MOTIVATION FOR THE STUDY
Understanding Pay Disparities for Evidence-Based Policy
Pay disparities, or inequality in earnings between women and men and between racial or ethnic groups, are well-documented in national statistics. In 2020, the median earnings of women who worked full-time, year-round were 82.3 percent of those earned by men over the same period (BLS, 2022a). Relative to non-Hispanic White workers, Black workers earned 76 percent as much and Hispanic workers earned 68 percent as much (Census Bureau, 2021a). Comparisons of Black and Hispanic women to non-Hispanic White men reveal even larger pay disparities—63 percent and 55 percent, respectively (Census Bureau, 2021a).
These statistics are aggregate measures of pay disparities and do not account for the multitude of factors that could reasonably affect differences in pay. An extensive body of research, predominantly in the fields of economics and sociology, has examined how observed aggregate pay disparities are correlated with differences in human capital, occupation, industry, work intensity, and local labor-market conditions, among other things (Ehrenberg et al., 2021). While differences in pay can often be attributed to differences in workers’ education, skills, work experience, or occupation, these factors fail to fully explain sex and race/ethnicity pay gaps. Moreover, based on information available from nationally representative individual-level survey data typically used in pay-disparity research, it is impossible to determine the extent to which pay disparities are linked to place of employment.
Among the federal statistical data collections that include earnings data, there is no single source that incorporates all the demographic, occupation, work-schedule, and employer information needed to adequately evaluate pay disparities for evidence of discrimination or even to describe the types of workplaces with large or small pay disparities. The administrative records of the Internal Revenue Service, Social Security Administration, and state unemployment insurance systems contain a large amount of detailed and interrelated pay, demographic, and employer data that could potentially be linked to data collected by the EEOC EEO-1 form and used for statistical purposes only, but the Confidential Information Protection and Statistical Efficiency Act (44 U.S.C. § 3501, 2010) and Title 13 (for Census Bureau-administered surveys) prohibit use of these data for enforcement purposes.
In practice, the ability to detect pay discrimination is complicated by a lack of transparency surrounding pay decisions, making it difficult for workers to know what their colleagues are being paid. One of the best-known examples involves Lilly Ledbetter, who only learned she had
been underpaid relative to her male counterparts after receiving a note from an anonymous ally. While she successfully sued her employer for pay discrimination on the basis of sex, the Supreme Court later overturned the lower court’s ruling, arguing that her claim exceeded the 180-day statute of limitations, without regard for the fact that her initial discovery of discrimination occurred outside of that time and the discriminatory act continued with each new paycheck. The Lilly Ledbetter Fair Pay Act of 2009 eventually nullified this ruling, by stating that the 180-day clock is reset with each new paycheck.
Pay secrecy is most common among private employers, many of whom either discourage or explicitly prohibit employees from discussing salary information.1 At the same time, there is often limited or no information concerning the practices and processes of private employers. While some employers limit the salary information available to job applicants, these same applicants may be asked to disclose salary history. This seemingly neutral practice can embed any previously encountered pay inequities into an employee’s starting salary with a new employer. Seventeen states and twenty city or county governments have enacted salary history bans while two states have prohibited such bans (AccuSource, 2021).
Pay disparities have multiple causes, and discrimination is only one. From a policy perspective, determining sources of pay disparities and addressing cases of discrimination is important. In the fiscal year 2020, a total of 67,448 charges were filed, many for multiple allegations of discrimination (EEOC, 2020a). Relatively few allegations (8,499) were for wage discrimination (EEOC, 2021a). Furthermore, most wage charges also involved other issues, usually employment terms and conditions, termination, promotions, or discharges.2 However, the relatively low number of pay-discrimination charges filed with EEOC is likely misleading: some employees may be unaware that they are experiencing discrimination; some may be afraid of retaliation; and some may lack the data to justify a complaint. Thus, there is a need for better and more complete data.
___________________
1 These practices persist although the National Labor Relations Act (NLRA) prohibits employer retaliation against nonsupervisory employees and job applicants who discuss pay with other employees. NLRA does not protect supervisors, managers, agricultural workers, or employees of rail and air carriers (Rosenfeld, 2017).
2 “The number for total charges reflects the number of individual charge filings. Because individuals often file charges claiming multiple types of discrimination, the number of total charges for any given fiscal year will be less than the total of the ten types of discrimination listed” (EEOC, 2020b).
EEOC Authority and Responsibility for Information Collection
As will be discussed further (see Chapter 2), a 2013 National Research Council consensus report, Collecting Compensation Data from Employers, advised EEOC on its initial plans for compensation data collection. The current report examines the quality of the compensation data EEOC collected in 2019–2020. Accordingly, several sections of this chapter draw heavily from content included in Chapter 3 of the 2013 report, except where otherwise referenced. These sections include the Equal Pay Act of 1963 (EPA), Title VII of the Civil Rights Act of 1964 (hereafter, Title VII), Executive Order 11246, and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA). For ease of reading, quotations are not marked.
The Equal Pay Act of 1963
Discrimination in pay on the basis of sex has been outlawed by the federal government for almost 60 years, since passage of the EPA. Enacted as an amendment to the Fair Labor Standards Act, the EPA’s coverage applies to any employer “engaging in commerce or in the production of goods for commerce” with an annual gross income of $500,000 or more (29 U.S.C. § 203(s), 1963). Government entities and health and educational institutions are covered irrespective of size. There are narrow exceptions to coverage under the statute for certain kinds of employees (29 U.S.C. § 213(a), 1963).
