Policy Studies Review, May 1985, Vol. 4, No. 4

Sandra E. Cleason and Collette Moser

SOME NEGLECTED POLICY IMPLICATIONS OF COMPARABLE WORTH

Introduction

Comparable worth, o r the concept o f equal pay fo r dissimilar jobs o f equal value to an employer, has been identi f ied as "the civil r i gh ts issue o f the eighties" (Katz, 1982). The debate over the merits o f comparable worth emerged when comparable worth in pay was suggested as a policy option which would raise the low wages earned by women in tradit ional ly female occupations such as nurs ing o r clerical work. Research based on intraf i rm wage analysis using relat ively bias-free job evaluation techniques oetermined these women earned on average wages 20 percent lower than men in tradit ional ly male occupations such as t ruck d r i ve r despite the fact that both jobs were o f equal value to the employer (Young, 1981).

The purpose o f th is note i s to discuss some aspects o f the costs and benefits o f comparable worth for p r iva te sector employers, employees and taxpayers i f comparable wor th were implemented. Discussions o f these cost-benefit considerations o f the pol icy option o f comparable worth are often neglected. A n analysis o f the costs and benefi ts o f comparable worth as a pol icy option is i l lustrated w i th reference to families w i th insomes below the poverty l ine which are headed by fully employed work- ing women. This subgroup o f families was chosen fo r analysis since it is a major disadvantaged group o f full-time workers. These workers are also pa r t o f the problem o f the feminization o f poverty. It is estimated that if the 1967-77 t r end continues, the pover ty population in the year 2000 wil l be composed solely o f women and the i r chi ldren (U.S. Commission on Civi l Rights, 1983).

The Private and Social Costs o f Comparable Worth

The policy choice of comparable wor th as the basis fo r pay equity (also referred to as pay pa r i t y ) i s basically a choice about which groups in society should bear the costs o f achieving pay equity. Employers who implement comparable wor th wil l bear the cost o f comparable worth since a variety o f monetary expenses and other adjustment costs w i l l be incurred as p r io r methods o f compensating pr iva te sector personnel are changed. However, i f pay inequit ies continue, working women earning wages too low to support themselves and the i r families wil l continue to bear the brunt of the present pay inequities as well as taxpayers who must support publ ic assistance programs which supplement inadequate earned incomes.

The estimates o f monetary costs which wi l l be incur red by employers range from $2 bi l l ion t o $150 bi l l ion pe r year fo r the economy (Smith, 1978; Business Week, 1979). However, it is important t o note that the methods used to der ive these estimates have never been described. Three considerations suggest tha t these estimates are too high. First , over time there may be a Ilshock effect" such as that noticed in some newly union- ized companies. Managers are "shockedI8 ou t o f the i r own ways o f doing things and ident i fy more creative ways o f decreasing costs, improving efficiency, and thereby increasing product iv i ty.

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Secoca, comparable worth i s being introduced gradually in an incre- mental manner to minimize i t s annual costs and impact on inflation. The wage structure is, therefore, not negotiated de nove, but rather only certain jobs are targeted. In some cases, such as in Michigan, the pro- posed method of implementation o f a comparable worth study is th rough the allocation of larger than average wage increases to "women's jobs" found t o be paid less than parity. ' Estimates by states which have studied the comparable worth issue indicate that 2 percent o f the Washington state budget would be required to fully implement comparable wor th in pay, anc 2 percent to 4 percent in the state o f Minnesota (Collette, 19821.

Finally, employers opposing comparable wor th advocate as an alternative market forces guiding women's occupational decisions. They argue that over time women who want to earn more wi l l choose to enter be t te r paying male occupations, thereby desegregating those occupations. Th is argument overlooks the fact that women who are cur ren t ly living in poverty as well as others who are heads o f households as displaced homemakers are no t usually in a position to conduct the career planning which the desegre- gation strategy implies. The problem these women face is no t occupational desegregation per se, but rather low incomes. Therefore a policy which direct ly attacks the problem of low pay is needed.

