STUDIES

Case Study 1: Equal Pay Discrimination or Lack of Negotiation Skills?

The publishing business was undergoing enormous changes and Carolyn Johnson knew that she had to swim with the prevailing tide or drown. Many days it was hard to keep her head above water, but the President of the Corbett Group, a publisher of trade books of all varieties, had made it very clear to all employees that they would have to be flexible and hard-working to survive against the other media, which seemed to be bombarding their customers from all directions. With the advent of the Internet and global competition, Corbett was being forced to go to print with shorter lead times and with new titles.

Calvin Kuehn was the president of the Corbett Group. The company was privately owned and he had inherited the business from his father. He knew publishing very well and had established a thriving, mid-sized firm specializing in trade books.

The Trade Book Industry

Most publishers of trade books are organized around a similar model. As an individual senior editor, Caroline, like other senior editors, was responsible for a list of titles under a particular category, such as mysteries, science fiction, or romance novels. Caroline’s list was mysteries. Typically, senior editors work with a group of authors or authors’ agents, encouraging them to write more titles and more marketable books. Senior editors juggle a number of projects at once; they need to drive authors to finish books to meet their publishing deadlines, but they have to be careful to not push too hard. After all, the best authors could go elsewhere. In addition to the editorial side of the business, other major parts of Corbett include the production department (here, employees set production budgets for individual titles and manage the physical production of books from their inception to print), the sales and marketing department (those responsible for advertising, promotion, and sales), the information technology department (employees who handle both internal information technology decisions and the company’s Internet presence), and the finance and accounting departments (which manage both internal financial controls and work with the marketing and sales department to set book budgets). To keep pace with technological advances, in the last several years the Corbett Group had begun publishing online versions of some of its most popular titles, as well as downloadable versions of certain books and audiobooks.

New Job Assignments for a Few

Throughout the company, employees were being asked to take on more work. The senior editors were no exception. The added amount of work came without additional staff; everyone was told that budgets were extremely tight and managers would need to find creative ways to get the work done. Two employees, Caroline and one of her senior-editor peers, Jack Dryer, were called to a meeting with the President of Corbett to discuss not only more work but different job responsibilities. Jack managed a list of science-fiction titles. Both Caroline and Jack felt the inevitability of this meeting since they had already been told that there would have to be changes. Although they were dedicated to the success of the company, they dreaded having additional work. They were already stretched too far.

Calvin Kuehn kept his comments fairly brief, “Thanks for coming in. I know that both of you are very aware of how our business is changing. It seems each year the market ups the ante. We have to give our customers as many options as our competitors do, just to stay even. Let me come to the point. I’ll need both of you to add more electronic options to your lists and more DVDs. You will need to work with our marketing department to figure out a strategy for distribution. I suspect we can use some of our current clearinghouses to distribute DVDs. We’ll use our website for electronic versions of titles. Work with IT on that. Can you come up with a proposal by Wednesday next week to show me which titles you think would be best to put into these formats?”

Although, Calvin asked a question, both Jack and Caroline understood it as a command. In unison they responded, “Of course.”

“OK then, Caroline I’d like to meet with you next Wednesday at 2 p.m. Jack, can you come in at 3?”

Jack automatically responded, “Be glad to,” even though he didn’t have any idea what he had planned for that day. If he had scheduled an out-of-town trip, he would simply change his plans.

“Oh, be sure to include timelines for rolling out new and old titles and a proposed budget.”

Calvin Kuehn rose from his chair, a sign that the meeting was over. He shook Caroline’s hand and patted Jack on the back.

“Good work, both of you.”

Caroline’s Meeting

Caroline had frantically put together a complete document with each title in her list and a suggested rationale for whether or not to expand its distribution to DVD or an electronic book. Before the meeting she had met with the marketing, production, and finance directors to discuss with them the promotion and distribution decisions that would have to be made and the projected costs associated with each project. Each of her recommendations had a timetable attached to it, a budget, and a suggested strategy for distribution. She handed the document to Calvin and she sat down at the conference table.

“It’s ambitious, but I think we can do it. All the costs have been cleared with both production and finance.”

Calvin nodded and began reading the document. Several minutes later, he looked up.

“This looks good. So you can do three titles by year end. And another four next year. That’s great. If you run into any snags you have my full support. You’ll need cooperation from just about every one of our departments. If you don’t get it, I want to hear about it, OK?” he smiled.