The EPA requires that men and women in the same workplace be given equal pay for jobs “the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions” (29 U.S.C. § 206(d)(1), 1963). Unequal pay between men and women for jobs that are substantially equal and that are performed under similar working conditions violates the act. Pay differentials are permitted if they are based on seniority, merit, quantity or quality of production, or a factor other than sex. Although the Department of Labor (DOL) was initially given authority to enforce the act, that authority was transferred to EEOC in 1978.
Title VII of the Civil Rights Act of 1964
Title VII prohibits a wide range of discriminatory employment practices, including both discriminatory pay practices and segregation of employees into specific jobs, and it addresses discrimination based on sex (including pregnancy, sexual orientation, and gender identity; EEOC, 2022a), as well as race, color, religion, and national origin. Title VII covers private-sector employers with 15 or more employees, state and local government employers with 15 or more employees, and the federal government as an
employer. Title VII also applies to employment agencies and unions that either operate a hiring hall or have at least 15 members.
Under Title VII, an employee challenging pay discrimination can file a charge with EEOC but typically must show that he or she is paid less than another similarly situated employee because of race, color, religion, sex, or national origin; or the employee may provide direct evidence of discrimination. If the employee does so, then the employer must assert a legitimate, nondiscriminatory reason for the pay disparity. If the employer is unable to provide a legally sufficient explanation for the disparity, the employer will be liable for damages for pay discrimination. If the employer provides a satisfactory reason for the disparity, to succeed in proving pay discrimination the employee must show that the employer’s stated reason is a pretext. If, after an investigation, EEOC determines that there is reasonable cause to believe discrimination has occurred, EEOC will invite the parties to join the Commission in seeking to resolve the charge through a voluntary, informal process known as conciliation (EEOC, 2022b). If the matter is not resolved in conciliation and the Commission decides not to litigate, EEOC issues the charging party a Notice of Right to Sue in federal court. The charging party then has 90 days to file a lawsuit in federal court.
Even when an employer does not intend to discriminate, a policy or practice that is neutral on its face may still disproportionately exclude or adversely impact members of a protected group. In such “disparate impact” cases, the individual alleging discrimination must prove—usually through statistical evidence—that the challenged practice has a substantial and significant adverse effect on a protected group. If the individual proves this, the employer will be liable for discrimination unless it can show that the practice in question is job related and consistent with business necessity. If an employer can demonstrate that a practice is indeed justified under this legal standard, the individual will be given an opportunity to prove that there are other policies or practices that would also serve the employer’s legitimate purposes but with less impact on the protected group.
Title VII empowers EEOC to accept and investigate charges of discrimination from individuals who believe they have been subjected to employment discrimination and from those acting on behalf of those individuals. Individuals have 180 days to file a charge under Title VII. The 180-day deadline is extended to 300 days if a state or local agency enforces a state or local law that prohibits employment discrimination on the same basis. Title VII also allows for members of the Commission itself to file charges of unlawful employment practices against employers.
Individuals must exhaust their administrative remedies through EEOC prior to filing a lawsuit under Title VII. But under the EPA, while aggrieved persons may file charges of discrimination with EEOC, they are not required to do so to file a lawsuit. The time limit for filing an EPA charge with
EEOC and the time limit for going to court are the same: within two years of the alleged unlawful compensation practice or, in the case of a willful violation, within three years. Moreover, filing a charge under the EPA with EEOC does not suspend the EPA’s statute of limitations, as it does under Title VII. For this reason, and due to the significant time it can take to exhaust administrative remedies through EEOC, some aggrieved individuals find it preferable to file a lawsuit in federal or state court under the EPA without filing a charge with EEOC.
Under both Title VII and the EPA, when EEOC’s investigation determines that there is reasonable cause to believe discrimination occurred, the Commission seeks to resolve the charge through voluntary and confidential conciliation. If the charge is not resolved in conciliation, EEOC may file a lawsuit in federal court to enforce violations of its statutes. Under Title VII, EEOC can litigate cases against private employers; charges against state and local government entities must be referred to the Department of Justice (DOJ) for litigation. Under the EPA, EEOC may litigate against any covered employer, private or public.
EEOC is also empowered to open “directed investigations” under the EPA and commissioner charges under Title VII. Each of these mechanisms allow EEOC to investigate potential pay discrimination without having received a charge of discrimination from an aggrieved person (EEOC, 2019a). “Commissioner charges and directed investigations also enable the EEOC to investigate and address discriminatory practices when workers are unlikely to have the necessary information” (Yang and Liu, 2021, p. 18).
Except for commissioner charges or directed investigations, the legal process for challenging pay discrimination places nearly all the responsibility for identifying, charging, and proving pay discrimination on the individual employee. This responsibility first assumes that individuals are aware of their rights under the law. The next hurdle that individuals face involves the unevenness of information between employers and employees, which makes it difficult for individuals to know how their pay compares to that of their peers. Additionally, the process of challenging pay discrimination requires an individual employee to accept personal risk in bringing a charge. Although federal employment discrimination laws prohibit employer retaliation, in fiscal year 2021, 56 percent of private-sector charges filed with EEOC included an allegation of retaliation (EEOC, 2022c). Fear of being ostracized and damage to reputation also represent social costs individuals may face when formally accusing their employers. Each of these hurdles contribute to underreporting of employment and pay discrimination. Thus, the panel believes EEOC must find ways to develop methods to identify prevalent but unreported discriminatory patterns. Such methods could include the collection of pay data from private employers.
Age Discrimination in Employment Act of 1967
The Age Discrimination in Employment Act of 1967 (ADEA) (and 29 U.S.C. § 626(e), 1967) prohibits employment discrimination against persons 40 years of age or older. The Older Workers Benefit Protection Act (Public Law 101-433, 1990) amended several sections of ADEA. In addition, section 115 of the Civil Rights Act of 1991 (Public Law 102-66, 1991) amended section 7(e) of ADEA (29 U.S.C. §626(e), 1967). “It does not protect workers under the age of 40, although some states have laws that protect younger workers from age discrimination” (EEOC, 2022d).
Americans with Disabilities Act of 1990 and the Rehabilitation Act of 1973
“Disability discrimination occurs when an employer or other entity covered by the Americans with Disabilities Act (42 U.S.C. § 12101, 1990), as amended, or the Rehabilitation Act of 1973 (29 U.S.C. § 701, 1973), as amended, treats a qualified individual who is an employee or applicant unfavorably because he or she has a disability.” “The law forbids discrimination in any aspect of employment, including hiring, firing, pay, job assignments, promotions, layoffs, training, fringe benefits, and any other employment term or condition. The law requires an employer to provide reasonable accommodation to an employee or job applicant with a disability, unless doing so would cause significant difficulty or expense for the employer (‘undue hardship’)” (EEOC, 2022e). Federal employees and applicants are covered by the Rehabilitation Act of 1973.
Uniformed Services Employment and Reemployment Rights Act of 1994
Title I of the Americans with Disabilities Act (ADA) and the Uniformed Services Employment and Reemployment Rights Act (USERRA) protect veterans from employment discrimination. Title I of the ADA, which is enforced by EEOC, prohibits private employers and state and local government employers with 15 or more employees from discriminating against individuals on the basis of disability. Any veteran with a disability who meets ADA’s definition is covered, regardless of whether the disability is service connected. USERRA has requirements for reemploying veterans with and without service-connected disabilities and is enforced by DOL and DOJ (EEOC, 2020b). Note that the Office of Federal Contract Compliance Programs (OFCCP) in DOL is responsible for enforcing equal employment opportunity for veterans who are applicants or employees of federal contractors.
Executive Order 11246, Section 503 of the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974
OFCCP enforces Executive Order 11246, which requires covered federal contractors and subcontractors to refrain from discrimination and take affirmative action to ensure equal employment opportunity on the basis of race, color, religion, sex, sexual orientation, gender identity, and national origin.3 In addition, OFCCP is responsible for enforcing Section 503 of the Rehabilitation Act of 1973 (29 U.S.C. § 503, 1973), covering persons with disabilities, and the VEVRAA, which covers prescribed categories of protected veterans. Under these laws, federal contractors must provide equal employment opportunities and take affirmative action to employ and advance applicants and employees; provide reasonable accommodations to employees, applicants, and veterans with disability;4 prepare affirmative action programs; permit OFCCP access during compliance reviews; and file an annual report with EEOC.5
OFCCP regulations require contractors to maintain records on employee compensation and provide them upon request (41 C.F.R. § 60-1.12(a), 2017), covering records on “rates of pay or other terms of compensation.” The regulations also require contractors to “regularly” monitor their compensation systems for potential pay disparities based on race, ethnicity, and gender; develop and implement appropriate corrections to any problem areas they identify; and report the results of their internal monitoring to management (41 C.F.R. § 60-2.17, 2017). This language requires federal contractors to maintain data on earnings by demographic characteristics but does not require them to annually report pay data or the results of internal pay analyses to OFCCP or EEOC. OFCCP schedules contractors for compliance evaluations through a neutral scheduling process.
While EEOC’s statutory role in enforcing equal opportunity employment and pay equity dates back to the 1960s, until recently, the Commission has only collected pay data from state and local government employers. (See discussion of EEO-4 collection, below.) In 2010, EEOC joined DOJ,
___________________
3 Executive Order 11246 (Executive Office of the President, 1965) was amended by Executive Order 13672 on July 21, 2014, to include sexual orientation and gender identity (Executive Office of the President, 2014a) and by Executive Order 13665 on April 8, 2014, to include the pay transparency nondiscrimination provision (Executive Office of the President, 2014b).
4 VEVRAA applies to protected veterans including (1) veterans with disability; (2) veterans who served on active duty in the Armed Forces during a war or in a campaign or expedition for which a campaign badge has been authorized; (3) veterans who, while serving on active duty in the Armed Forces, participated in a U.S. military operation for which an Armed Forces service medal was awarded pursuant to Executive Order No. 12985 (61 Fed. Reg. 1209); and (4) recently separated veterans.
5 The application of each of these requirements may vary based on contract size and number of employees.
DOL, and the Office of Personnel Management on the National Equal Pay Enforcement Task Force to identify ways of improving enforcement of federal laws prohibiting wage discrimination. The work of the task force highlighted a need for collecting wage data to assist EEOC’s enforcement efforts.
