Source: Getty Images

Pay-Equity Fight Quickens Even Without U.S. Cheerleader-in-Chief

Updated on
  • More than 20 states are weighing laws to close gender-pay gap
  • New bills ban use of pay history, allow worker pay discussion

In Anna Moeller’s first job in government, she served as an assistant village manager in the Illinois hamlet of Lake in the Hills. She said Yes to the $40,000 salary she was offered, only to later learn from her boss that if she’d asked for more, she’d have gotten it.

Men typically don’t have that problem, one reason the gender-pay gap persists. It’s compounded by the power of salary history to determine future compensation, and Moeller, now an Illinois state legislator, has introduced legislation to help level the playing field.

Moeller’s bill would prohibit employers from asking about previous pay as part of the hiring process, modeled on a bill passed in Massachusetts last year. The National Conference of State Legislatures counts Moller’s among more than 60 bills pending in more than 20 states that attempt to address the stubborn fact that nationally, women still make about 82 cents for every $1 earned by a man.

Narrowing that gap was a priority for President Barack Obama from his signing of the Lilly Ledbetter Fair Pay Act in January 2009 to the White House Equal Pay Pledge signed by more than 100 companies in 2016.

In recent weeks, President Donald Trump has reversed some of the Obama-era protections for women workers, including the requirement that in order to be eligible for federal contracts, companies must be transparent about employees’ salary and compensation.

“The states have to play a greater role in ensuring pay equity for women,” said Maryland State Senator Susan Lee. “This is becoming even more critical now, because we don’t think the Congress will move on anything dealing with pay equity, nor will the President.”

Equal pay for equal work was enshrined in federal law in 1963, with the passage of the Equal Pay Act, and since then, all states except for Alabama and Mississippi have added at least some extra protections for workers, according to the U.S. Department of Labor.

Progress has been slow over the past decade. At the current rate, women in the U.S. aren’t expected to reach overall pay parity until 2059, according to the Institute for Women’s Policy Research.

State Action

Lawmakers are eager to make it happen sooner. The flurry of bills this year follows on an active 2016, when 36 states introduced at least one bill and six states -- California, Delaware, Maryland, Massachusetts, Nebraska, and Utah -- passed new regulations making it harder for companies to defend unequal pay and easier for employees to detect it, said Kate Nielson, state policy analyst for the American Association of University Women. She estimates another half dozen states may pass a new rule this year as well.

One common provision includes protections for employees who want to discuss their pay with coworkers to be more aware of salary gaps, which was a provision of the Delaware law. Other new bills assign steeper penalties, make it harder for employers to justify unequal pay and requires smaller companies to comply. There is also the ban on past pay history, as in Massachusetts, California and, if Moeller’s bill passes, Illinois.

“Accepting a lower offer when you first start out and having that follow you your whole career, because companies are basing their offer on what you made at your last job, that’s a lot of money in the end,” Moeller said. “The pay should be based on the value of the job within the organization and the market.”

It’s too soon to know whether these bills will do what they’re supposed to. Evidence from the public sector suggests that pay transparency, at least, leads to a smaller gap. In the private sector, where about 60 percent of workers are forbidden or discouraged from comparing salaries, the pay gap is twice what it is in the public sector, where only about 20 percent of workers say they face similar restrictions, according to a 2014 survey by the Institute for Women’s Policy Research.

Corporate Reaction

State business groups often oppose stronger attempts to close the pay gap, saying it’s not fair to impose stiff penalties or limit companies’ defenses of inadvertent pay gaps. They also reject new reporting requirements, saying they add costs and complexity and the measures might not even work.

How much individual companies suffer is open for debate. In a 2015 study, McKinsey found that companies with above-average gender equity are 15 percent more likely to outperform markets than those who lag in gender diversity.

Brian Levine, who conducts pay analysis for companies at Mercer Inc., said his firm has reviewed pay parity for dozens of clients over the last year. In addition to state regulatory pressure, there has been a torrent of shareholder proposals urging more transparency on the gender pay gap, he said.

“The demand for these kinds of analysis has grown considerably over the last couple years,” said Levine, adding that companies trying to improve overall gender diversity need to focus on pay parity.

Online real estate company Zillow Group Inc. is one of them. “Outside of whether or not there’s federal government support for this currently, it is a conversation that’s happening within companies,” said Amy Bohutinsky, Zillow’s chief operating officer. “People want to work at companies that equally value all of their employees.”

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE