Comparable Worth: The Canadian Legislation

Kenneth A. Kovach

I n many ways the historical aspects of Cana- dian public policy on gender-based wage discrimination have undergone a develop-

ment much like those in the IJnited States. AI- though the concept of comparable worth is a relatively new phenomenon, it is the end result of a steady progression of pay policies dating back over 40 years.

The first equal pay laws began in the Cana- dian province of Ontario in 1951 with the Ontario Female Employees Fair Remuneration Act. ThroLlghoL~t the 1950s other provinces passed similar legislation. In practice, these laws proved to be quite restrictive in that they required the work to be identical before a comparison could be effected. Viewing this as a significant weak- ness in the laws, subsequent legislation broad- ened the definition to allow comparisons of sub- starztialiy similar work that possessed slight dif- ferences in the nature or tasks of the job. This definition was broadened again to allow for com- parisons of jobs that were held similar in the composite of skills, effort, responsibility, and working conditions. Consequently, the require- ment that jobs be substantially similar in each area was diluted to allow comparisons as long as the overall composite of all areas was similar. This composite approach was eventually adopted in all provinces that passed conventional equal pay legislation.

At the federal level, gender-based wage dis- crimination was addressed in the Canadian Hu- man Rights Act passed in the mid-1970s. Under the “Equal Wages” title of the legislation, wage differentials between men and women perform- ing “work of equal value” was deemed illegal discrii~ination. The Canadian Human Rights Commission was empowered to enforce the Act,

Yet the enforcement of provincial laws con- cerning conventional equal pay remained prob- lematic for several reasons. The composite ap- proach, while providing a broader interpretation,

Comparable Worth: The Canadian Legiskttion

still restricted compari- sons to jobs within the same occupation. Com- parisons of jobs in dissimilar occupations found to be of equal value in the composite of skill, effort, respon- sibility, and working conditions were not expressly permitted. Early provincial legisla- tion also required a controversial matter to he brought in the form of a complaint under the legislation. This effectively allowed the enforce- ment phase of the legislation to remain moot as long as no complaint or prima fkie evidence of discrimination was advanced.

At the federal level, the relative lack of progress was attributed to the prevailing narrow interpretation of the legislation and the insuffi- cient extent of enforcement action. The burden of proof of specific intent requirement, as well as the lack of class action suits, made enforcement at this level especially difficult.

What is important to realize is that the per- ceived successes or failures accompanying imple- mentation of the Canadian legislation will have tremendous consequences on legislative initia- tives in the United States. Opponents or propo- nents of similar legal measures in this country will no doubt use the Canadian experience to bolster their arguments and show the practical implications of such government-mandated mea- sures. Thus it is crucial that citizens on both sides of the border understand the Canadian legislation and cfoseff monitor its im~~fementation.

Male-Female Earnings Gap

Despite the federal legislation, surveys conducted in the 1980s revealed a consistent gender-based

41

wage gap seven years after passage of the Cana- dian Human Rights Act. Kov:tch and Millspaugh (1989) found that female average earnings by occupation were 59.4 percent of male average earnings. with a range of 46 percent to 68 per- cent across all occupations sampled. Compari- sons conducted t>y Gunderson (198X) on occupa- tions within the same company reflected wage disparities of 10 to 20 percent. For full-year, hll- time employees the ratio ~~1s found to have in- creased from 58.4 percent to 65.8 percent in the period from 1967 to 1989. Controlling for the mde average work week of 40.9 hours and the female average work week of 35.6 hours, Gunder- son and Kiclclell (1992) maintain it is possilde that the true final ratio may actually be in the 75 to HO percent range.

ITnfortunately, no empirical studies have been undertaken to study the wage gap while controlling for possible intemening variables in the composition of the Canadian work force, such as age and experience. Shapiro and Stelcner (1987) posit th:tt the decline in the earnings gap can be attributed not only to fewer instances of discrimination hut also to women’s improved potential for productivity. Studies conducted in the United States and other countries find that although controlling for differences in productiv- ity-related factors does reduce the wage gap, a discriniin:itory portion of the o\~erall gap remains. Occupational segregation has been cited as a larger part of the gap than has wage discrimina- tion. This gap has also l>een olm~~eci to IX larger in the private sector than in the public sector. It must be concluded, then, that all studies continue to find ;i significant component of gen- tier-hased wage discrimination in the overall gap in wages between male and ft-iii& occupational groups.