Foundations for Evidence-Based Policymaking Act of 2018 and Executive Order 13985
EEOC’s motivation for collecting wage data predates, but is consistent with, a broader federal movement toward the use of data in evidence-based policy making. The Foundations for Evidence-Based Policymaking Act of 2018 (Public Law 115-435, 2019) was passed to advance data and evidence-building functions in the federal government so that agency decision makers have the information needed to make “critical decisions about federal program operations, policies, and regulations, and to examine the impact of resource allocation on achieving program objectives” (OMB, 2019, p. 1). “Evidence” is broadly defined and includes foundational fact finding, performance measurement, policy analysis, and program evaluation. The Act incorporates many of the recommendations of the Commission on Evidence-Based Policymaking of 2017, a bipartisan initiative established in 2016 by former House Speaker Paul Ryan (R-WI) and Senator Patty Murray (D-WA). That Commission broadly defined evidence as “information produced by ‘statistical activities’ with a ‘statistical purpose’ that is potentially useful when evaluating government programs and policies” (Committee on Oversight and Government Reform, 2017, p. 3). Under this law, all federal agencies must submit an annual plan to the Office of Management and Budget (OMB) and Congress that includes, among other things:
- Data the agency intends to collect, use, or acquire to facilitate the use of evidence in policy making;
- Methods and analytical approaches that may be used to develop evidence to support policy making; and
- Challenges to developing evidence to support policy making, including any statutory or other restrictions to accessing relevant data.
In 2021, President Biden issued Executive Order 13985 (Advancing Racial Equity and Support for Underserved Communities Through the Federal Government), which states that the federal government “should pursue a comprehensive approach to advancing equity for all, including people of color and others who have been historically underserved, marginalized, and
adversely affected by persistent poverty and inequality” (Executive Office of the President, 2021, p. 7009). Recognizing the importance of gathering the data necessary to inform and support federal efforts to advance equity, Executive Order 13985 also established an interagency Equitable Data Working Group, whose function includes consulting with agencies to identify inadequacies in existing federal data-collection programs and to facilitate the sharing of information and best practices, consistent with applicable law and privacy interests.
Though not a direct motivation for EEOC’s collection of pay data, these policies have clear implications for EEOC and its capacity to collect and utilize appropriate data to inform and support its enforcement responsibilities, which play a critical role in advancing equity.
Statement of Task
For reporting years 2017 and 2018, EEOC added pay bands and hours-worked data components to the EEO-1 form collected annually from qualifying private-sector employers, including federal contractors. Given the unique circumstances of the collection (see Chapter 2), EEOC asked the National Academies of Sciences, Engineering, and Medicine to form an expert panel to evaluate the quality of the Component 2 data for its intended use (see Box 1-2).
APPROACH OF THE PANEL
To develop an evaluation plan consistent with the scope of the statement of task, the panel felt it important to understand the answers to the following questions. This information was foundational to the panel’s approach to its charge, and it guided requests for stakeholder information, the development of a data-analysis plan, data analyses, and considerations for improving future data collections.
Guiding Questions
- What is EEOC’s intended use of Component 2 data and how does the Commission intend to use the data for its intake process?
- What is the appropriate unit of analysis (firm or establishment)?
- What are the main comparisons within a firm/establishment (sex, race/ethnicity, occupation) and across firms/establishments (peers, geographical area/local labor market, industry)?
- Given the width of the pay bands (about 24 log points),6 how will they be used to detect pay disparities? Is the variable of interest mean earnings within firms/establishments by sex, race/ethnicity, and occupation?
- How will data on hours worked (aggregated for all employees in each of the sex and race/ethnicity pay bands, by occupation) be used?
- Are there decision values that will be used for determining next steps and targeting programs?
- How will EEOC use Component 2 data during charge intake and investigations?
- How will EEOC use Component 2 data to support class-based investigations and systemic case analysis?
- What can the panel learn from prior studies of EEOC pay-data collection efforts by the 2012 National Research Council panel (NRC, 2013) and Sage Computing (Sage Computing, 2015)? The specific findings and recommendations most relevant to the current panel’s statement of task are described in Chapter 2.
- How has EEOC responded to the 2013 National Research Council report recommendation that the Commission enhance its capacity to summarize, analyze, and protect earnings data?
- The 2013 National Research Council report included detailed instructions regarding a pilot study recommended by the panel prior to any future data collection. To what extent were these
___________________
6 Approximately 27 percent.
-
- instructions adopted in the study EEOC contracted Sage Computing to conduct (Sage Computing, 2015)?
- What were the conclusions of the Sage Computing report and how did they influence decisions made about compensation data collected using the Component 2 instrument?
- What is the nature of the EEO-1 respondent frame? The same frame was used for Component 1 and Component 2, so both components must be examined for coverage.
- How is the master file for EEO-1 reports maintained? What is the basis for the master file, frequency of updating, source of information for updating, and process for updating (reasons to add or remove establishments)?
- Are there known coverage gaps or quality issues associated with the EEO-1 frame? If so, what are they?
- What is the process for certifying the information provided in the reports?
- Are there known concerns about the data-collection process or the quality of data (known or suspected errors) collected with the Component 2 instrument? If so, what are they?
- Have comparisons between Component 1 and Component 2 data been performed?
Method
The panel began its work by examining the intended uses of the data. In light of EEOC’s enforcement responsibilities, the panel placed its greatest emphasis on EEOC’s anticipated uses by intake staff to inform initial assessments of charges. A series of open panel meetings were held with EEOC, OFCCP, employer pay-equity and human resource specialists, and civil rights advocates. Based on information provided in those meetings, the panel submitted follow-up questions to EEOC to clarify its interpretation of the statement of task and to refine the evaluation process. Intended uses of Component 2 data are described at the end of this chapter.