Moreover, occupational desegregation i s no t a costless alternative to comparable worth. If occupational desegregation is t o occur rapidly, rela- t ive to past trends, publ ic funds are needed. Without publ ic and pr iva te employer-sponsored programs which encourage these occupational changes by women, the full representation o f women in a l l types o f paid employment is expected to occur ve ry slowly2 due to the problems women in nontradi- tional fields t a ~ e . ~ Furthermore, there are strong monetary and nonmone- ta ry pressures on men to stay in the i r tradit ional f ields (Heubens and Reubens, 1977). If only 20 percent o f the women employed in clerical and service occupations in 1981 were provided w i th programs designed to facilitate these changes in occupation, it would cost $1.6 bi l l ion to provide basic employment counseling and job placement services, and close to $12 bi l l ion for t ra in ing programs to provide marketable ski l ls in the labor market.')

Most importantly for the purpose o f th is paper, the employer's estimates o f cost appear to focus only on the i r p r iva te costs. These estimates, therefore, do not take into account taxpayer savings when fewer publ ic sector resources are needed for cash and noncash benefi ts to aid families headed by women whose earnings are too low to support themselves and their families adequately. The taxpayer savings are readi ly apparent when the impact o f comparable worth on poor working women i s analyzed.

The Impact o f Comparable Worth on Poor Working Women

In 1982 approximately 36 percent o f families headed by females, o r 3.4 million families, had incomes which fel l below the pover ty line. This reflects the impact o f the feminization o f pover ty resul t ing from an in- crease in the proport ion o f female-headed families in the pover ty popu- lation. White families headed by females increased from 14.8 percent o f the poverty population in 1959 to 25.5 percent in 1980 while black families headed by females increased from 24.4 percent to 58.6 percent auring this period (U.S. Bureau o f Census, August, 1983). However, only 40 percent o f these women family heads were in the labor force, so changes in wages result ing from comparable worth w i l l no t help a l l poor women heading families. Also the largest impact of comparable wor th w i l l be on those

Cleason/Moser: Sane Neglected Pol icy Implications of Comparable Worth 597

women w i th full-time employment. To i l lustrate the benefits of comparable worth to th is latter group, attention is focused on the 6.5 percent of the poor female-headed families (224,000 families) who were employed full-time for 50 to 52 weeks in 1982 (U.S. Bureau of the Census, July, 1983). These women are heavily employed in the tradit ional ly female occupations on which much o f the comparable worth controversy has focused. For example, in 1980 about 87 percent o f the longest jobs held by poor female family heads w i t h no husband present were in the clerical (28%), opera- t ives (13%). and service (46%) occupations (U.S. Bureau o f the Census, July 1982).

To estimate conservatively the impact o f comparable worth pay policy on this subgroup o f poor family heads, i t was assumed these women were employed in a minimum wage job w i th no publ ic assistance being received. As Table 1 indicates, th is resulted in an estimated earned income which fell below the pover ty threshold by $993 for a mean family size of three persons. If a comparable wor th increase o f 20 percent were paid, the employee would earn an income $347 above the poverty line. Th is change in income level would therefore sh i f t the burden o f poverty from the employee to the employer. A 15 percent wage increase paid by employers to raise wages jus t to the poverty threshold would cost about $222 million if accomplished in one year i f no employment changes occurred.

TABLE 1 The Economic Impact o f Comparable Worth on Famil ies

Below the Poverty Line w i th an Employed Householder, No Husband Present, 1982

Weighted Average Poverty Threshold, Three Persons, 198Za s 7,693

$ 6,700 Earned Income, Minimum Wage

Earned Income A f te r 20% Comparable Worth Wage Increase s 8,040 Cost t o Employers t o Raise Earned Income t o Poverty Threshold $222,432,000

Benefi ts t o Taxpayers from Reduction i n Noncash Benefi ts $186,816,000

$ 42,560,000 Foodstamps

Medi cai d3 $144,256,000

1

2

'Estimate based on $3.35 per hour f o r f o r t y hours per week for M reeks.

'The mean annual value of foodstamps received would be reduced by $190.'

3Due t o the complexity o f the medicaid formula, i t is d f f f i c u l t t o estimate the reduction i n publ ic expenditures resu l t i ng frm the increase i n earnings. Harever, f o r the earnings range being considered. the amount h i c h an ind iv idual must pay for medical care before becoming e l i g i b l e f o r medicaid payments would approximately double a f t e r the wage increase. Therefore t o estimate the taxpayer savings, the average annual market value i n 1979 of medicaid benefi ts o f $629 f o r a nondisabled adul t and $329 f o r a c h f l d under the age of 21 was reduced by 50 percent.b A two-chi ld family was assumed.

