Good news came from the White House in late January, bolstering efforts to reduce the persistent pay gap between men and women.
The Obama administration, together with the U.S. Equal Employment Opportunity Commission and the Department of Labor, announced an executive action that will force companies to take a harder look at pay inequality. Under the new rules, beginning in 2017 companies with 100 employees or more will be required to disclose salary information broken down by race, gender and ethnicity.
The EEOC intends to publicly release aggregated pay data in an annual salary report to provide insight into how workers are paid in different sectors and industries across the country. Armed with this new information, government agencies will be able to better focus investigations on employers that are unlawfully shortchanging workers based on their gender, race or ethnicity. The hope is that these new requirements will also encourage businesses to better police themselves and to correct detected pay disparities.
The announcement coincided with the seventh anniversary of the Lilly Ledbetter Fair Pay Act, which makes it easier for employees to challenge discriminatory pay.
Although the pay gap has closed slightly in recent years, the U.S. still lags behind many other industrialized countries that have made greater progress in closing the gender gap over the past decade. Women in full-time jobs currently earn about 79 cents for every dollar a man earns. The pay gap is even greater for minorities, with African-American women earning 60 cents and Latina women earning 55 cents for every dollar earned by a white man.
Statistics around the pay gap are both illuminating and alarming:
According to The Global Gender Gap Report 2015 issued by the World Economic Forum, it will take 118 years for the economic gap between men and women to close. That's 2133.
The pay gap is even greater when one accounts for full compensation packages, including health and retirement benefits. Women are less likely to have an offer of health insurance from their employers, and less likely to have retirement savings plans (the latter disparity is primarily concentrated among lower-income women). Women are also somewhat less likely to have access to paid leave and are thus more likely to take leave without pay.
The pay gap tends to grow over a worker's career. Three economists recently conducted a study of salaries of MBA graduates from a top business school, which found that although male and female graduates' salaries were roughly commensurate upon graduation, male graduates earned approximately 60% more than women within 10 years. Claudia Goldin conducted a similar study of law school graduates, reaching similar results -- while male and female law school graduates earned similar salaries upon law school graduation, within 15 years, male lawyers earned 55% more than female lawyers.
Interestingly, women are still more likely to work in lower-paying occupations and industries. The White House Counsel of Economic Advisors notes that women remain underrepresented in the three industries with the highest average wages (mining, utilities and information services), but represent more than half of employees in the three industries with the lowest average wages (leisure and hospitality, retail trade and other services).
While this new executive action is by no means a fix-all, it’s certainly a step in the right direction towards equal pay for all workers.
Lindsay Cornacchia is an associate in Debevoise’s New York office.
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