To measure data quality, the panel was guided by a total survey quality framework (Biemer, 2011), wherein the total survey error assessment of data quality is extended beyond instrument and operations design contributions to total survey error (i.e., accuracy and precision) to include timeliness and availability of data. This framework considers “fitness for use” given available resources.
The Component 2 data collection was launched after several years of design consultation. Approved for collection in 2016, the collection was paused in 2017 and resumed by court order in 2019. To understand how this unusual roll-out of data collection may have contributed to data
quality, the panel reviewed the 2013 National Research Council report, the 2015 Sage Computing report, and the 2016 EEOC information-collection request to OMB and accompanying instruments. The panel also reviewed the comments received by OMB regarding the collection after launch, and the testimonies received by EEOC and OMB. It reviewed court documents rendering the decision to resume Component 2 data collection in 2019 for reporting years 2017 and 2018, and the court’s decision to complete collection in February 2020.
When first approved by OMB, the EEO-1 data collection for Components 1 (the historic collection) and 2 (the pay-data collection) was planned as a single study with a common clearance number and data-collection contractor. When the collection was paused, the Component 1 instrument was separated from the Component 2 instrument. Component 1 data continued to be collected by Sage Computing, and the Component 2 data collection was paused between 2017 and 2019. After the pause was lifted by court order, the National Opinion Research Center (NORC) at the University of Chicago conducted the Component 2 data collection. To understand how data-collection field experiences may have contributed to data quality, the panel held open panel meetings with EEOC staff and NORC. The study frame, instruments, instruction materials, field period, and methodology reports were reviewed.
The panel also considered the concepts measured and the collection and coding processes that could contribute to the quality of the data for their intended use. To inform this understanding, the panel held open meetings with federal statistical agency staff responsible for managing the Longitudinal Employer-Household Dynamics Survey and Occupational Employment and Wage Statistics7 program. Open panel meetings were also held with state fair-employment practice agencies and human resource information specialists. To better understand the filing process and that aspect of survey quality, open panel discussions were also held with employer representatives and companies that responded to the Component 1 and 2 data collections on behalf of their clients.
The panel also engaged in original data analysis. Component 2 data collected for 2017 and 2018 were examined; and to inform limited assessments of Component 2 data, Component 1 data for those years were also examined. Data were received from EEOC and analyzed through the National Academies’ contract with RTI International. Data were compared to appropriate external and internal benchmarks. The panel then examined how Component 2 data compare to pay gaps, as measured using the American Community Survey, noting the limitations of the data
___________________
7 Formerly Occupational Employment Statistics.
as appropriate. In addition, the panel conducted an exemplar analysis of Component 2 data as might be done by EEOC intake staff, using an earlier EEOC report on the technology sector of Silicon Valley as a guide.
Structure of the Report
The report starts with a description of the intended uses of Component 2 data (Chapter 1) then examines design decisions of the Component 2 data collection and its implementation (Chapter 2). Chapter 3 examines measurement concepts of pay, pay bands, hours worked, occupation groups, sex, and race/ethnicity that are used to understand differences within and across establishments. Additional and alternative measures are described for consideration in future pay-data collections. Chapter 4 applies a total quality framework to examine the coverage and nonresponse properties of Component 2 data, including the implications of incomplete coverage and differential nonresponse on intended use. Chapter 5 examines item quality, as measured by reliability indices and plausible values, and how these findings can affect intended use. Chapter 6 demonstrates an analysis of pay differences using methods standard to labor economic research and discusses the utility of the data for estimating population pay gaps. Chapter 7 demonstrates methods that might be used by EEOC staff in their initial assessments of charges and discusses the utility of Component 2 data for enforcement purposes. Chapter 8 looks ahead to future pay-data collections and describes uses for which the data are well suited, uses that could be achieved with some adjustments, and uses for which the data are not well suited. The chapter concludes with a summary of conclusions and recommendations and a suggested prioritization of actions to recognize and complement EEOC’s ongoing modernization efforts.
USE OF DATA FOR ENFORCEMENT BY EEOC
Current Collections of EEOC Data
The various antidiscrimination laws and regulations are accompanied by mandates for the federal government to collect data that can be used in their enforcement. EEOC uses its authority under Section 2000e-8(c) of Title VII to collect workforce data from private- and public-sector employers. The statute requires employers to preserve “records relevant to the determinations of whether unlawful employment practices have been or are being committed,” and to “make such reports therefrom as the Commission
shall prescribe by regulation or order, after public hearing, as reasonable, necessary, or appropriate for the enforcement of [Title VII] or the regulations or orders thereunder” (42 U.S.C. §2000 (e) 8 (c), 1991).
EEOC currently collects workforce data from private-sector employers with 100 or more employees; from federal contractors with 50 or more employees, all state and local governments, school districts, and local unions with 100 or more employees. Employers that meet the reporting thresholds are legally obligated to provide the data; it is not voluntary. Data are collected through four EEO reports, each addressed to specific employer groups. Each version of the EEO report, as described below, collects data on the sex and race/ethnicity composition of the workforce by occupation. Thus, EEO data provide a snapshot of the demographics of the workplace by job category. In addition, EEO data collected from public-sector employers also includes measures of pay and full- and part-time status.
EEO-1 Report
The EEO-1 report is required from private employers with 100 or more employees or 50 or more employees and a federal contractor (EEOC, 2021b). Firms must file a separate report for each facility with 50 or more employees, although many firms voluntarily report for smaller establishments. The EEO-1 report has been collected annually since 1966 (EEOC, 2021c).