Table 1 Portion of Overall Earnings Gap Closed by Comparable Worth Adjustment in Various Legislative Jurisdictions

RATIO OF FEMALE/MALE EARNINGS For elwy clolla~- a nun cxns,

a wwmn earns Ptwmrt of

Act71al Ex~err’c17ce BllfiWt’ Afirr Gq Closed Manitol,a government s .82 $ .87 28”% Minnesot:t .71 .82 3 I?/;, Iowva, kfore amenchent .78 .Hj 2ri’Yu 10~~1. after amendmernt .78 .88 46%

Estimated potential impact: .76 .H7 4S”h

Iov,x, Michigan, Minnesota, Wxshingmn DC. and San Jose

Econom)--wide (est. by Johnson ancl Solon 1986) 8-2O’W) Economy-mitle (est. I,); Aldrich and 13whelle 1986) 1520?4

Rationale for Comparable Worth

The rationale for comparable worth lies partly in the conventional equal pay law’s inat3ility to ad- dress comparisons between dissimilar occupa-

tions. Although the concept of comparable worth is not structured to address any market forces that may tend to segregate women into low-wage jobs. it does have the potential to address that part of the lo\h~-wage structure that is not associ- ated with the components of the job itself. This form of redress is seen as especially important for older \yonien or others who may be unable or unwilling to leave fem:ile-dominated, lower-pay- ing jot,5

Table 1 illustrates the proportion of the wage gap that has been closed in \,arious jurisdictions following the implementation of comparable worth policies. The results show that about 30 percent of the gender-based gap has been closed in public sector situations in which comparable worth has been implemented. However, as a policy, comparable worth also possesses some characteristic flaws that render it unlikely to result in the complete closure of the gender-hased n;age gap. Women limited to low-paying jobs hecausc of constraints outside the labor tnarket may not be helped 13~ comparable worth poli- cies. Also unlikely to benefit are women working in jobs for which no male comparator group exists and those in positions that receive low evaluation scores.

Comparable worth policies tnay also be re- stricted in their ability to make comparisons across establishments. This reduces their effec- tiveness at dealing with that component of the male-female wage gap that is reflected across different employers. Moreover, they are, by their own definition, limited to comparisons of jobs th3t are determined to he of the same or similar value 3s me:isured by some job evaluation instru- ment. So if a Lvonian’s jot, is determined to be X0 percent of the value of a man’s jot, but she is paid onl\r 60 percent of the man‘s wage. redress is not required.

Features of Canadian Legislation

The Canadian government is divided into 12 provinces. Approximately 90 percent of labor and human rights issues are within provincial jurisdic- tion; the remaining 10 percent fall under federal jurisdiction. When studying comparable worth policy in Canada it is important to remember that there is not one but several policies, which vaq consideratdy across jurisdictions. Table 2 pro- vides a comparison of coniparat3le Lvorth policies across the different provinces.

All but the three western provinces have

some form of comparable worth (British Colum- bia has committed to some form of comparable worth for its government workers). All provinces have passed conventional equal pay legislation. The principal difference here is that conventional equal pay legislation limits comparisons to the same occupation, whereas comparable worth policies rely on comparisons that use some job evaluation procedure. Although it is possible to bring a comparable worth complaint via conven- tional legislation, in practice this is rarely done. In Quebec and in lands directly under federal jurisdiction, the comparable worth legislation is applied to private industry. Although this makes these two jurisdictions unique, their legislation remains complaint-based, with most complaints still coming from the public sector through union grievances.

In five provinces the legislation is proactive. This means employers must actively initiate evaluation procedures to look for gender-based wage gaps and provide wage adjustments to achieve comparable worth. Most important, this is required of employers who have had no cum- plaints or findings of discrimination. In 1987, the province of Ontario became unique in Canada 3s well as the world by enacting legislation that applied proactiud~ to the p’zute sector as well as the public sector. The Pay Equity Act of 1987 became effective on January 1, 1988. Because of its extensive nature, it was implemented in stages, with wage adjustments required in the public sector by January 1990, for private sector employers with 500 employees or more by Janu- ary 1991. and for private employers with loo-499 employees by January 1992. C(~~ll~li~~nce is vol- untary for organizations with fewer than 100 employees; those employing fewer than 10 are completely exempt. A synopsis follows of the five major parts of the law.

