The Concise Encyclopedia of Economics

Comparable Worth

by June Ellenoff O'Neill
About the Author
Should a truck driver earn more than a telephone operator, or an engineer more than a librarian? Questions like these are largely resolved in the labor market by the forces of supply and demand. Proponents of comparable worth, however, challenge the resulting pattern of wages by arguing that occupations dominated by female workers are paid less than comparable male-dominated jobs because of systematic discrimination against women. Under comparable worth, employers would be required to set wages to reflect differences in the "worth" of jobs, with worth largely determined by job evaluation studies, not by market forces. Advocates expect comparable worth to increase pay in jobs dominated by women and to sharply narrow the overall gender gap in wages.

The campaign for comparable worth policies has generated heated controversy. Advocates of the concept, who also refer to it as "pay equity," have won important political support. A policy that promises substantial pay increases for many women in the name of equity is bound to have popular appeal. Opponents, however, argue that comparable worth would reduce economic efficiency and would even reduce employment opportunities for women.

The issues are complex. Does the evidence on the male-female wage gap justify new and more radical methods for combating sex discrimination? How would a comparable worth policy actually operate? Would it ultimately benefit women and correct the inequities it is designed to remove?

The Wage Gap

In 1988 the ratio of women's to men's hourly earnings in the United States was around 70 percent. This ratio was close to 90 percent at 20 to 24 years of age and 80 percent at 25 to 34 years, but it was only 63 percent at 45 years of age and older. The extent to which these differentials reflect discrimination, and the form this discrimination takes, are issues central to the debate over comparable worth.

Proponents of comparable worth believe that most of the gender gap in wages is caused by discrimination. According to this view, employers, out of habit or prejudice, reduce the pay scale in traditionally female occupations to levels below the true worth of these jobs, even when the jobs are held by men. Discriminating against a whole occupation is not the same as unequal pay for equal work, or discriminatory hiring or promotion. The latter are widely considered unfair and are illegal under the Equal Pay Act of 1963 and Title VII of the Civil Rights Act of 1964. In the view of comparable worth supporters, however, equal-pay legislation is inadequate or even irrelevant because women tend to work in different occupations than men. Comparable worth is intended to address discrimination against the occupations in which women predominate.

Critics of comparable worth question whether the type of discrimination the policy seeks to remedy is important or even exists in a meaningful way in our economy. If firms with a large fraction of their work force in traditionally female jobs held wages below the value of the employees' services to the firm, they argue, profits would be high. The prospect of high profits would attract other firms to the industry. To fill the new female jobs created, new firms would offer higher wages, raising wages industry-wide. The competition for workers could be thwarted only by collusion among employers. Most economists believe, however, that the prospect of collusion among literally thousands of firms is unrealistic because each firm has too strong an incentive to cheat on the collusive agreement by paying a little more in women's occupations. Moreover, critics of comparable worth point out that no evidence has been found that firms and industries with substantial employment in female jobs earn higher-than-average profits.

The critics question why workers in predominately female occupations do not leave the supposedly undervalued occupations to take the better-paid male or mixed-gender jobs if discrimination is the sole reason for lower wages. Some supporters of comparable worth have argued that women's mobility is limited because they are barred from entering nontraditional occupations. But this argument, which was valid in the past, has lost force over time as barriers have eroded. Moreover, if barriers to entry were the problem, the logical solution would be to remove the barriers, which are illegal under Title VII of the Civil Rights Act. Many comparable worth supporters, however, do not allude to barriers but instead simply argue that women who choose to work in traditionally female occupations should not be penalized for their choices.

Although pay in women's occupations is below pay in typically male occupations, many economists believe that this fact alone is not evidence of discrimination by employers. Other factors unrelated to discrimination can explain gender differences in occupations and in pay. One important factor is that women typically have primary responsibility for the care of home and children and, as a result, work outside the home for 40 percent fewer years than men. Anticipating a shorter and more uncertain career, therefore, women are less likely to invest in lengthy vocational schooling or training. Moreover, many women choose jobs that provide hours and other working conditions that are compatible with home demands.

The factors that limit their work reduce the wages women can earn in two ways. First, the occupations many women enter are paid less because they require less work experience and training and may impose costs on employers for providing the schedules and working conditions women value. Second, women are likely to earn less than men in the same occupation because they typically have less experience and, therefore, less skill on the job.

The situation described is by no means static, however. Younger women are working longer and taking shorter breaks for childbearing and child rearing. Because women expect to remain in the work force, they have greatly increased their representation in careers such as medicine and law, which require lengthy training periods. As a result the wage gap narrowed considerably during the eighties. The relatively high ratio of women's to men's earnings at younger ages partly reflects the increased experience and skill acquired by younger women.