In 2018 and 2019, EEO-1 data collections occurred in two components. The customary EEO-1 instrument containing composition data (Component 1) was collected in 2018 for reporting year 2017, and in 2019 for reporting year 2018 in a separate data collection. In 2019, pay data (Component 2) were collected for reporting years 2017 and 2018. In this report, we refer to historical EEO-1 data collections as EEO-1, and the 2017 and 2018 EEO-1 Component 1 and Component 2 instruments as “Component 1” and “Component 2,” respectively (see Figures 2-1 through 2-4). All information collected by the Component 1 instrument is also collected by the Component 2 instrument. The panel assumes that future pay-data collections, if they occur, will need only a single yearly instrument.
Approximately 73,400 employers filed EEO-1 reports in 2018, covering 56.1 million employees (EEOC, 2018). Employers must file the EEO-1 report annually. The data elements collected include seven race/ethnicity
categories8 and 10 job categories,9 and sex.10 Employers may use employment figures from any pay period in October 1 through December 31. Employers may submit EEO-1 reports on paper forms, as data files uploaded to EEOC, or by entering the data online through the EEO-1 online-entry mode. About 99 percent of reports are received electronically.
There are distinct types of reports for single-establishment employers and multiple-establishment employers. Multiple-establishment reports must include a consolidated form that includes all employment for the firm, one form for headquarters locations, and one form for each location with 50 or more employees. For locations with fewer than 50 employees, employers are required to report only the address and total number of employees at that establishment rather than a complete matrix of employee counts by each race, sex, and job category, but these worker counts must be included in the consolidated report. Many employers voluntarily file full reports on these smaller establishments.
EEO-4 Report
The EEO-4 report is used for state and local governments. It is required in odd-numbered years. EEO-4 requires all state and local governments with 100 or more employees to submit workforce-composition data as well as salary-band data. Until 2019, this was the only EEO report that collected employment data by job category as well as salary ranges for race/ethnicity and sex groups, with separate reports by function. Data are collected separately for full-time employees, part-time employees, and new hires (EEOC, 2021d). Additional discussion of EEO-4 data, including wage data, is provided in Chapter 3.
Other EEO Reports
EEOC engages in two other information collections, one on union hiring halls (EEO-3 report) and the other for public school districts (EEO-5
___________________
8 The EEO-1 race/ethnicity categories are Hispanic or Latino, White, Black or African American, Native Hawaiian or Other Pacific Islander, Asian, American Indian or Alaska Native, and two or more races. Only one category may be selected.
9 The EEO-1 job categories are executive-senior-level officials and managers, first- or midlevel officials and managers, professionals, technicians, sales workers, administrative support workers (formerly office and clerical workers), craft workers (formerly craft workers, skilled), operatives (formerly operatives, semiskilled), laborers and helpers (formerly laborers, unskilled), and service workers.
10 The EEO-1 sex categories are male and female.
report). Although neither collects pay data, these collections may be instructive in providing an overall description of EEOC’s data program, particularly given their focus.
The EEO-3 report is used for local unions, specifically local referral unions. The report is required in even-numbered years. The EEO-3 form collects data on membership and referrals by race/ethnicity and sex.
The EEO-5 report is used for primary and secondary public school systems and districts. It is required in even-numbered years. Data are collected from each school district with 100 or more employees, by race/ethnicity and sex for relatively detailed job categories. EEO-5 data are also collected for part-time employees and for new hires (EEOC, 2020c).
We note that the EEO-1 report does not currently collect data on new hires or distinguish between part-time and full-time employees. The EEO-4 and EEO-5 reports do collect such data. In addition, the EEO-5 report uses a broader set of job categories, reflecting the typical occupational structure of public schools. There may be value to considering the reporting and pay period(s) used across EEOC’s data-collection program when providing recommendations for future Component 2 data collections. Additionally, should recommendations be made for future collections of EEO-1 Component 2 data that relate to measures and methods used for other EEOC collections, understanding the full EEOC collection program will be useful.
Current Uses of EEO Reports in Enforcement Efforts
EEOC currently uses EEO-1 data on workforce composition in enforcement processes, including charge intake, systemic enforcement, selection of commissioner charges, and preparation of special reports. OFCCP also makes use of EEO-1 data for regulatory processes. Below, we detail current uses of EEO-1 data, followed by a discussion of how collection of Component 2 data could enhance these enforcement efforts.
EEOC Charge Intake and Investigations
Between 2016–2020, EEOC received an average of 78,000 charges of discrimination per year (EEOC, 2021e). EEOC currently makes use of EEO reports, particularly EEO-1 data on private-workforce demographic composition, to inform charge processing and investigations. At charge intake, an intake specialist or investigator may inspect a particular establishment’s EEO-1 data to assess the sex and race/ethnicity composition of the occupation(s) involved in a claim. Such initial assessments can provide background information on workforce demographics and occupational
segregation that may lend support to a charging party’s claim(s) and provide additional context for those claims.
As investigations progress, EEOC enforcement staff and data analysts may use various statistical tools to compare a particular establishment’s workforce demographics to comparable establishments in the same industry and local labor market. Such comparisons are guided by the details of each charge, including the basis of alleged discrimination (i.e., race, sex, national origin), the employment issue(s) at stake (i.e., hiring, promotion, termination, job assignment, pay, segregation), and the occupation(s) involved. For instance, a promotion claim filed by a Black female professional may involve statistical assessments of the establishment’s sex and race/ethnicity composition in professional, managerial, and executive job categories, as well as comparisons of such job-category demographics to peer establishments in the same industry and geography. The results of such statistical analyses may help guide the next steps in the investigation, such as the decision to request more detailed information and workforce data from the establishment under investigation.