Part I. Definition and Purpose. The Act’s singuidr purpose is “to redress systemic gender dis~rimi~~ti(~n in colllpens~ition for work per- formed by employees in female jobs” (Scc.ii( 1)). Discrimination in this form is to be identified by comparing each male and female job class in a firm in terms of compensation for the work per- formed and its value. The formulation employed to place a value on each designated job class specifies the criterion to he applied. But nowhere does the law specify how skill, effort, and re- sponsibility are to be evaluated. Most firms are using the point system of job evaluation to assess the level of each factor. Once the job class evalu- ation has been completed, if the employer‘s work force has a trade union, only job classes con- tained within the bargaining unit may be com- pared. The same rule holds-for comparisons of job classes established within the segment of the work force falling outside a Ijargaining unit. The

Table 2 Existence of Comparable Worth in Each Canadian Jurisdiction

~~~~~~~ct~~t~ Comparable Worth

Quebec Manitoba Yukon Ontario ~e~~~f~~Lln~~~nd Nova Scotia Prince Edward Island Nerw Brunswick NW Territories

Conventional Equal Pay British Columt~ia All>~l%l Saskatchewan

1976 1985 1986 1987 1988 198X 1988 1989 1990

1953 1957 1952

Yes Complaint-based No Proactive plans No Cotrrpt3int-t,asect Yes Ploactive/compi~ints No Collrctive bargaining No l’rwictive No Proc4~tiv~l’complaints No Proactive No Compl~lint-teased

Yes Yes

Yes

Act specifically prohibits employers from reduc- ing the c(~mpensation of any employee or posi- tion to meet the new pay equity requirements.

Part II. Implementation: Public Sector and Large Private Sector Employers. When wage discrepancies appear, employers are re- quireci to prepare pay- equity plans and post them in the workplace. The firms that have a segment of their employees in a bargaining unit and the rest nonunionized must prepare a separate plan for each group. Employees who are not part of a bargaining unit have 70 days from posting to suggest changes in the employer’s proposed plan. Whether these are inc~)rp~~rate~l is left to the discretion of the employer.

Part III. Implementation: Small Private Sector Employers. Formal pay equity plans for employers of more than nine but fewer than 100 employees are optional. Should the employer choose to establish a plan, however, it would then be subjected to the same posting, amending, and formal objection requirements established for tnandatory plans.

Part IV. Enforcement. The creation of a formal Hearing Tribunal and a discussion of its powers are found in this section. Among the powers allocated to the Tribunal is the ~1Lltht~rity. when necessary. to order a review officer to pre- pare a pay equity plan for an establishment (at the employer’s and bargaining unit’s expense), to order reinstatement of an employee to his or her job and previous pay leve1, to order hack pay and wage adjListl~~ents, and to order revisions in an employer’s pay equity plan. Failure to comply with any provision of the Act or an order issued by a Hearing Tribunal can result in fines of up to

$2.000 for individuals and up to $25,000 for organizations or bargaining units. (Note: All mon-

eta-y figures are expressed in Canadian dollars.) Part V. Administration. This section de-

scribes the various institutional arrangements referred to briefly in the preceding parts of the statute-that is. the creation and establishment of two subagencies, the Pay Equity Hearings Tribu- nal mentioned above and the Iby Equity Office. The Ontario legislation thus broke new ground by applying the issue of comparable worth to the private sector with a “proactive, system-wide, regulatory approach” (Gunderson 19891, requir- ing plans to IX formulated and approved whether or not there had been complaints or findings of discrimination.

Application Issues

In addition to differences in whether the legisla- tion applies to the private and/or public sector and whether it is proactive or complaint-based,

provincial legislation also differs across Canada with respect to other design. implementation. and administrative flea- tures. Gender dominance definitions, which deter- mine the percentage of incunihents that must IX of one gender for 21 joh to he classified 21s male or female, range from 55 to 70 percent. Legislation in some provinces allo\vs exemptions for factors that are legitimate deter-

minants of \v:tges hut are not reflected through jol, evaluation scores. The range is from zero to ten exemptions and includes such factors 3s merit, seniority. red-circling, temporary training assignments. regional ~2ge differences. tempo- rary skill shortages. relevant work experience. productivity or overtime prf2miums. and l>argain- ing strength once pay equity has been achieved.

Another major issue for each piece of compa- rable \vorth legislation is the technical procedure used to estimate paylines and adjust w2ges once the results of the jol-, survey instrument indicate 3 gender-hased inequity. Some of the appropriate questions for estimating paylines would include the following:

1. Should evaluators simply add separate job evaluation point scores for skill, effort, responsi- bility, :tncl working conditions to arrive at a total point score in estimating separate paylines for male- and fem:lle-clominated jobs? This w~~11d eliminate at lcast some of the subjectivity in the process by removing individual opinion regarcl- ing the relative \vortli of the various jol, factors. Or should evaluators assign sep:irate \veigtits fat

each characteristic of male-dominated jobs, then use these separate weights to assign points in female-dominated jobs? This would provide esti- mates of the wages that workers of each gender would receive if they were all paid according to the male structure for each job characteristic.

2. Should evaluators test for equality of weights across characteristics before imposing equity? That is, should one simply add up the scores and estimate 3 single payline between pay and points, or should the job evaluation proce- dure be designed to imply an equity of weights (regression coefficients) across different charac- teristics? Though the first approach would Ix

easier to implement, the second may reduce the variance between jobs.

3. Should the paylines be linear or should evalu:itors use 3 more flexible functional form to estimate the relationship between pay and points? After all, there is no inherent reason why 3 re- gression line must he fit. Perhaps some sliding scale relationship I>etween pay and points would he more appropriate.

4. Should the paylines have 3 constant term, implying that jolt of zero value should receive some pay? Or should they be constrained to pass through the origin, in Lvhicli case they would not necessarily pass through the means of the d:ita?

Line-to-line adjustments. which are used in Manitoba. New Bruns\vick, and Prince Edward Island. involve raising the female payline to the male payline. This procedure eliminates the sys- tematic differences bebveen the genders but leaves random deviations within the separate paylines intact. Generally, this adjustment will cause less variation in the magnitude of adjust- ment within female-dominatccl jobs.

Legislation in Ne~vfoundland and the federal jurisdiction uses ;I point-to-line adjustment whereby the pay in each female-dominated jot> is raised to the male payline. The effect of this ad- justment is to remove both the systemic cliffer- ences as well as random v:&tions in the female payline. Although this rrltionale has the goal of reducing individual discrimination. the argument sut~unies that cdl deviations around the female paylinc are ;I result of individual discrimination. Additionally, the adjustment does not eliminate the \a%don around the male payline. This pro- cedure may nlso lead to greater variations in the magnitude of adjustment within female-dom- nated groups, causing secondary effects (that is, fairness proldems).

The Ontario legislation attempted to avoid these pitfalls 13~ using :I jobto-job comparator approach. This procedure requires that a com- parison 1~2 nide between ;i female-dominated job and 21 bdl-defined male ampardor group. When se\.eral male comparator jobs exist, the lowest-paid jot, is used. When no mate compara-

tor job of equal value exists, the lowest-paying male job of the next highest value is used. Through the use of such comparators, this proce- dure has the effect of eliminating both random variation as well as systemic differences within paylines. Again, however, assuming that these deviations are all the result of individual discrimi- nation may be problematic.

Another major issue relating to the imple- mentation and application of comparable worth legislation involves what has come to be known as “phasing”-staggering dates for compliance under a particular piece of legislation. Most pro- vincial legislation has followed a phasing pro- gression of application from government to quasi-government to the private sector. Across the private sector the phasing continues from larger firms (which may have evaluation systems already in place) to smaller firms, with the small- est firms exempted altogether. I?hasing allows mid-course adjustments as well as use of the knowledge gained through successive applica- tions. Moreover, a common feature of many plans involves an annual ~xirn~illl ceiling of 1 percent of payroll per year for wage acijustment costs.

Another application issue is that of labor organizations. With almost 40 percent of the Ca- nadian workforce covered by collective bargain- ing contracts, Canada has more than double the union coverage found in the IJnited States. Unions are concerned that comparable worth, through its extensive use of job evaluation proce- dures, could mean a return to the principles of “scientific management” of the early 1900s. He- c3use the application of comparable \vorth does not recognize l~rg~ti~ling power as a ~ietel-lllin~~nt of wages, it is feared that the process could un- dermine collective bargaining. In response, the Kirious legislatures have tried to work through the collective bargaining process. Methods of including unions and collective bargaining in the comparable worth process include design of the job evaluation instrument to account for this issue (Ontario), job equity complaint systems that spe- cifically account for this factor (federal), distrihut- ing the awards across both union and non-union employees (Manitoba), and even formally recog- nizing bargaining power once comparable worth has been achieved ~Ontario).

Impacts in Canada

Although comparable worth legislation has been in place in various forms in Canada for several decades. very little comprehensive empirical re- search of its results has been published. Some research has noted the relative failure of early, conventional, complaint-based policies that relied on the premise of equal work (as opposed to equal pay). Gunderson (1975, 1985) found that