“I don’t foresee any problems, Mr. Kuehn, but thank you for your support.” Caroline shook his hand as she prepared to leave.

Jack’s Meeting

“I’ve been working on this steadily since we last met. I think you will be pleased with it. May I walk you through it? I made us both copies,” Jack said.

“Be my guest,” replied Calvin Kuehn.

In great detail, Jack proceeded to explain how he planned to introduce technology to his book list. Like Caroline, he planned to introduce three downloadable editions this year and four e-books next year. He recommended that one title be dropped; it wasn’t making the company much money and it was very time-consuming. He explained that with a little extra time he would really be able to devote himself to thinking more strategically about the list. He mentioned that he thought a good complement to the science-fiction titles would be a few books of fantasy or magical realism. He hadn’t really sketched this out, but wanted to test the waters with Mr. Kuehn to get his opinion. Mr. Kuehn seemed receptive to the idea and told Jack that he liked his kind of forward-thinking. At the end of the discussion, Jack said,

“Mr. Kuehn I’ve worked for the company now for eight years and I have always stepped up to the plate when called on to do extra things. I work long hours and my family and I have sacrificed a lot to make this company successful. This project will increase my workload substantially. It’s really a new job role for me. I will need to learn the electronic publishing business and everything that goes with it. That will mean taking on some additional courses to learn selling in this new medium, networking with other publishers in the e-space, and it will require that I learn new production principles that are completely different from our traditional trade books. It’s really a new learning curve for me and a new terrain for our company. It will require a huge effort. I am very happy to do this but it has expanded my job role considerably. I think that it warrants extra compensation. Obviously a large raise would be great, but I do understand the kind of financial pressures we are under. It is more the recognition of my hard work that I am looking for.”

“Jack, I do know how hard you work. Let me take a closer look at our budget and I will get back to you. I am not making any promises, though.”

Caroline’s Lunch Date

Denise Snyder, an employee in the payroll department and one of Caroline’s closest friends in the company, called her to have lunch. They found their usual quiet corner in the company cafeteria.

“You can’t breathe a word of this because you know I am supposed to keep employee details confidential. This one really burned me up, though, and I thought you should know. Do you promise not to tell a soul?”

“Promise,” Caroline said.

“Well, I was asked to amend Jack’s employment records. Kuehn has approved adding another $10,000 to his merit bonus. I thought our President just told us we all needed to tighten our belts and pitch in to get the work done. What did Jack Dryer do to deserve such treatment? You work just as hard as he does and in my opinion get more done.”

Caroline was astonished to hear this news. She knew that she worked just as hard as Jack did and felt she deserved the same. She couldn’t believe that Mr. Kuehn wouldn’t do the same for her.

“Now, you can’t tell anyone I told you.”

“I won’t, I promise,” Caroline reiterated.

Discussion Questions

1. In your opinion, was this a case of Caroline’s lack of negotiation skills or a case of discrimination?

2. If you were Caroline, what would you do now?

3. Could Caroline have presented herself better during her meeting with Mr. Kuehn? If so, how?

4. Mr. Kuehn owns the company and is simply trying to keep costs in line and keep his employees happy. Is he unwise to pay Caroline and Jack differently from one another or is he simply making a smart business decision?

5. In pairs, role play the conversation between Caroline and Mr. Kuehn during which she is describing her proposal to him. If you are playing Caroline’s role, ask for what you think you deserve.

6. Look at the information on pay comparisons between men and women in this chapter. In your opinion, why do these disparities still exist?

7. Read the article by Gneezy, Niederle, and Rustichini entitled, “Performance in Competitive Environments: Gender Differences” (Quarterly Journal of Economics, 2003). Do you think women shy away from competitive situations? Why, or why not? Do you think women’s performance slips when they are challenged by males?

Case Study 2: Splitting Tips or Splitting Hairs? Should Female Wait Staff Complain?

Lauren DeStephano pulled on her work uniform, a pair of khaki pants and a white button-down-collar shirt, with Luigi's embossed in bright red on the breast pocket. She mentally prepared herself for a long Saturday evening of being on her feet and smiling graciously to her customers – even the most demanding, unreasonable ones. Lauren began her shift at 6 p.m. and finished by midnight. She worked part-time at Luigi’s as a way to supplement her college spending money and to help defray the cost of her textbooks.