Source: 'U.S. Department o f Comnerce, Bureau of the Census. Characterist ics of Households and Persons Receiving Selected Noncash Benefits: 1982. CPR P-60. No. 143, January, 1984.

bU.S. Department o f C-rce. "A l ternat ive Methods f o r Valuing Selected In-Kind Transfer &nef i ts and Measuring Their Ef fect on Poverty," Technical Paper No. 50.

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A focus on these monetary costs t o the employers ignores the savings to taxpayers resu l t ing from a reduct ion in the noncash assistance received by the poor. Based o n 1979 estimates o f the market va lue o f noncash benefi ts o f foodstamps and medicaid, th is would amount t o about $834 p e r household, an annual taxpayer saving o f $186 mil l ion (shown in Table 1 ) . However, these are conservat ive estimates since the va lue o f pub l i c r e n t subsidies, free o r reduced-price school lunches, and the costs o f program administrat ion are excluded. If the average annual market value o f pub l i c r e n t Subsidies in 1979 were reduced by on ly 14 percent o r $146 p e r house- hold, th is would save taxpayers $36 mil l ion in one year , thereby ra is ing the total taxpayer saving t o $222 mill ion.

Thus, the payment o f increased wages to the work ing poor women in th is subgroup o f poor female family heads as the r e s u l t o f comparable wor th in pay equ i ty resul ts in a p r i v a t e employer cost which is approx i - mately equal t o the pub l ic benef i ts ga ined due t o the reduct ion o f the taxpayer burden. However, since the reduct ion in taxpayer b u r d e n is based on conservative estimates, there is reason t o bel ieve tha t t h e actual benefi ts w i l l outweigh the p r i v a t e costs o v e r time. In the shor t - run , ind iv idual family resources may n o t change i f the increased wages are only equal to the loss in food stamps a n d medicaid. However, in the long-run, since wages on one job are usual ly used as a barometer fo r subsequent jobs, promotions, a n d wage increases, the family's income posi t ion should improve i f employment levels are unaf fected by the women's wage gains.

It should n o t be concluded f rom t h i s example t h a t the estimated im- provement in the economic welfare o f families headed by fully employed but poor women which can r e s u l t from a comparable w o r t h pay equ i ty po l icy wi l l solve the i r economic problems. Women family heads are d ispropor t ion- ately handicapped in the labor market by poor education a n d sk i l l s which need to be upgraded. L ike o ther women workers in t rad i t ional occu- pations, they should b e encouraged t o develop new sk i l l s a n d consider moving in to nontrad i t ional occupations t o insure more substantial improve- ments in the i r earn ings a n d f u t u r e career options.

As addit ional caveats, it should b e noted tha t a somewhat d i f fe ren t taxpayer impact occurs when the employer i s a pub l i c one, such as a state ra ther than a p r i v a t e sector employer. In the case o f t h e pub l ic employ- e r , i f the wage adjustment i s immediate a n d resu l ts in no reduc t ion in wages o f rioncomparable w o r t h jobs, taxes wi l l have t o b e ra ised a n d there may be n o n e t ga in t o the taxpayer f rom the reduc t ion in food stampslmed- icaid b u r d e n re la t ive t o the increased pub l ic wage burden. However, as noted ear l ier , the focus f o r adjustment o r implementation o f comparable wor th in states such as Michigan has been on a la rger percentage increase for female jobs re la t ive t o o ther jobs o v e r time. In t h i s case t h e improve- ments in the wages o f the low-income comparable w o r t h job holders wi l l be at the expense o f pub l i c employees in noncomparable w o r t h jobs. Conse- quent ly the implementation method w i l l determine whether the n e t taxpayer burden remains constant o r i s reduced as in the p r i v a t e sector case.

Conclusion

Pay equ i ty enta i ls b o t h p r i v a t e a n d pub l ic costs a n d benef i ts which must be ident i f ied and measured if the impact o f comparable w o r t h i s t o b e determined. T h i s paper estimates t h e re la t ive costs a n d benef i ts of compa- rable w o r t h fo r a subgroup o f families headed by women employed ful l- t ime but whose earn ings fal l below the p o v e r t y l ine. It was found tha t a l though pr iva te sector employer costs increased, the taxpayer b u r d e n was

Cleason/Mosei: Some Neglected Policy Implications of Comparable Worth 599

reciuced. A conservative rat io o f these public benefi ts to pr ivate costs o f about one-to-one was estimated. This reminds us that pay equity based on the comparable worth concept w i l l y ie ld important benefits not only to employees but to the economy as a whole.

