Suicide mission: The union push for comparable worth

By Diana Furchgott-Roth
web posted January 3, 2000

Last April, the AFL-CIO joined with the National Committee on Pay Equity and the National Organization for Women to persuade the nation that women are undervalued and underpaid. Together the groups staged a series of stunts that included distributing dollar bills with holes in them to reflect the gaps in women's pay.

At the same time, the AFL-CIO and the Institute for Women's Policy Research released Equal Pay for Working Families: National and State Data on the Pay Gap and Its Costs, a study that purportedly provides a statistical foundation for their claim that in the United States women are paid only 74 cents on a man's dollar. It also includes data for women's earnings in individual states. The AFL-CIO study looks at the percentage of men and women working in different industries and concludes that "America's working families lose a staggering $200 billion annually to the wage gap."

The AFL-CIO is a strong supporter of "comparable worth," a term that describes the setting of wages according to a theory of value rather than according to market forces. The union federation is leading a high-profile charge on the issue and, not surprisingly, politicians are reacting accordingly. This year, Senator Tom Harkin (D-IA) has introduced the Fair Pay Act and Senate Minority Leader Tom Daschle (D-SD) and Representative Rosa DeLauro (D-CT) are sponsoring the Paycheck Fairness Act (S. 74). In January President Clinton announced a $14 million Equal Pay Initiative, and called for passage of the Paycheck Fairness Act, saying that "Today women earn about 74 cents for every dollar a man earns" and that the pay gap persists because of "the demeaning practice of wage discrimination in our workplaces." Twenty-six states have also been targeted by the AFL-CIO for comparable worth legislation.

Under comparable worth plans, officials are supposed to examine working conditions and the knowledge or skill required to perform a task in order to measure a job's worth. These officials then set "wage guidelines" for male-and female-dominated jobs. These criteria tend to favor traditionally female occupations over male ones, and education-based and white-collar jobs over manual, blue-collar work. By contrast, neither experience nor risk, two factors which increase men's average wages relative to those of women, are typically included as job-related criteria. (Men's jobs are generally more dangerous than women's: 92 percent of workplace deaths are male.)

Comparable worth, or pay equity, as it has been renamed for the new millenium, has been put into practice in a number of states in the U.S. as well as in Canada, the U.K., and Australia. What is meant by comparable worth, and why are unions supporting it when it's against their interests ?

Average Wage Gaps: The Rationale for Comparable Worth

How can the AFL-CIO conclude that women make only 74 cents on a man's dollar? The 74 cent figure is derived by comparing the average median wage of all full-time working men and women. To obtain figures for individual states, average wages of men and women within a state are compared. But this means older workers are compared to younger, social workers to police officers, and those working 60-hour weeks to those working 35-hour weeks, since full-time means any number of hours above 35 a week (and sometimes fewer).

These estimates fail to consider key factors in determining wages, including education, age, part- or full-time status, experience, and, perhaps most importantly, consecutive years in the workforce. That is why the wage gap is wider in states such as Louisiana, where it is less common for women to work, and where they have less education and work experience. In areas where it is more usual for women to work, such as the District of Columbia, the gap is smaller. But the average wage gap, as it is known, says nothing about whether there is pay discrimination against individuals with the same qualifications who are in the same jobs.

The AFL-CIO study calculates the cost of alleged "pay inequity" caused by the predominance of women or men in different occupational categories. The study compares the wages of workers in female-dominated occupations with those in nonfemale-dominated occupations. Workers were compared who had the same sex, age, race, educational level, marital and parental status, and urban/rural status; they lived in the same part of the country and worked the same number of hours; and they worked in firms of the same size in the same industry. The study concluded that women were underpaid by $89 billion per year because of occupational segregation. Without sex, race, marital and parental status, and firm and industry variables, the figure rose to $200 billion per year.

The study boasts an impressive list of variables, but it leaves out two major factors. First, it omits the type of job. A footnote says that "no data on the content of the jobs (the skill, effort, and responsibility required by workers who hold them nor the working conditions in which they work) are available" in the data set. Second, it leaves out the field of education. But how can it make sense to say that the earnings of a man or a woman with a B.A. in English should be the same as the earnings of a man or a woman with a B.A. in math? Thus, the study compares workers without regard to education or type of work: secretaries are compared with loggers, bookkeepers with oil drillers. These numbers do not present an accurate estimate of wage gaps, and moreover, they illustrate the difficulties of implementing the comparable worth legislation proposed by Members of Congress.

How much less do equally-qualified women make compared to men? Surprisingly, they make about the same. Economists have long known that the adjusted wage gap between men and women—the difference in wages adjusted for occupation, age, experience, education, and time in the workforce—is far smaller than the average wage gap. Simply adjusting for age removes a lot of the gap: for instance, in 1998, according to data published in Employment and Earnings by the Department of Labor, women aged 16 to 24 made 91 percent of what men made when age was factored into the calculations.