Luigi’s is a growing franchise restaurant that appeals to middle-income people – families and single people alike. With a wide selection of Italian dishes at moderate prices (pastas, cannelloni, lasagna, and pizza), popular salads, anti-pastas, trendy desserts, and a full bar menu, Luigi’s attracts large crowds, especially on the weekends. In keeping with the food, the restaurant has an Italian flair. The walls are painted a creamy yellow with faux-finish designed to give the restaurant a rough-hewn appearance as if it had one time been a Tuscan farmhouse. Italian motifs adorn the walls – landscapes of hill towns, vineyards, and the ever-present Venetian gondola. The wait staff at Luigi’s is almost entirely female: eight women servers and two male servers. Those clearing tables, the “bus-boys,” are all male, and the three full-time bartenders are male.

When Lauren started her job, she was told that the wait staff pooled their tips with the bus-boys and the bartenders. Bill Myers, the general manager of the restaurant, took all of the credit-card receipts and added up all of the tips that had been added to each receipt. He then took that amount from the cash drawer and added it to the tip pool. At the end of the evening, the money was divided up evenly among all of the wait staff, the bartenders, and the bus-boys who had worked that shift.

When Lauren first started her job, she was too busy and preoccupied with college work to think about the fairness of the tip system; however, as she became better acquainted with her fellow female waitresses, her attention to the matter increased. The women often stayed after work and had a drink together. On a Saturday night after the restaurant was closed, they began to discuss the rationale behind the pooling-of-tips system.

Janine began, “I can understand a system where the wait staff would pool their tips because it is really the luck of the draw if someone who is rich and not cheap sits in my section and not yours, Sal.”

“I agree. We can’t really control who sits where and how much they might tip. And I think we all work hard so it is fair that we share our tips. But I’m not sure about sharing them with everyone else,” Sally offered.

“The bus-boys work hard, but they don’t have to deal face to face with the customers as often as we do. Customers don’t blame them for anything. When the steak that was supposed to be rare turns out burned to a crisp, we take the flak, they don’t,” Mary said.

Sally added, “I think they deserve some part of our tips, but we shouldn’t have to split them with them. The guys do clear off our tables and get them ready for the next customers that come in. But I agree, they shouldn’t get as much as we do.”

“Look we make $5.50 an hour and we need all of the tips we can get. I have rent to pay and groceries to buy. I can barely make it on what I bring in. I know we make less because supposedly our tips make up for it, but that just isn’t the case.” Mary said.

“How much do the bartenders make an hour?” Lauren asked.

“They make $8.55 an hour. Why should we split our tips with them? They make much more than we do!” Sally fumed.

Mary added her indignation, “Besides, they make tips from customers who sit at the bar. They don’t split those tips with us!”

“Why don’t we try to talk to the general manager about this? We could ask him to meet with us after our next shift,” Lauren offered.

“Good idea, Lauren. Will you ask him?’

Lauren agreed to speak to Bill Myers the next day to set up a meeting.

The Meeting with Bill Myers

Myers was an outgoing, friendly man, younger-looking than his 55 years. He bought into the Luigi franchise five years before and had made a success out of it through working persistently, hiring reliable people, and advertising widely in community newspapers. The restaurant had gone from a small number of patrons to families, college students, and single people, largely because of his efforts. He had instituted happy hours, family meal specials, and once-a-month special events with live music for sororities and fraternities. He was more than willing to talk to the women about their concerns.

“We had an incredible Saturday, didn’t we? You all did very well and I think it could have been one of our busiest nights ever. But, you wanted to discuss something with me, didn’t you? OK ladies, what’s on your mind?”

Lauren began, “We have some concerns about the pooling of tips system.”

Lauren waited for her colleagues to pitch in. When they didn’t, she continued, “It’s just that we don’t understand why we have to pool our tips with the bus-boys and the bartenders. It seems unfair.”

As soon as Lauren opened up the conversation with their chief concern, the other women volunteered their views.

“Mr. Myers, I’ve been here three years and it’s always bothered me that I have to give my hard-earned tips to the bartenders. They make almost double what I make,” Sally said.

“And they don’t share their tips with us,” added Mary.

“Well, let me address the bartenders’ pay first. They make more because their position requires more knowledge. They have to know how to make lots of complex drinks. And they attended a bartending school. In terms of the bartenders’ tips, they don’t get many. Most of our customers sit at the bar only because they are waiting for a table. We don’t get many hard-core drinkers in here.”

