HomeMy WebLinkAbout06-07-15 Bennett City Commission Equal Pay ResolutionJune 7, 2015
Dear Mayor Krauss and City Commissioners,
I am providing written testimony regarding action the City Commission may take on Resolution 4601,
Equal Pay for Equal Work, proposed by the Bozeman Business and Professional Women (BBPW)
organization. My interest in this resolution is that of an economics teacher and a businessman.
Some of the assumptions presented in the “Whereas” clauses of the resolution are troubling and
somewhat misleading. Numerous research studies have been conducted on equal pay for equal work.
These studies shed more light on the perceived “gender gap” in wages.
For a business owner, a worker’s pay is dependent on the worker’s productivity and the consumer
demand for the business’s product or service, from hamburgers to software programs to backpacks to
furniture to houses. If a worker is unable to produce enough product or service to meet customer
demand, then the business owner has less revenue coming in and cannot pay the worker as much in
wages.
These research studies have shown that differences in average pay do not necessarily indicate
discrimination. Many factors affect workers’ productivity and thus their pay, including:
Work hours. Employees who work longer shifts—including overtime—usually produce and earn more than
those who do not.
Education and human capital. More educated workers often have more skills and greater productivity
than less educated workers. Consequently, they usually command higher pay.
Occupation and industry. Jobs in some occupations and industries (e.g., construction, manufacturing) are
more physically unpleasant or dangerous than others: 92 percent of workplace fatalities in the U.S. are
male. In order to attract potential employees, these jobs must pay a compensating wage differential that
accounts for the work’s danger or unpleasantness. Other jobs require specialized skills or expertise.
Experience. Employees become more productive as they gain experience. Economists also find that their
pay tends to rise as well.
Career interruptions. The skills and productivity of workers who drop out of the labor force can erode.
When they return, they usually earn less than they would have had they remained employed continually
throughout.
Benefits. Cash wages make up only two‐thirds of workers’ total compensation. Non‐cash benefits, such as
health coverage and paid leave, make up the rest. Employers care about the total compensation they pay
but do not particularly care about how it divides between cash wages and benefits. Workers who want
more benefits may accept jobs with lower wages, and vice versa.
Market forces compel employers to set pay on the basis of factors such as these that affect productivity.
Businesses that pay their workers below their productivity see them accept better job offers from
competitors. A company that paid experienced workers and new hires the same amount would have great
difficulty retaining experienced workers. A hospital that paid its doctors and nurses fast‐food wages would
find itself chronically understaffed—if it had any staff at all.
Economists would not expect men and women with different levels of education and experience working
in different occupations in different industries and with different benefit packages to make the same
amount. To the contrary, pay differences would naturally arise in the absence of any discrimination.
The U.S. Department of Labor (DOL) commissioned an examination of this research, which it published in
2009. This extensive study was conducted by CONSAD Research, titled “An Analysis of the Reasons for the
Disparity in Wages Between Men and Women.” (Link:
http://www.consad.com/content/reports/Gender%20Wage%20Gap%20Final%20Report.pdf)
I encourage you to read at least the Forward in this report. Following are some excerpts:
“During the past three decades, women have made notable gains in the workplace and in pay equity,
including increased labor force participation, substantial gains in educational attainment, employment
growth in higher paying occupations, and significant gains in real earnings.”
“However, despite these gains the raw wage gap continues to be used in misleading ways to advance
public policy agendas without fully explaining the reasons behind the gap. The purpose of this report is to
identify the reasons that explain the wage gap in order to more fully inform policymakers and the public.”
“There are observable differences in the attributes of men and women that account for most of the wage
gap. These variables include:
A greater percentage of women than men tend to work part‐time. Part‐time work tends to pay less
than full‐time work.
A greater percentage of women than men tend to leave the labor force for child birth, child care and
elder care. Some of the wage gap is explained by the percentage of women who were not in the labor
force during previous years, the age of women, and the number of children in the home.
Women, especially working mothers, tend to value “family friendly” workplace policies more than
men. Some of the wage gap is explained by industry and occupation, particularly, the percentage of
women who work in the industry and occupation.”
The analysis found that the average woman makes 18 percentage points less than the average man.
Controlling for demographic factors and education actually slightly increases the gap (to 20 percentage
points) primarily because women’s educational attainment now outpaces men’s. However, detailed
proxies for occupation and industry reduce the overall gender gap by almost a quarter—to 14 percentage
points. Adding controls for overtime hours worked and part‐time status further shrinks the overall gap.
And adding additional controls for the number of children a worker has and time out of the workforce
reduces the gender gap by three‐quarters—to just five percentage points. Other factors, such as the cost
of fringe benefits, may account for much or the entire remaining gap.
As for City employees, keep in mind that City employees’ wages are covered by collective bargaining
agreements. Managers have no ability to discriminate in favor of or against female employees.
Following is a quotation from the DOL report Summary and Conclusions (page 35):
“As a result, it is not possible now, and doubtless will never be possible, to determine reliably whether any
portion of the observed gender wage gap is not attributable to factors that compensate women and men
differently on socially acceptable bases, and hence can confidently be attributed to overt discrimination
against women. In addition, at a practical level, the complex combination of factors that collectively
determine the wages paid to different individuals makes the formulation of policy that will reliably redress
any overt discrimination that does exist a task that is, at least, daunting and, more likely, unachievable.”
Based on the above data, I urge the Commission to vote No on adopting Resolution 4601, Equal Pay for
Equal Work.
Sincerely,
Richard Bennett
1612 West Olive, Bozeman