Systemic Enforcement
EEOC also uses EEO reports to provide context for systemic cases. Systemic cases, as defined by EEOC, include “pattern or practice, policy and/or class cases where the discrimination has a broad impact on an industry, profession, company or geographic location” (Cadle et al., 2006). Bias may be built into systems, employment environments, or policies that affects groups or “classes” of employees or applicants. In systemic investigations, EEO-1 workforce-composition data or external data (e.g., Census Bureau data) may be used to assess the representation of specific sex and race/ethnicity groups across job categories for an entire firm (rather than an individual establishment) and to compare firms under investigation to peer firms in the same industry and geographical region.
Commissioner Charges and Directed Investigations
Though the vast majority of EEOC investigations are initiated by individual charges, EEOC is authorized to initiate investigations of possible discrimination under Title VII and the ADA, and under ADEA and EPA through “directed investigations” (EEOC, 2019a). In 2019, for example, EEOC approved nine commissioner charges and 55 directed investigations (EEOC, 2019a). EEOC enforcement staff may use EEO-1 workforce-composition data to support the issuance of commissioner charges. Analyses may involve identifying whether establishments or firms under consideration depart
from their industry and/or geographical peers with respect to employment and job segregation patterns.
Industry and Special Reports
Finally, EEOC draws on aggregated EEO-1 data to produce special reports that summarize workforce composition and trends in specific industries. For instance, EEOC has profiled diversity in technology, finance, retail distribution, high-end department stores, media, and law firms (EEOC, 2021f). EEOC also releases reports aggregating EEO-1 data for sex and race/ethnicity groups across job categories, states, large cites, and industries more generally (EEOC, 2018). These reports identify industries and occupations in which sex and race/ethnicity groups are underrepresented relative to their representation in the local labor market and/or peer establishments, show where progress has been made, and indicate where EEOC commissioner charges and directed investigations may be appropriate.
OFCCP Reviews
OFCCP currently uses EEO-1 data to inform the scheduling of federal contractors for compliance reviews. During desk audits of establishments, OFCCP uses EEO-1 data from both establishment and consolidated reports to identify patterns of discrepancies by sex and race/ethnicity at establishments and firms.
NEED FOR PAY DATA FROM PRIVATE EMPLOYERS
The collection of EEO-1 and related EEO reports enables EEOC and OFCCP to analyze the representation of sex and race/ethnicity groups in particular establishments under investigation and relative to local labor-market and/or industry averages. These analyses are well suited to assessing claims of discrimination based on hiring, promotion, termination, job assignment, and segregation, as these forms of discrimination deal with bias in the allocation of workers across jobs. However, bias can also stem from differential reward mechanisms, both within and across jobs (Smith-Doerr et al., 2019). EEO-1 data, though crucial for understanding sex and race/ethnicity differences in assigning workers to jobs, do not provide insight into how various sex and race/ethnicity groups are rewarded or compensated for their work. Thus, collection of pay data and hours worked using the Component 2 instrument is necessary for assessments of pay practices and differences in compensation by sex and race/ethnicity groups.
Enhanced Enforcement
EEOC Enforcement
The collection and analysis of pay data would directly inform investigations of pay discrimination under Title VII and the EPA and would also enhance investigations of charges alleging discrimination in promotions, terms and conditions of employment (especially hours), job/work assignments, and occupational segregation, as these forms of discrimination can generate pay disparities based on sex and race/ethnicity. Pay data would allow EEOC to pursue a more data-driven approach to charge investigations and processing. The often-subtle nature of sex and race discrimination makes bias difficult to detect in employment settings. This is particularly true for pay discrimination, as individuals often do not know how their pay compares to that of their coworkers. Thus, reliance on individual claims as the primary mechanism for reporting pay (and other forms of) discrimination is insufficient for detecting and remedying subtle forms of bias.
Establishment-level pay data are required to track pay practices across workplaces. The EEO-1 report currently tracks only differences in workforce composition—not differences in pay. Access to both workforce composition and pay data could enhance EEOC’s investigative toolkit by providing background information on workforce composition, allocation, and compensation processes at establishments under investigation. These data would also allow comparison of pay among firms and establishments in the same industry and/or geographic area.
OFCCP’s Enforcement
For OFCCP’s purposes, data gathered through the Component 1 data collection support the compliance review scheduling process, trend analyses, and audits. The collection of pay data could enable OFCCP to use pay disparities, in addition to compositional patterns, to identify areas for further investigation.
Intended Uses of Component 2 Pay Data
Support Charge Investigations
Identify establishment and job-level pay gaps: during charge investigations, Component 2 data could be used to identify establishment- and job-level pay gaps, as well as occupational and pay-band segregation at particular establishments. At the job level, EEOC staff could calculate sex and race/ethnicity pay gaps for occupations identified in the charge. For instance,
for a charge brought by a Black female in management, analysts may calculate pay gaps for females relative to males, Black workers relative to White workers, Black females relative to White males, and/or Black females relative to the job average for the “managers and officials” occupation. To identify establishment-level pay gaps, EEOC analysts could calculate similar between-group pay gaps across an entire establishment (overall and by job category). Such analyses would provide an initial indication of the extent, if any, of sex and race/ethnicity pay gaps at a particular establishment and within the particular occupation. Comparing the sorting of employees across occupations and pay bands could inform the degree to which internal inequalities are produced by segregation processes. Such information could be used to inform the next steps of the investigation, such as assigning priority and resources to the case, requesting more information from the employer so that analysts could adjust raw pay gaps by individual factors known to affect pay (such as education and job tenure), or closing the investigation.