“Well, Mr. Myers, about the bartenders knowledge. . . . We also need to know how to serve tables correctly. How to pour wine, which side to serve from, exactly how the food is made, which items are vegetarian, and what comes with each dish, and how to deal with customers when they don’t get what they expect. Every time the menu changes we have to learn what new items are on it,” Sally countered.

Janine added, “We really work hard on a weekend night, running around from table to table. The bus-boys and the bartenders don’t have the physical demands we do. We have to have both stamina and a constant, cheerful attitude with the customers.”

“Janine, I know you all work hard. So do the bus-boys and bartenders and they count on a share of the tips from the customers. The bus-boys have physical demands like you do. They are on their feet all evening and lift heavy trays of dishes. In this restaurant, we all serve the customers wherever we are, whether we are serving them at the tables like you do or from behind the bar,” said Bill.

“So you aren’t going to change the system?’ asked Lauren hesitantly.

“Look, this is how all of Luigi’s franchises operate. The chain is very well run and management hasn’t received any complaints from other locations on this issue. I run this restaurant on the principle of teamwork and I think everyone should have a share of the customer tips if they contribute to the service. The bartenders and the bus-boys deal with customers too.”

Job Description for Bus Person

The individual job-holder will support a station in the restaurant, typically six tables, by setting tables with table clothes, silverware, and napkins. The individual will clear tables when customers are finished with their meal and deliver the dishes to the stations located on the sides of the kitchen. Bus-persons will be sure to keep salt and pepper mills full, ketchup and other condiments full and clean on the tables. They will clean tables with clean towels after they are cleared and before new customers sit down. As part of the restaurant team, bus-persons will also help out where needed. This may include filling water glasses when the wait staff becomes very busy or answering customers’ questions if they are asked. Because this is a visible position, bus-staff must be courteous and well-groomed, and strong enough to lift trays of dishes.

Job Description for Wait Staff

Wait staff will manage six tables in their station. They will take orders, answer customers’ questions about meal choices, and they will understand our various offerings. This includes everything on the menu, as well as evening entrée specials and desserts that change daily, and the bar and wine menu. Wait staff will periodically attend training sessions to learn about new wines on the menu and the various new offerings. They will handle customer complaints and special requests so as to minimize attention of other customers and to ultimately “take care of the customer” so he or she will have had a pleasant dining experience. As a team member, wait staff will support one another. This means on occasion taking customers in another wait staff’s station to relieve pressure or helping with large parties. This job position requires stamina, teamwork, diplomacy to handle difficult customers, an outgoing personality, and the ability to learn the technology we use to enter and transmit orders to the kitchen staff. Previous experience desired.

Job Description of Bartender

This job requires previous experience as a bartender and a complete knowledge of the range of drink orders, including types of wines, beer, and hard liquor drinks. The position requires speed and accuracy in handling drink orders, which may come from either the bar or from the wait staff when people order drinks from their tables during their meals. The individual must be able to work well under pressure and be a team player, as this position requires working with other bartenders and wait staff. Stamina is required as bartenders remain on their feet throughout their shift. The individual must be personable and well-groomed. Knowledge and enforcement of the law required; bartenders may not serve individuals who are underage or continue to serve individuals who have had too much to drink.

Discussion Questions

1. Bill Myers indicates that the male bartenders have more human capital (skill and knowledge) than do the female servers. Do you agree or disagree?

2. If you were the women, what other tactics would you use to try to obtain a fairer system of compensation?

3. How is restaurant work gendered? Why do you think this persists?

4. This case demonstrates some of the problems with the concept of “comparable worth.” In what other professions (jobs) do you see making a comparison between a man’s job and a woman’s job problematic?

5. Design a program for assigning worth to three positions in this restaurant so as to assign wages and tips more equitably.

6. Go to www.salary.com for an interesting look at what specific occupations pay around the United States. Enter your zip code and a job title and see the ranges for salary in a particular job category for your area of the country.

LANDMARK EQUAL PAY AND FAIR COMPENSATION CASES

Two cases have strengthened the US Equal Pay Act, Schultz v. Wheaton Glass (1970) and Corning Glass Works v. Brennan (1974), and one, Ledbetter v. Goodyear Tire and Rubber (2007), has weakened some equal-pay cases.

