By Claire Cain Miller
The Obama administration had an idea it thought would help address the pay gap between white men and almost everyone else: requiring companies to report how much they paid people, along with their sex and race.
On Tuesday, that regulation became the latest of those reversed by the Trump administration, before the requirement was to go into effect next year.
Pay transparency, alone, would not have solved the pay gap problem. But without it, employees and regulators won’t have evidence that a problem exists at any particular company — and employers will face less pressure to fix it.
There is little data on whether forcing companies to disclose pay makes it more equitable, mostly because the pay of individual workers or companies is generally kept secret. The Bureau of Labor Statistics surveys companies about compensation, but publishes only aggregate, anonymous data. Researchers who have studied the few instances in which companies have publicly disclosed individual salaries say it is not enough to close pay gaps, nor is it essential — some companies have closed them on their own, without publicly reporting pay information.
But most companies have no incentive to close pay gaps. The regulation provided that incentive — by pressuring them into it.
“Part of the motivation behind it would be to shame certain employers that found large gaps into doing something and taking proactive steps,” said Jake Rosenfeld, a sociologist at Washington University in St. Louis who has studied the issue.
White women’s median hourly earnings are 82 percent of those of white men, according to a Pew Research Center analysis of Bureau of Labor statistics data. Asian women earn 87 percent of what white men earn, while black women earn 65 percent and Hispanic women earn 58 percent. Black and Hispanic men also earn less than white men, while Asian men out-earn them.
The pay gap shrinks after controlling for factors like industry, education and hours worked, but a gap persists. Economists say the unexplained portion of the gap is probably because of discrimination.
The Obama regulation required that employers with at least 100 workers include aggregate, anonymous information about pay for categories of employees, on a form they already submit with information on sex, race and ethnicity. Similar policies are in effect in Europe, including a new law in Britain.
Proponents said the regulation would make it easier for employers to police themselves and harder for them to hide discrimination. It would also make it easier for the federal government to investigate them.
Business groups opposed the rule, saying it was a burden and wouldn’t prove that any disparities were because of bias. The Trump administration agreed, and said it required too much paperwork.
While pay transparency doesn’t prove discrimination, it’s a starting point for employees and regulators to find out if there is any. Lilly Ledbetter, who inspired the Fair Pay Act of 2009, did not find out she was being paid less than men until she received an anonymous note 19 years after she started her job.
The little research that exists has shown that pay transparency leads to smaller pay gaps, sometimes just by making people aware there’s an issue. Mr. Rosenfeld found in a study that it raised wages by helping workers negotiate. Many public-sector employers are required to publish pay, and pay gaps tend to be smaller.
Employers might not intentionally pay people differently, said Cynthia Estlund, a law professor at New York University who has written on the topic. But publishing the information highlights pay gaps that arise for other reasons, like the fact that women negotiate pay less often.
“These individual negotiation strategies with a lot of secrecy around salaries basically allow employers to keep salaries lower for some groups,” she said.
Pay transparency can have unintended consequences. Though some research has found that it motivates people to work harder, other research has found that it lowers morale and motivates people to look for new jobs.
When California cities began publishing municipal salaries, one study found, it prompted pay cuts among men. The quit rate also increased by 75 percent.
A study by economists at Princeton and the University of California, Berkeley, found that people who were paid below the median reported lower job satisfaction and were more likely to look for new jobs, and that people who earned above the median reported no higher job satisfaction.
To get around the problem, some companies, like Salesforce, have done internal audits and given people raises to close the pay gap without publicizing pay. That might seem like the easiest solution — but companies are less likely to feel the need to do it without outside pressure.
Published on The NY Times on August 31, 2017.