Attempts by social scientists to measure the component of the wage gap accounted for by nondiscriminatory factors are inconclusive for two reasons. First, data on complete work-life histories are hard to obtain, and what economists call career attachment (basically, dedication to work) is even harder to quantify. Several studies have found that about half of the wage gap can be explained by fairly crude measures of years of experience and schooling, leaving the reasons for the other half of the gap unresolved. But when women and men with more similar backgrounds are compared—such as women and men with training in a particular field, or women and men who have never married—the pay gap tends to be much smaller than in the aggregate. For example, the pay gap between men and women with doctorates in economics is about 5 percent.

Discrimination almost certainly accounts for some of the gender gap. But the most likely form this discrimination takes is the restricted access of women to certain positions or promotions. Critics of comparable worth, who include most economists, argue that it would do nothing to address these problems.

Effects of Comparable Worth

Regardless of the sources of the gender gap, the proposed method for implementing comparable worth deserves attention in its own right. Under comparable worth, jobs within a firm or government would be rated, and points would be assigned according to characteristics such as necessary knowledge and skills, mental demands, accountability, and working conditions. Jobs scoring the same would then be paid the same, regardless of the pay differentials that might prevail in the market.

The evaluation procedure may appear objective, but it in fact is highly subjective. Although it makes sense for job attributes such as skills and working conditions to influence pay, there is no one correct method for determining the number of points to be assigned to each attribute, or for determining the weight each attribute should have in the overall worth of each job. Which takes the most skill, playing the violin, solving an engineering problem, translating a language, or managing a restaurant? How should skill be weighted relative to working conditions or accountability? Answers to these questions are bound to be subjective. Therefore, different job evaluation systems and different job evaluators are likely to assign different rankings to the same set of occupations.

Most economists would agree that the outcome is not likely to be efficient, since the procedure cannot incorporate the myriad factors that influence supply and demand in the market. One need only consider the economies of Eastern Europe to observe the results of replacing the market with administered and planned systems.

The imposition of comparable worth would likely raise pay in traditionally female jobs; appointing persons favorable to the concept to conduct the job evaluation would all but guarantee that result. But because the higher pay in female jobs would raise costs, employers would reduce the number of such jobs, by automating or by reducing the scale of operations, for example. Workers with the most skills would be more likely to keep their jobs, while those without the skills or experience to merit the higher pay would be let go. The ironic result is that fewer workers would be employed in traditionally female jobs. While the higher pay might induce more workers to seek these jobs, the reduced demand could not accommodate them. Less skilled women would lose out to more skilled women and, quite possibly, to men who would be attracted by the higher pay. What's more, some employers would respond to the higher wages by providing fewer of the nonmonetary benefits (like flexible hours) that help accommodate the needs of someone who dovetails home responsibilities and a job.

The few instances where comparable worth has been implemented in the United States tend to support those conclusions. Thus far, comparable worth has been almost entirely confined to the civil service systems of about twenty state governments and a number of local governments. When Washington State implemented comparable worth, according to one study, the share of state government employment fell in those jobs that received comparable worth pay adjustments. The largest relative declines in employment were in the occupations that received the largest comparable worth pay boosts. Other studies have found that Minnesota's well-known comparable worth plan has reduced employment growth in female jobs relative to male jobs.

Comparable worth has not fared well in the courts. It suffered its biggest setback in 1985 when the Ninth Circuit Federal Court of Appeals rejected a comparable worth job evaluation as evidence of discrimination. In a case involving the government employees' union (AFSCME) versus the state of Washington, the court upheld the state's right to base pay on market wages rather than on a job evaluation, writing, "Neither law nor logic deems the free market system a suspect enterprise." The judge who wrote the decision was Anthony Kennedy, now a member of the U.S. Supreme Court. The state of Washington, despite its victory in court, found the political heat too great and implemented comparable worth anyway. But the momentum toward comparable worth appears to have slowed since the Ninth Circuit's ruling.

About the Author

June Ellenoff O'Neill is Wollman Professor of Economics at the City University of New York's Baruch College, where she directs the Center for the Study of Business and Government. She has previously served as director of the Congressional Budget Office and as director of the Office of Policy and Research at the U.S. Commission on Civil Rights, as a senior research associate at the Urban Institute, and as a senior economist with the president's Council of Economic Advisers.

Further Reading

Aaron, Henry J., and Cameron M. Lougy. The Comparable Worth Controversy (on the fence; neither pro nor con). 1986.

Paul, Ellen. Equity and Gender (in opposition). 1989.

Treiman, Donald, and Heidi Hartmann, eds. Women, Work and Wages: Equal Pay for Jobs of Equal Value (the bible of proponents). 1981.

U.S. Commission on Civil Rights. Comparable Worth: Issue for the 80s, vol. 1 (a collection of 16 articles on comparable worth, pro and con). June 1984.

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