In Schultz v. Wheaton Glass, the US Court of Appeal’s Third Circuit ruled that jobs that are paid equally need to be “substantially equal” in terms of tasks and responsibilities but not be identical. This case proved significant because most jobs are not identical, particularly as one moves up the hierarchy in organizations. Assembly-line workers may have identical jobs, but managers rarely do.

In Corning Glass Works v. Brennan, the US Supreme Court ruled that employers cannot justify paying lower rates for women for the same job simply because the market has accepted the rate. In other words, even if women accept lower pay for the same job, the court ruled the practice illegal. Corning Glass Works had been paying women sales executives less than male sales executives.

Wal-Mart has been forced to pay $78.5 million for violating Pennsylvania labor laws by forcing employees to work through rest breaks and off the clock. In this case, “off the clock” is a term used to explain that employees are expected to work without getting credit for all of their time. For example, a maid might be forced to punch out (thus recording the end of her shift), but still work a half-hour or more to clean up. The class action suit was filed by 187,000 current and former employees of both Sam’s Club and Wal-Mart (Dale, 2006). One plaintiff, who was fired after complaining about work practices, reported that she worked eight-to-ten unpaid hours a month. In addition to uncovering the practice of not paying for overtime, the prosecuting attorney in the case explained that Wal-Mart’s computers were programmed to dock workers for every minute that they signed in late. This practice saved Wal-Mart $26 million in one year.

Lilly M. Ledbetter v. The Goodyear Tire Company

Lilly Ledbetter, a supervisor at Goodyear Tire and Rubber’s plant in Gadsden, Alabama, worked from 1979 until her retirement in 1998. Her equal-pay discrimination case finally made its way to the US Supreme Court in May 2007. Her claim was dismissed by the Supreme Court based on a narrow reading of the Title VII law, rather than on the spirit of the law, which was written to prevent discrimination based on sex, race, color, religion, or national origin. In January 2009, President Obama reversed the Supreme Court’s decision and signed into law the Lilly Ledbetter Fair Pay Resolution Act, making it possible for persons experiencing age discrimination to have their case heard after the 180-day time-limit requirement if they had no knowledge of the discrimination during the time-limit period.

When Ledbetter was first hired, her salary was in line with similarly situated male area managers. Over time, however, her pay fell in comparison to the pay of male managers with equal or less seniority. Ledbetter was the only woman working as an area manager. By the end of 1997, her pay was in sharp contrast to her 15 male counterparts; she was paid $3,727 per month versus the lowest-paid male area manager who received $4,286 per month and the highest, at $5,236 (Justice Ginsburg, 2007, p. 1). Under Title VII legislation, Ledbetter made charges of discrimination to the Equal Employment Opportunity Commission in March 1998. A jury eventually found that Goodyear more than likely paid Ledbetter an unequal salary because of her sex. The court awarded Ledbetter money for back pay, damages, her legal fees, and other costs associated with the judgment. Goodyear took the case to the Supreme Court where Justices Alito, Scalia, Kennedy, and Thomas reversed the lower court’s decision. The court held that Ledbetter’s claim was time-barred because of Title VII’s stipulation that charges of discrimination be filed within 180 days of the alleged unlawful act. The court ruled that it was incumbent on Ledbetter to file charges each year that Goodyear failed to increase her salary commensurate with the salaries of her male peers (Ginsburg, 2007, p. 2). Moreover, the court affirmed that any pay disparity not contested within 180 days becomes impossible for Title VII to repair. Ledbetter narrowly lost her case at the Supreme Court in a five-to-four decision. The dissenting Supreme Court Justices, Ginsburg, Stevens, Souter, and Breyer, contested the ruling for several reasons. Ginsburg, the author of the dissenting opinion, wrote:

The Court’s insistence on immediate contest overlooks common characteristics of pay discrimination. Pay disparities often occur, as they did in Ledbetter’s case, in small increments; cause to suspect that discrimination is at work develops only over time. Comparative pay information, moreover, is often hidden from the employee’s view. Employers may keep under wraps the pay differentials maintained among supervisors, no less the reasons for those differentials. Small initial discrepancies may not be seen as meet for a federal case, particularly when the employee, trying to succeed in a non-traditional environment, is averse to making waves.