The focus o f th is cost-benefit evaluation has been on salary adjustment. While some changes in employment might occur in response to comparable worth wage increases, only small employment adjustments are expected because o f two considerations: wages would not be out o f line w i t h worker product iv i ty and the majority o f affected jobs are expected to be in the service sector rather than in manufacturing (U.S. Department o f Labor, 1982). Most service sector f i rms cannot sh i f t production to low-wage foreign countr ies in response to domestic wage increases.

It is useful to note as well that the analysis o f comparable worth pre- sented here is analagous to that o f a var iety o f other policies pursued to achieve desirable social objectives even i f those policies impose additional costs on the pr ivate sector. An example is the local, state and federal statutes implemented to provide a clean and healthy environment b y con- t ro l l ing a i r and water pollution. The impact o f these laws has been to shi f t the burden o f pol lut ion from the public to the pr iva te producers o f these external i t ies in the same manner comparable worth would sh i f t to the pr ivate sector some o f the costs imposed on society by the low wages paid to poor working women employed full-time.

FOOT NOTES

'The Michigan organization "Women in State Governmento1 has presented such a proposal to the state employment relations board. Michigan women state government workers now earn 794 for every dol lar earned by their male counterparts. The organization has recommended as a p a r t o f the incremental approach to pay equity a target improvement in fiscal year 1985 o f raising women's wages to 854 for every dollar earned b y men.

'From the period 1950 to 1979, the aggregate index o f segregation in all occupations for all workers decreased from 68.2 to 63.2. However, while the percentage o f males in h igh ly segregated occupations fell from 73 percent to 53.3 percent, the percentage o f females rose from 35.7 percent to 46.3 percent (Bu r r i s and Wharton, 1982).

3Although women can improve the i r financial positions by moving from tradit ional clerical and blue collar female jobs to rlontraditional blue collar jobs, a var iety of problems such as those related to t rsr isfer o f seniori ty, make the transit ion unattract ive (O'Farrel l , 1982).

4 1 ~ 1981 approximately 22.8 million women were employed as clerical o r service workers (U.S. Department o f Labor, 1982). The estimates o f program costs are based on the estimated costs in January 1984 o f pro- grams for dislocated workers in Michigan established by the Governor's Office for Job Training. The program, designed solely for assisting unem- ployed workers to assess the i r ski l ls, seek new jobs and gain some new ski l ls, was estimated to cost $340 per person. More extensive t ra in ing programs were estimated to cost an average o f $2600 pe r person.

REFERENCES

Burr is , V., & Wharton, A. (1982 , Fall). Sex segregation in the U.S. labor force. The Review of Radical Political Economics, pp. 43-56.

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Business Week. (1979, Gecember 17). The new pay push for women. Collette, C.O. (1982). Ending sex discrimination in wage setting.

AFSCME, mimeographed. Katz, P.A. (1982, Spring). Comparable worth. federal Service Labor

Relations Review, pp. 38-57. OIFarrell, B. (1982). Women and non-traditional jobs in the 19801s: A n

overview. In P. Wallace (Ed.), Women in the workplace. Boston, MA: Auburn House Publishing Co., pp. 135-165.

Reubens, B.G., 6 Reubens, E.P. (1977). Women workers, nontradit ional occupations and full employment. In American women workers in a full employment economy: A compendium of papers. Joint Economic Commit- tee, Congress o f the United States, 95th Congress, 1st session, Wash- ington, DC: U.S. Government Pr in t ing Office.

Smith. (1978, September 11) . The EEOCls bold foray into job evaluation. Fortune.

U.S. Bureau o f the Census. (1983, August) . American women: Three decades of change. Washington, DC: U. S. Government Pr in t ing Office.

U.S. Bureau o f the Census. (1982, Ju ly ) . Characteristics of the popu- lation below the poverty line: 1980. Curren t Population Report P-60. No. 133.

U.S. Bureau of the Census. (1983, July) . Money income and poverty stotus of families in the Untied States: 1982. Curren t Population Ke- po r t P-60. No. 140.

U .S . Commission on Civi l Rights. (1983, May). A growing crisis: Disad- vantaged women and their children.

U.S. Department of Labor, Bureau of Labor Statistics. (1982, Septem- ber) . The female-male earnings gap: A review o f employment and earnings issues. Report 673.

Young, A. and Co. (1981). A comparable worth study of the state o f Michigan job classifications. Mimeographed.

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