Sincronía Summer 2008

Deconstructing Employment Policy in America: Equal Pay or Affirmative Action

Jason L. Powell, University of Liverpool, UK

Ian G. Cook, Liverpool John Moores University, UK


Employment policy shapes people’s work lives and thus the life-course, because, along with economic factors (e.g. type of economy), it sets the context in which people’s work lives unfold – by regulating certain aspects of employment and by attempting to "fix" perceived injustices. Employment policies may also imply direct intervention in the labour market. It can also refer to macroeconomic policies designed to foster desired conditions. For example, high and predictable levels of economic growth. Traditionally, employment policy has been stressed upon unemployment and job search as a criteria of supporting people through times of job loss. While the transition between employment and non-employment remains central, policy makers have come to recognise other forms of transition that impacts on the life-course. Of particular importance have been: (i) ensuring that schools and post-school forms of education prepare younger people adequately for the world of work; (ii) enabling the ‘family’ adults including parents and carers (usually women) to cope with the demands of employment and with domestic responsibilities; and (iii) easing the transition for older people from employment into retirement through pension policies. Governments enact employment policies to ensure that the law enforces certain practices of employment: ranging from gender equality in terms of income and access to specific occupations, equal access to employment for groups traditionally excluded from particular paid forms of employment, and the protection of workers’ health and well-being. An important goal of most employment policies is to eliminate discrimination from the workplace. To "discriminate" against someone means to treat that person differently, or less favorably. Individual employees can be discriminated against by co-workers, managers, or business owners. The State is responsible for protecting individuals against one type of discrimination - employment discrimination on the grounds of one’s race, religion, sex (including pregnancy), national origin, disability or age.

At the same time, the employment policies enforced by different governments (including the US in particular) are put in place to protect individuals against employment discrimination when it involves: (1) Unfair treatment because of race, religion, sex (including pregnancy), national origin, disability, or age; (ii) Harassment by managers, co-workers, or others in the workplace, because of your race, religion, sex (including pregnancy), national origin, disability, or age; (iii) Denial of a reasonable workplace because of religious beliefs or disability; (iv) Retaliation because complaint about job discrimination, or assisted with a job discrimination investigation or lawsuit.

If we look at specific policies we can see how they impact on creating dramatic effects of employment policy. The following two examples of the Equal Pay Act and Affirmative Action are indicative of employment policies that have effects for workers experiences.

(i) The American Equal Pay Act (EPA)

In 1963, under the Kennedy administration the American Congress passed the Equal Pay Act to prohibit discrimination on account of sex in the payment of wages by employers. Congress included within the text of the EPA a clear and concise policy statement and briefly described the problems it was intended to remedy. The clear statement of congressional intent and policy guiding the EPA’s enactment indicate the Congressional desire to fashion a broad remedial framework to protect employees from wage discrimination on the basis of sex. The Supreme Court has expressly recognized the view that the EPA must be broadly construed to achieve Congress’ goal of remedying gender discrimination. Congress passed the EPA out of "concern for the weaker bargaining position of women" to provide a remedy to discriminatory wage structures that reflect "an ancient but outmoded belief that a man, because of his role in society, should be paid more than a woman.". The EPA protects both men and women. It also protects administrative, professional and executive employees who are exempt under the Fair Labor Standards Act.

The Equal Pay Act was the first law to suggest that the pay of women should be equal to men when their positions are equal. The purpose of the Equal Pay Act was to secure equal pay for women when they have jobs similar to men and to seek to eliminate discrimination and the depressing effects on living standards caused by reduced wages for female workers. While sources indicate that women's pay is still approximately 25 percent less than men's pay, the Equal Pay Act is still considered one of the best attempts to help close the gap. At the same time, the Equal Pay Act (EPA) requires that men and women be given equal pay for equal work. The EPA states that employers may not pay unequal wages to men and women who perform jobs that require equal skill, effort and responsibility, and that are performed under similar working conditions within the same establishment. Each of these criteria is summarized below:

First, measured by factors such as the experience, ability, education, and training required to perform the job. The key issue is what skills are required for the job, not what skills the individual employees may have. Second, the amount of physical or mental exertion needed to perform the job. Third, the degree of accountability required in performing the job. Four, working conditions encompasses two factors: (1) physical surroundings and (2) hazards. Five, the prohibition against compensation discrimination under the EPA applies only to jobs within an establishment. Yet there are examples were working conditions have highlighted the problems that the EPA has failed to deal with. The huge corporate scandals in the US, Enron, Worldcom in 2001 and a growing list of mortgage sub-prime organisations in 2008 have rocked the US economy, and resulted in the loss of the life savings, homes and pensions of thousands of workers (Estes, Biggs and Phillipson, 2003). Most of them were public sector workers who had little idea of where there pensions and savings were held, and many of them were employees who had themselves been persuaded by their employers that the company they worked for was a sound investment (See fall of Enron for example). Despite the EPA, we also know that many more times as many people are killed at work as a result of safety laws being broken by companies - a criminal offence - than those who are murdered in the street or in their homes. In the US, at least 25,000 people per year are killed at work (Powell, 2005).