these plans, with their limitation of restricting comparisons to the same occupation in the same establishment, were found to have had no impact on narrowing the wage gap.

Though economists have yet to document any comprehensive analysis of the impacts of more recent comparable worth legislation, some general empirical evidence is available:

1. The complaint-based systems in place in Quebec and the federal juriscliction since the mid-1970s have resulted in relatively few awards. Though few in number, individual awards in the area of $4,000 per recipient and estimates of payline adjustments of 10 percent or more are not uncommon.

2. With the proactive legislation in place in ~~nitol~a since 1985, wage adjL~stments have run in the neighborhood of 15 percent in female- dominated jobs, resulting in a cost estimated at 3.3 percent of payroll over a four-year period. The combined adjustments narrowed the wage gap from 0.82 to 0.87-a 28 percent closure.

3. An analysis of 30 recently reported cases under the proactive Ontario legislation revealed an overall unweighted average award of $4,000, or a 20 percent increase (excluding extreme high and low figures). Although generalizations drawn from so few cases are open to question, awards tended to be larger in the public sector when compared to the private sector, and in union settings when compared to nonunion settings. Prelitninary evidence of awards in large firms (more than 500 employ- ees) in the private sector category of the Ontario legislation suggests award adjustments will be smaller than those in the Dublic sector.

There is also con- cern on the part of employers that indirect costs may exert pressure to restore parts of the old relative wage scale. Employee groups that do not receive adjustments have voiced concern that the costs of adjustment shrink the size of the pie that remains for the bargaining process and individual adj~lstnlet~ts. In at least one example, some hos- pitals have broken with traditional, centralized, province-wide bargaining after comparable worth adjustments disrupted the bargaining process.

Though selective evidence is available on the impact of comparable worth awards in an ind- vidual’s pay, no evidence exists on such other related factors as: the disemployment effect for recipients and nonrecipients; the extent to which this effect, if found, may be related to compa- rable worth implementation; the second-round employment effects on male- and female-domi-

nated joh; the decrerise in occupational segreg:~- tion resulting from men entering better-paying f%male-clomin~ltecl jobs: or the impact on the collecti\~e bargaining process.

C an:d:~‘s experience with conq~:ir;hle bmth is of significant interest 3rd rel- cv;lnct’ from :I numkr of kictors. Its ex-

tensive headth of co\w3ge, its application to the priwte sector, its legislative integration Lvith col- lecrive h-gaining. and its proactive npprodi all stand 3s models of comp’arable worth policies workhkk. The Cuuclian form of governmenr. \I-hi& gives strong powT\;crs to the provincktl juris- dictions, pro\kles an opportunity to study sew-d different legislah~e plans of conip:u-hle \Yorth with vaq%ig coverage. :kpplicdion. and imple- nwntation features. No~vherc else in he \Yorlcl does the opportunity for such rese:uch exist.

To&y the discussion of comp;~~~lde worth in C3nacln has turned from ;t dthte on the nwrits of the concept to ;I ckhatc on how Iwst to implc- nicnt it. Hqwd the issues of p’-:icticality. issues of fairness :lre where the process is presentI) running into trouble. With the limited retrospec- tive data ~~\~~~ilahle. tiiui)’ questions relating to design 2nd implt7iient;~tion reni:lin unarwvcrecl: Whzt are the relative advantages ;Incl disncl~~~~n- tages of csing point-to-line. line-to-line, 2nd job to-job n-:qe aclj~lWment methods? Sliodcl estrapo- lation and projection of p:iylincs he pcrmittecl? Should the he more legishti\~e attention to job e\2luation instruments used in implcnienting conipar2lde worth? Will the inclusi\.e use of ex- eniptions :rllo\v for 21 tlexihle :ippro;lch to hir implement:ltion or :I loophole for ~~hst?

Pcrl~aps the most kwinating piece of conip;~- r;llde ~vorth legislation has re3ched ils find phse of impl”ii’ntation in Ontario. The most salient feature of this legislation-iml,ositi~ conip~~ral~le \\urth on the pri\2te sector in ;I pro:tcti\.e ni;ui- ner-is the most intrusive attempt to clatc to :rd- dress systemic gender-hsed 1’2) inequities. Its enforcement through the legislative crc2tion of tlw lb). Equit)~ Comniission of Ontario must 1~2 closely examined ;uid measured to eduatt. the effectivcnc5.s of this 13~~ in achieving its desired goal hirl!,.

As \vith niosr public policiw. tlw question finallv remains: rh the henefirs out\\+$i the costsi This question Idance econonlic. soci;ll. ethic31. and politiul v~~lues 3rd should he the focus of study froni :I \2riety of disciplines. The true lessons to IX learned from the impknienta- tion of conipar3lde lx-orth in C:tn:lcl:l we still to conle. The situation is not \vithout par:lllel in the

IJnited 3:lte.s. and 3s mentioned e;uIier, American hsiness leaders would he well advisecl to \63tch this situation and the resultant debate 2s it un- folds. The implications for [J.S. employers, p:w titularly in the prh2te sector. will be enornious. Anyone who does not realize this hs silnply not ken paying attention! 0

References

Kenneth A. Kovach is a professor of human resource management at George Mason University, Fairfax, Virginia.