Tenure and experience are two of the most important factors in explaining the wage gap. According to the U.S. Bureau of the Census, women on average spend a far higher percentage of their working years out of the workforce than men. As demonstrated by economists such as Francine Blau, Andrea Beller, David Macpherson and Barry Hirsch, this means that upon returning to the workplace, women will not earn as much as their male or female counterparts who have more uninterrupted experience.

It is important to note that there are reasonable explanations for the differences between men and women in their average wages. First, in the 1960s and 1970s women received fewer undergraduate, graduate, and professional degrees than men. It was only in 1982 that women began to earn more than half of B.A. and M.A. degrees, as they continue to do today. In 1970 women earned about 5 percent of all awarded law and business degrees, compared with about 40 percent today. It is these 1970 graduates who are now in their 50s, the age of peak earnings, and this group includes more highly- paid men than highly-paid women, since they were awarded a far higher percentage of the degrees in that period.

Second, many college-educated women still choose to major in specialties which pay less, and women without a college degree are at a disadvantage in the blue-collar labor force. Women get more degrees in public administration and communications and fewer degrees in math and engineering. Men on average are physically stronger than women, and so men without a college education are able to take jobs in industries such as construction, mining, oil drilling, and logging, jobs which many women find undesirable or for which they are physically unsuited. Hence, the jobs for which women qualify often command lower salaries than those of men.

Third, many women choose jobs that enable them to better combine work and family, and these pay less than those with rigid or extensive hours. Even in higher-paying professions such as medicine, many women choose to go into pediatrics, psychiatry, and family practice, all lower-paying fields than surgery, which is more demanding in terms of hours.

Since average wage gaps occur naturally in labor markets for the above reasons, the only way to get rid of such gaps is not to require equal pay for equal work, but equal pay for different jobs. Comparable worth, as it is known, aims to eradicate differences in pay across male-and female-dominated occupations, and unions have been among its strongest supporters.

The Decline of Unions

Overall, unions membership has declined from 24 percent of wage and salary workers in 1974 to 14 percent today. The United States has created millions of new jobs in the past decade, but because the American economy is moving towards non-manufacturing service industries, few of them are union jobs.

The reasons for union decline are well-known: prosperity has reduced the "us-versus-them" hostilities, while federal wage and hour laws have reduced the need for union representation. Workers are increasingly skilled and mobile, so they feel less need for unions. Finally, union bureaucracies are less equipped to deal with small companies—which create most new jobs—and globalization—which threatens many old ones.

While unions have grown increasingly irrelevant, the treatment of women in the workforce has become more important. A generation ago, the issue was equal pay for equal work. The federal government responded by making this the law of the land. However, equal pay for equal work has not been enough. Equal total compensation has become a battle cry for some feminist groups, regardless of whether there is equal skill, effort, or activity.

Women's labor issues emerged largely outside of unions. Beginning in the 1970s, individual women or groups of non-union women sued for equal treatment, and they often won their cases. Women activists pushed the envelope of labor law themselves. Rarely did they rely on unions.

As union leaders observed these developments, they saw that women's work was an opportunity to regain their relevance and replenish their depleted ranks. Radical approaches to women's issues might also rekindle the rabidly adversarial "us-versus-them" labor environment of the first half of this century when labor had scored its greatest gains. Moreover, as women's issues moved through the courts, an increased demand for union leadership might arise.

Why Unions Support Comparable Worth

In 1997, the AFL-CIO conducted a national survey of American women. Termed "Ask a Working Woman," it tried to find out which issues were women's greatest concern. Fifty thousand unionized and non-unionized women completed surveys, and the union conducted interviews in person and by telephone.

According to the AFL-CIO, women listed equal pay as their top concern. Ninety-nine percent listed equal pay for equal work as important. Forty-one percent cited pay as a top concern, while 24 percent cited low pay, discrimination, and the glass ceiling as limiting women's opportunities. Thirty-seven percent said making ends meet had become more difficult since 1992, and almost one-third said that their job did not provide equal pay for equal work. The AFL-CIO is conducting a similar survey which it will release in March, 2000.

The survey results are predictable: individuals enter the workforce to make money, and so income is naturally their primary concern. It would be surprising if men did not also say that pay is their top concern. However, the AFL-CIO wants to use the survey to show that it understands women's concerns and is responding to them. Its 1999 Executive Council Report states that the survey's equal pay concerns have been incorporated into the union's agenda, and that the AFL-CIO has introduced model state legislation on pay equity in 26 states.

Clearly, it is in the interests of unions to increase female membership by promising women higher wages. And promised increases in women's earnings do not necessarily have to come at the expense of men's earnings. The first experiments with comparable worth in the U.S. have been with state government employees. Historically, states that have put comparable worth systems in place have included unions in the implementation process, and the unions have tried to make sure that the salaries of male workers do not suffer. But this has meant that the only real loser in the process is the taxpayer, male or female, who is left paying more in state government salaries.

When a state decides to implement comparable worth for its employees, it generally chooses a consultant to develop a factor points system, such as the Hay system, to assign a number of points to each job based on a variety of factors. Compensation for the job depends on the number of points assigned. By itself, the points system could benefit female workers at the expense of male unionized workers. But no state has ever accepted the consultants' points system without changes. Instead, unions are consulted about implementing the recommended system, and they can influence the outcome through collective bargaining. Union representatives were on oversight committees in all states that developed comparable worth systems.

