98 / Comparable Worth

- COMPARABLE WORTH IS IN THE EYE OF THE BEHOLDER

Marilyn DePoy Vandra Huber Stephen Mangurn

Mississippi saw on their screens, “Goodevening (sic) HBO from Captain Midnight. $12.95 a month? No way! (ShowtimeIThe Movie Channel, beware!).” See Richard Zoglin, “Captain Mid- night’s Sneak Attack,” Time, May 12, 1986, pp. 100-101. The action, although not a copyright offense, clearly violated the Federal Communications Act provisions against willful interference with authorized signals. The intruder, later identified as John MacDougall, a dish dealer from Ocala, Florida was fined five thousand dollars.

Using the “comparable worth” of jobs to compare wages in predominantly female versus male positions remains a controversial policy issue precisely because it lends itself to analysis by such a variety of legitimate analytical approaches with such divergent results. However, analysis seems to contribute little to the ultimate disposition of this pay equity issue, which is being resolved piecemeal within employee-employer relations, particu- larly in the public sector. These were the main conclusions of an APPAM Conference panel titled “Alternative Views on Comparable Worth.”

ECONOMISTS VIEWS

Economists’ viewpoints reflect their intellectual biases; three types are notable with re- gard to comparable worth. Neoclassical economists come at the issue with the conviction that competitive labor markets clear at wage levels that automatically register compara- ble worth: The employer discovers by trial and error what each additional worker hired adds to the total output of the organization and, for the private employer, what the sale of that output adds to the firm’s revenues. The employer then seeks to add employees until that marginal revenue product is just equal to the wage that must be paid to attract that final employee. The employer may never know exactly where that point lies but con- stantly probes toward it. Otherwise, potential profits would be forgone or losses incurred. That is the worth of the job to the employer.

In a free labor market, the employee is never forced to take a wage offer. There is a choice among jobs and a choice between any job and no job. The employee who accepts a position does so because it is more attractive than the next best alternative. The accepted wage, therefore, must be a valid measure of the worth of the job to the employee.

A wage that the employer is willing to pay and the employee willing to accept in comparison to all other alternatives must therefore be the job’s comparable worth for both. This line of reasoning takes care of the private sector. Public employers are generally required by law to pay wages comparable to the price markets. Even if not so required, public employers typically anchor their job evaluations and other decisions about com- pensation to the private market, such that no wage can depart very far or very long from the job’s comparable worth as observed in surveys of private work and wages. Thus, say neoclassical economists, no intervention is needed or justifiable. Any intervention will only detract from the total welfare of society.

Radical economists operate from a very different set of assumptions: wages are set by a combination of forces-historical, social, and political as well as economic. Women’s wages are the victims of exploitation from both the capitalist employer and the patriar- chal half of the human race. Capitalists segment labor markets in every possible way so as

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to divide and conquer in the class struggle and to expropriate excess labor values for themselves. Men subjugate women wherever possible to enhance their own opportunities and enjoyment. Lower wages for women equal higher wages for men in a distribution system held in tight constraint by employer power. Any intervention tending to break the domination of the capitalist and the patriarchy is therefore socially desirable and should be pursued.

Institutionalist economists begin with no such fixed ideological framework, and are thus less readily assured of the rightness of any “cause”: economic forces act within and through institutions that must be understood in order to assess those forces and their impacts. Whether and how to intervene depends upon lessons drawn from that institu- tional understanding. But once understood, no existing mechanisms or results are sacred. Secure within such institutional expertise, institutionalists are not loathe to intervene but, as inveterate tinkerers and pragmatists, prefer to do so by incremental means. Hence, collective bargaining is preferred to legislative fiat or judicial decree.

INSIGHTS OF A COMPENSATION SPECIALIST

Wage setting is the stock in trade of compensation analysts. They perform the market surveys that underlie most public sector wage setting, and much of that in the private sector. They know that no market wage exists in the sense of a single rate paid across all employers to all workers in the same occupation in the same labor market. They use the survey results to set wage ranges of varying widths within which the employer can choose how much to pay. Wage policies reflect how selective the employer wants to be able to be, how quickly openings need to be filled, what reputation an organization wants to main- tain in a community, and how susceptible it is to unionization.

Pay systems for the most part attach to the content of the job rather than the skills of the workers. Compensation specialists understand that certain jobs are firm-specific or indus- try-specific and thus have no external market counterparts; only for generic jobs, ones that exist across industries, is the broad, external market directly relevant. They recog- nize the need to maintain wage equity with external employers to be able to attract and retain workers. They also see the need for internal wage equity among firm employees to minimize employee unrest and for individual equity to motivate extra effort from employ- ees. Compensation specialists also understand the inherent subjectivity of the formal job analyses and the job evaluation systems through which these objectives are pursued. For them, comparable worth becomes a compromise between the need to effectuate organiza- tional policy (including cost containment) and to maintain labor harmony within a mix of male and female employees.

A LEGAL VIEWPOINT

The legal view begins with the acknowledgement that neither statute nor common law plainly mandates comparable-worth wage-setting. As a legal theory of comparable worth succeeds or fails according to the ability of counsel to persuade a court to interpret the strictures of either the Equal Pay Act of 1963 or Title VII of the Civil Rights Act of 1964 to include it.

The Equal Pay Act provokes little controversy because its applicability is so limited. It bans differential wages for men and women only where the job content of positions held by men and women is substantially identical. Title VII more broadly prohibits sex-based wage discrimination. As with all other aspects of Title VII discrimination, such discrimi- nation can be proven by either “adverse impact” or “disparate treatment,” as the lawyers categorize things. Adverse impact is a results-oriented test. It can reach salary practice

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that is ostensibly sex neutral (“on its face,” as they say) but results in substantially different compensation between the sexes, unless the difference in treatment is compelled by business necessity. The general but not universal conclusion of the courts seems to be that setting pay scales according to either competitive market outcomes or the dictates of legislatures is defensible as a business necessity.’