Comparisons to establishment peers: during charge investigations, EEOC analysts could also compare any pay gaps identified at particular establishments to a group of industry peer establishments in the local labor market. Analyses could compare the magnitude of a particular establishment’s pay gaps by sex and race/ethnicity between the establishment under investigation and the local labor-market average. The results of such analyses could inform subsequent steps of the investigation.
Identify Systemic Discrimination
In addition to use in charge investigations, Component 2 pay and hours-worked data could be used by EEOC and OFCCP to direct regulatory efforts to identify potential systemic discrimination as well as cases for commissioner charges and directed investigations.
Systemic cases, which involve patterns, practices, or policies that result in or facilitate discriminatory decisions, are often difficult for individuals to identify and allege in an individual charge. With access to both workforce composition data through EEO-1 Component 1 data and pay and hours-worked data through Component 2, however, EEOC enforcement staff would be better able to identify potential systemic cases. For example, where outlier firms exhibit large segregation or large pay gaps within job categories, that information could justify an expanded investigation of a discrimination charge.
Thus, analyzing pay gaps for workers who are in the same jobs and the same establishments, and making comparisons between establishments’ pay gaps and the pay gaps of peer establishments could be a starting point
for EEOC commissioner charges and directed investigations. Such analyses could provide useful information for considering a commissioner charge or directed investigation of possible discriminatory practices.
OFCCP could similarly use Component 2 data to conduct outlier analyses to identify establishments or industries that depart substantially from comparable benchmarks for use in its compliance review scheduling process. Such analyses could provide a basis for selecting federal contractors for further review of pay disparities. OFCCP could also use pay data to enhance the three-year-trend analyses currently conducted with EEO-1 data during compliance reviews.
Analyze National, Regional, and Industry-Based Pay Gaps
Component 2 data could be used to estimate national and subnational sex and race/ethnicity pay disparities by industry, occupation, region, or labor market. Analysts could assess variance in pay disparities by occupation, establishment and firm size, industrial sector, and geographical area. Such analyses could be used to produce industry- or region-based reports that document both the representation of sex and race/ethnicity groups in the labor market (using EEO-1 data) as well as their pay (using Component 2 data). Thus, analysts could assess the extent to which pay discrepancies are driven by the segregation of sex-race groups into particular jobs, occupations, or pay levels. Analysis of Component 2 data by industry, occupational groups, and geography could also enable EEOC to focus its outreach, education, training, and compliance assistance on areas with the most significant disparities.
Enable Employer Self-Assessment of Pay Disparity
EEOC suggests that firms could use Component 2 compensation data to self-assess their pay practices and identify disparities at the job level that warrant additional scrutiny. Making Component 2 data available to establishments in a manner that protects data privacy could enhance such self-assessment through comparisons to relevant labor markets. Additionally, just the act of collecting pay data may encourage firms to do a more thorough self-assessment using their own internal personnel data. For instance, pay data are collected in Australia, where data collection was followed by a four percent drop in pay disparities by sex. Additional recent studies suggest that the collection of pay data reduces pay disparities, presumably by enhancing transparency and accountability (Workplace Gender Equality Agency, 2019). Finally, to encourage self-assessment, EEOC could use employer reports to generate aggregated comparison data, alerting employers of large disparities relative to national, local, and industry patterns.
Examine Consequences of Enforcement on Pay Disparities
Researchers could use Component 2 data to examine whether discrimination charges and lawsuits, particularly those for pay discrimination, lead to reductions in sex and race/ethnicity pay disparities in the years following the charges or lawsuits.
Over the past several years, a small group of academic researchers, working closely with EEOC, was permitted access to EEO-1 data through confidentiality agreements (Hirsh, 2016). This data sharing enabled researchers to assess the impact of charges and lawsuits on occupational segregation by sex and race/ethnicity (e.g., Hirsh, 2009) and on the representation of women and race/ethnicity groups in management (e.g., Skaggs, 2009). Component 2 data would enable EEOC analysts and approved academic researchers to conduct similar studies assessing the impact of charges and lawsuits on pay disparities.
SUMMARY
This chapter described the motivation for the study. It described the broad landscape of pay gaps, and the need for data to identify and thereby address these disparities.
The chapter reviewed the authority given to EEOC to collect pay data to address pay gaps. Through this authority, EEOC collected its first pay-data collection from private employers (Component 2). EEOC charged the panel to assess the quality of Component 2 data for its intended use. The chapter described the panel’s interpretation of its charge and its evidence-gathering methods. The total quality framework informed the structure of the report. The chapter included a description of the current collection and uses of EEO data. It identified gaps in EEOC’s data collections and how the collection of Component 2 data could meet these gaps and be used to further the enforcement missions of EEOC and OFCCP.
CONCLUSION
A conclusion based on the findings of this chapter is presented below.
CONCLUSION 1-1: The 2017–2018 Component 2 data are a potentially valuable resource. They are the only federal data source for pay data and demographic characteristics collected at the employer level, which is helpful for enforcement efforts, for employer self-assessment, and for providing a broad description of pay practices.