(Ginsburg, 2007, p. 2)

Ginsburg explains that both the pay-setting decision (under the 180-day rule by Title VII) and the actual payment of a discriminatory wage are relevant to the Title VII legislation and its intent to make unlawful the practice of pay discrimination based on sex. The Supreme Court ruling was clearly a setback for women. Often it takes more than 180 days for people to realize that they have been unfairly compensated. Furthermore, individuals may be trying to negotiate a fair outcome with their employer; in this case, they may not wish to file a complaint when they are attempting to rectify the situation by conciliation with their employer. Ginsburg remarked that Ledbetter’s experience was more suggestive of a hostile work environment, rather than a single, discrete episode of pay discrimination.

In April of 2008, Congress revisited Title VII, but did not change the 180-day rule. Many Congressional members felt that it would result in a groundswell of equal-pay cases. The statute of limitations is controversial. Some against changing the law suggested that it would actually hurt workers because employers, as the cost of litigation increases, would hire fewer people and pay them less. Ted Frank, an attorney,

writes:

To the extent every employee is a potential lawsuit, that is a cost of hiring an employee. As those costs go up, employers will hire fewer employees, and charge “insurance” to the employees they do hire by reducing their wages to account for the possibility of a future lawsuit. If the misnamed “Lilly Ledbetter Fair Pay Act” passes, the vast majority of workers will be worse off, as money that would have gone to pay employees will instead go to pay attorneys.

(Frank, 2008)

In 2008, several members of Congress introduced the Lilly Ledbetter Fair Play Act, which revised the law to state that prior acts outside the 180 day statute-of-limitations could be included. The bill passed in January 2009.

Boeing

In the 1990s, Boeing Corporation quietly began to conduct data on pay to see how women were paid in comparison to men for similar work. Several salary studies concluded that women had been paid less than men. In 2000, 38 Boeing female employees filed a class action suit against Boeing. As part of the legal proceedings, the prosecution lawyers requested pretrial documents that Boeing had about gender pay differentials. Boeing’s lawyers refused to turn over documents, citing attorney–client privilege as the legal principle. Meanwhile, behind the scenes, employees removed the pay documents. The case was settled out-of-court for $40.6 million. Boeing was ordered to revamp its hiring practices, overtime assignments, criteria for promotion, and its complaint procedures. The maximum award that any plaintiff received in the suit was $100,000.

Other Equal Pay Cases

In the United Kingdom, Stephanie Villalba, the former head of European private banking for Merrill Lynch, earned substantially less than her male counterparts. She was unsuccessful in suing Merrill Lynch for £7 million in damages as the employment court dismissed her allegations of unequal pay and sexual discrimination. The Industrial Tribunal ruled that she did have a case for unfair dismissal because after she was dismissed from her position she should have been offered an alternative position within the company. There is a monetary cap on unfair dismissal claims in the UK of £55,000.

Liz Pullen, a regional director for Onyx Environmental Group, a French company operating in the UK, found that when she was laid off from her job along with two other male directors, her severance package was significantly less than theirs. She has been offered six months’ severance pay while they were offered one year’s pay. At the same time, she discovered that she had been underpaid in comparison to them, earning £15,000 a year less. Since severance packages are calculated based on salary and the number of years employed by the organization, not only was she disadvantaged during her time with the company, but also when she was “let go.” Pullen managed an annual turnover of £20 million and 300 employees, and had worked for the company for six years.

In 2007, API, a British manufacturer for the graphics and packaging industry with operations in Europe, the US, and Asia, settled an equal-pay case for £25,000. When Bridget Bodman, an accountant with API, was promoted from an accountant to a financial controller, she discovered that her successor was offered £8,000 more than she had made as an accountant, and had received an additional £8,640 in a car allowance and other benefits. An industrial tribunal ruled that the company had no defense for offering her replacement more than she had made. The case highlights the importance of companies’ pay rates, even in situations in which an employee has left a job and moved on to another.

In Mrs. Cadman v. Health & Safety Executive, the UK court ruled that Mrs. Cadman’s pay could not be determined based on a length-of-service requirement. Mrs. Cadman filed against her employer when she discovered that she was being paid less than a male performing the same job, based on the fact that he had more seniority with the company than she did. The court said that a length-of-service requirement must be objectively justified to a set of employees, not to a single employee, and that it needs to determine what weight it should have compared to other factors, such as merit. It is easier to justify a length-of-service requirement in managerial roles, where experience may be relevant to performance, than in routine jobs where it is not as much a factor.