Unions can affect which factors are included, which are given most weight, and how factors determine pay. In other words, the final pay structure can be altered by changing the factor points analysis—the system of points assigned to jobs—or by collective bargaining. The result will depend partly on how many women and union members are in the relevant labor market. For instance, in Iowa, Connecticut, New York, and Oregon in the 1980s, implementation of comparable worth plans was subject to union negotiation. New Mexico and Wisconsin threw out their original comparable worth plans and started over again. New York rejected two plans before coming up with a satisfactory system. Unions were also involved in Michigan, Minnesota, New Jersey, Washington, and Massachusetts.

Most of these comparable worth schemes initially suggested that there needed to be reductions in pay to some workers (union members) and increases to others (women). Washington and New York did cut pay of a few workers. But, as you might expect, most states raised pay for some groups and left other pay unchanged. In Iowa, cuts were canceled and pay increases—the entire reason for comparable worth schemes—were reduced because of union objections. In Iowa's original comparable worth proposal, women's pay would have been raised by 8.8 percent, but when finally implemented their pay rose only 2 percent. Dues-paying union workers were supposed to lose 8.6 percent but actually gained 3.4 percent. It appears that unions used their input to raise the pay of their traditional member base rather than support the platitudes of comparable worth.

The Fallacy of Comparable Worth for Unions and Union Members

Unions attempt to introduce comparable worth into the negotiating process to benefit their members, but in the long run union members lose. Comparable worth schemes frequently favor new workers over tenured workers because they give less weight to seniority and more weight to specific skills. Comparable worth systems favor some job classifications over others, and blue-collar jobs often do not fare as well as jobs which require more education. Finally, these systems favor complex job descriptions over those that are less complex.

Consider what happened in Minnesota. The Minnesota Association of Professional Employees (MAPE) was outraged when its mostly male workers in the Department of Natural Resources—who had jobs such as forester, park naturalist, wildlife manager—were not given raises with the female employees in the American Federation of State, County, and Municipal Employees (AFSCME). Pay levels for MAPE jobs were far lower than those in female-dominated jobs such as librarians, which received pay raises. Only the threat of a MAPE lawsuit led Minnesota to give the male-dominated professions a raise.

Comparable worth leads to shortages of workers in professions that are underpaid. Some states have circumvented this problem by allocating more funds to state government and changing factor point systems to allocate higher salaries to professions in demand. However, if the federal government imposed wage guidelines, as is proposed in Congress, then private employers would not have the option of altering the guidelines to attract scarce workers.

The province of Ontario, in Canada, has had comparable worth since the Canadian Human Rights Act passed in the mid 1970s. It provides a perfect example of the economic difficulties that comparable worth can cause.

In the past year, private, non-profit child care centers in Ontario were ordered to raise current salaries and to pay tens of millions of dollars in back-pay to predominantly female workers. About 950 private daycare centers were affected, accounting for 40,000 spaces. Many of these non-profit centers could not afford the back pay or could not afford future salary increases. The net result was that some childcare centers closed and many more did not expand, placing childcare services in Ontario in some risk. Parents had fewer options and childcare workers had fewer jobs.

Similarly, Bell Canada, the largest local exchange telephone company in Canada, faced large comparable worth claims, primarily from operators and clerical workers whose pay was lower than that of technicians. The union won the case and the Supreme Court refused to hear Bell Canada's appeal.

The result? Bell Canada will pay its back pay liabilities, but it has contracted with Excell Global Services of Arizona to provide expansion of future operator services, thereby avoiding the most onerous of Canadian comparable worth laws. Thus, while operators at Bell Canada may have at least momentarily higher wages, Bell Canada will not create any significant new jobs in Canada. New jobs will come to the U.S.

It is ironic in light of these examples that the AFL-CIO is pushing for comparable worth. The goal of expanding membership—and union coffers—is taking precedence over the likely consequence of job losses. Companies would undoubtedly react to comparable worth by trying to shift jobs overseas.

In our technology-oriented global economy companies have many choices about numbers of workers hired and plant location. Higher wages mean that companies change their production processes to use more machines and fewer workers, or shift production to countries with low wages. Naturally, this isn't going to happen tomorrow. But it will happen whenever the company has to decide whether to hire that extra person or build that second plant.

The American economy is steaming ahead, with a 4.1 percent unemployment rate, a 30-year low. While it's in the interests of union management to try to reverse the decline of union membership, it hardly makes sense to falsely promise members artificially high wages through comparable worth. And a false promise it is, because these wages cause more job losses than they put money in pockets. The best system for American workers is not to fix what ain't broke—and keep the government out of the labor market.

Diana Furchtgott-Roth is Resident Fellow at the American Enterprise Institute in Washington, D.C. She is a co-author with Christine Stolba of Women's Figures: An Illustrated Guide to the Economic Progess of Women in America. Reprinted with the kind permission of the Capitol Research Centre.

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