“Disparate treatment,” in contrast, requires a showing of intent to discriminate, not merely differential results. Most cases successfully attaching wage discrimination by sex have rested on this ground. The landmark case is County of Washington v. Gunther. There, a public employer concluded from market surveys and job evaluations that the pay spread between male and female prison guards as justified by job content should be 5 percent but nevertheless resolved to pay the women 30 percent less2 The United States Supreme Court found this behavior to be intentional discrimination.

A less blatant, but more widely known case arose in the state of Washington. The state studied its own pay practices and concluded that it was paying 20 percent less for female- dominated than for male-dominated jobs scored equally on job evaluations. For a decade the State refused to take corrective action, and the union, AFSCME, filed suit in American Federation of State, County and Municipal Employees v. the State of Washington. Although the state had resolved (but had not appropriated the necessary funds) to close the gap over 10 years after the lawsuit had been filed, the federal district judge, mindful of criticisms that school desegregation “with all deliberate speed” had taken a generation or more, said the remedy must occur now and also awarded back pay.3 In the most controversial of the long string of so-called comparable worth cases, the Ninth District Court of Appeals ignored most of the trial judge’s reasoning. It overturned his ruling in September 1985 on the ground that “neither law nor logic deems the free market system a suspect enter- p r i ~ e . ” ~ The case has been settled out of court for over $100 million in inequity adjustment over 6 years.

WHITHER COMPARABLE WORTH?

As a result of these conflicting viewpoints, enough controversy to keep comparable worth a lively issue in policy conferences for years ahead. In the meantime, the comparable- worth movement steams persistently on, at least in public employment, seemingly little affected by the views of economists, compensation specialists, or lawyers. State, county, and city governments one by one seem to succumb to the internal and external pressures from unions, women employees, and activists. Despite the ringing support offered by the Court of Appeals, the State of Washington realized it could not expect peaceful productiv- ity from its women employees after having confessed to underpaying them relative to their male colleagues, and so negotiated the out of court settlement. Minnesota had taken similar action in 1983.5 Massachusetts, Iowa, Wisconsin, New York, and New Jersey have also begun implementation either through collective bargaining or legislative initiative. Similar provisions are won in one collective bargaining after another. San Francisco, Chicago, and Los Angeles are among the latest public employers to agree to pay equity at the bargaining table. The San Francisco settlement with SEIU was achieved despite opposition from the mayor and the voters.6 As of this writing, AFSCME (The American Federation of State, County, and Municipal Employees) has won over $200 million al- ready for its women members in pay equity negotiations.

Legal challenges are a last resort and hereafter will probably be undertaken only where employees refuse to take voluntary action. Negotiation is the strategy of choice, and public employee unions can anticipate a new membership spurt based on the champion- ship of women’s pay. Spread to private sector, unions will probably be impeded by the realization that, ultimately, men will have to pay through slower wage increases for the

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rise of women’s compensation. Nevertheless, a significant number of major firms are already initiating comparable worth experiments without fanfare? The same profit mo- tive that makes a private employer want to restrain overall wage costs also induces interest in any compensation practice contributing to productivity.

In sum, comparable worth seems to offer a private and public policy dispute where policy analysis can highlight the contending viewpoints but have little influence on the results. On this issue, analysts appear to come out where they went in, depending upon their basic assumptions. Yet the parties at interest push on to workable solutions that reflect the internal and external dynamics of labor relations within which they must coexist or cooperate. The real world seems to press persistently toward some form of comparable-worth wage setting, although it may never arrive at the totality sought by the concept’s most vocal advocates.

MARILYN DEPOY is Women’s Rights Coordinator for the American Federation of State, County, and Municipal Employees. VANDRA HUBER is Assistant Professor of Management at the University of Utah. STEPHEN MANGUM is Assistant Professor in the Faculty of Management and Human Resources at the Ohio State University. This policy note summa- rizes the papers given by the authors at a session of the Seventh Annual Research Conference of the Association for Public Policy Analysis and Management, October 26,1985, in Washing- ton, D.C. The alternative economic views were supplied by Dr. Mangum, the compensation analysts’ approach by Dr. Huber, and the report on legal developments by M s . DePoy.

NOTES

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5. 6. 7.

Christensen v. State of Iowa, 1977,563 F. 2d 353; Lemons v. City and County of Denver, 1980,620 F. 2d 228-230; American Nurses Association v. State of Illinois, 1985,37 FEP 705 (7th Circuit 1985). County of Washington v. Gunther, 452 US. 161 (1981). American Federation of State, County and Municipal Emplbyees (AFSCME) v. State of Washington, 578 F. Supp. 846 (1983). AFSCME v. State of Washington, Nos. 84-3569, 84-3590 (9th Circuit, filed September 4, 1985) p. 12. Business Week, April 28, 1986, p. 52. Business Week, February 10, 1986, p. 167. Business Week, April 28, 1986, p. 52.

TIME FOR CHANGE IN STATE-LOCAL RELATIONS I I Steven D. Gold

We may be on the brink of a period of significant change in the way state and local governments interact. The problem-or opportunity-arises from federal policy changes: budget cutting and devolution of responsibility. Two recently-coined phrases crystallize these developments: state and local governments must cope with “de facto federalism” and “fend for yourself federalism.”’ These terms are very apt, but they leave a great deal unsaid about their implications for state-local relations. That’s what this note is about.