Despite What the Pope Says, Proportional Pay is Still Not Required in the U.S.

Since Pope Francis added his voice in protest about about gender based pay differentials after Equal Pay Day, maybe this is a good time to revisit the status quo.

Current American federal law only compels equal pay for practically identical work. The usually highly imbalanced disproportional pay to protected classes is the big “hidden” issue that confuses people when they confront the issue.

But, it is different in Canada.

While Canada requires pay proportionality, the U.S. does not. Here, tiny distinctions can justify large pay variances.  Minor tweaks in either job title or specific work content elements or educational criteria can result in relatively immense differences in pay. And when the Stateside adverse impact falls disproportionately on protected classes, it can be justified by “the market” and “internal equity” defenses.

Grossly disparate treatments may not be right or proper, but they remain legal here.

Canada learns from America’s mistakes

Note that before Canada finalized its Bill of Rights, they sent analysts to attend American compensation seminars on pay equity. They told me this is their usual pattern, to let America screw things up first and then learn from our mistakes.

Accordingly, they require “equal pay for work of equal value” instead of the U.S. “equal pay for equal work” standard within enterprises. Canada requires comparable pay for comparable content while America demands equal pay only for identical content.

This is just another example of the apparently minor but substantially immense differences between American and Canadian labor laws. Even though we started earlier, we still remain far behind our neighbors to the North in the pay equity arena.

Partly as a result of the continuing disparity between Canada and the U.S. in gender equity issues, Equal Pay Day was created in 1996 by the National Committee on Pay Equity (NPCE) where I had a long history of prior involvement.

Their first Executive Director and I were the only Americans to address Canadian Crown Corporations in an Ottawa Labour Canada conference on the topic many years earlier. Unfortunately, both the NCPE and their creature, the U.S. Labor Department’s Women’s Bureau, continue to pound on the broad and misleading but emotionally engaging 77-78 percent factoid that obscures the real issue.

Solving the U.S. gender pay problems

More information will not necessarily solve the gender equity problems in America. The Labor Department’s Office of Federal Contract Compliance Programs (OFCCP) disclosures compelled under the new pay transparency rules for government contractors will not shed much light.

Article Continues Below

First, because they must use Standard Occupational Classifications (SOCs), which might not map clearly for understanding outside the federal ranks. The generally broad SOC occupational categories will not always match up with internal job titles or specific employer classification systems in ways that assure identical common agreements. Differing terms will create legitimate problems when comparing apples and oranges.

Second, the industry matches under the rules will probably also use the new federal North America Industry Classification System (NAICS) code which is completely inconsistent with the old SIC industry coding approach sanctified in history.

Standard Industry Classification (SIC) industry codes are still retained by credit agencies, pay surveyors and the SEC (whose excuse is that they are not a statistical organization and thus exempt from the requirement for such federal agencies to abandon the SIC codes). The two systems have contrasting base approaches.

SIC codes were ranked by 1930s employment demographics and address what is made, handled or delivered. NAICS codes are assigned by th eprocess applied by the enterprise to make, handle or deliver the product or service. Transitioning to new industry codes will also be troublesome but inevitably essential, since pay data tends to be highly specific to industry.  Those are all complications that obstruct pay equity comparisons.

How many compensation pros can fix this problem?

Employers whose whose self-audits reveal pay equity issues may want to review a guide which is a slight rewrite of the pamphlet Job Evaluation – A Tool for Pay Equity that I wrote for NCPE many years ago. Most of this will fall on deaf ears, however, since maybe only one compensation pro in 50 knows enough to even understand the causes of the historical problem, much less how to implement effective palliative measures.

If you are one, however, you have a high future earnings potential … if America ever embraces the concept of gender-free pay proportionality.

This was originally published at the Compensation Café blog, where you can find a daily dose of caffeinated conversation on everything compensation.

E. James (Jim) Brennan is Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. Semi-retired after over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), and will express his opinion on almost anything. Contact him at ej.brennan@erieri.com.

Topics