The EPA is also supposed to regulate the balance of wages between men and women. Despite the establishment of such equal pay policies, gender gaps in earnings persist in the US. For example, there is a 17% gap between men and women’s pay for full time work in the US with a woman earning on average 80 dollars for every $100 a man earns. (Powell, 2005). When we look at older women and their pay beyond employment one sees a dramatic decrease in resources. In the United States, women comprise 59% of those over 65+, they account for 72% of the older poor (Powell, 2005). According to Estes, Biggs and Phillipson (2003), the poverty rate in the USA is 19% of which older women are the poorest groups. In 1993 older women's average income was 43% lower compared with older men. Poorest of all are older black women who in 1990 had an average income of $3,500 with 82% classified as poor or 'near poor' (Powell, 2005). Indeed for many women such negative financial conditions would express powerlessness and economic marginalisation. Many older women's adverse financial situations were instigated because their participation in the labour market was limited and dominated by men thus generating 'dependency' upon men. In terms of social security benefits, 66% of older women received benefits below the poverty line. Equality of opportunity may be seen as an important goal but these statistics illustrate low resources in an economy that puts premium on present work; and not rewarding past employment through low pensions.

Comparatively, in Europe, the right to equal pay for work of equal value is set out in Article 141 of the European Union (EU) Treaty, which states: "Each Member State shall ensure that the principle of equal pay for male and female workers for work of equal value is applied." More specifically, in the United Kingdom, the right to equal pay is set out in the Equal Pay Act 1970. The outcome of a successful claim for equal pay is that an "equality clause" is inserted into the Claimant’s contract of employment, meaning that the worker is entitled to equality of pay and other terms and conditions with someone of the opposite sex in a comparable job. Other codes of practice are published by the European Commission and the Equal Opportunities Commission. Although they are not legally binding, they may be used as evidence in equal pay claims from any plaintiff from a particular EU nation state.

(ii) Affirmative Action

A second key policy theme of employment policy relates to "affirmative action". This can be defined as positive steps taken to increase the representation of women and ethnic minorities in areas of employment, education, and business from which they have been historically excluded.

In the U.S., the effort to improve the employment and educational opportunities of women and members of minority groups through preferential treatment in job hiring, college admissions, the awarding of government contracts, and the allocation of other social benefits. First undertaken at the federal level following passage of the landmark Civil Rights Act of 1964, affirmative action was designed to counteract the lingering effects of generations of past discrimination. The main criteria for inclusion in affirmative action programs are race, sex, ethnic origin, religion, disability, and age. The Supreme Court of the United States placed important limitations on affirmative action programs in its 1978 ruling in Regents of the University of California v. Bakke; several subsequent Supreme Court decisions (e.g., Adarand Constructors v. Pena in 1995 and Texas v. Hopwood in 1996) imposed further restrictions. In 1996 California voters passed Proposition 209, which prohibited government agencies and institutions from discriminating against or giving preferential treatment to individuals or groups on the basis of race, sex, colour, ethnicity, or national origin. Similar measures were subsequently passed in other states. In 2003, in two landmark rulings involving admission to the University of Michigan and its law school, the U.S. Supreme Court reaffirmed the constitutionality of affirmative action but ruled that race could not be the preeminent factor in such decisions.

The policy was implemented by federal agencies enforcing the Civil Rights Act of 1964 and two executive orders, which provided that government contractors and educational institutions receiving federal funds develop such programs. The Equal Employment Opportunities Act (1972) set up a commission to enforce such plans. The establishment of racial quotas in the name of affirmative action brought charges of so-called reverse discrimination in the late 1970s. Although the U.S. Supreme Court accepted such an argument in Regents of the University of California v. Bakke (1978), it let existing programs stand and approved the use of quotas in 1979 in a case involving voluntary affirmative-action programs in unions and private businesses. In the 1980s, the federal government's role in affirmative action was considerably diluted. In three cases in 1989, the Supreme Court undercut court-approved affirmative action plans by giving greater standing to claims of reverse discrimination, voiding the use of minority set-asides where past discrimination against minority contractors was unproven, and restricting the use of statistics to prove discrimination, since statistics did not prove intent. The Civil Rights Act of 1991 reaffirmed a federal government's commitment to affirmative action, but a 1995 Supreme Court decision placed limits on the use of race in awarding government contracts; the affected government programs were revamped in the late 1990s to encompass any person who was "socially disadvantaged." In the late 1990s, in a public backlash against perceived reverse discrimination, California and other states banned the use of race- and sex-based preferences in state and local programs. A 2003 Supreme Court decision concerning affirmative action in universities allowed educational institutions to consider race as a factor in admitting students as long as it was not used in a mechanical, formulaic manner. In Europe, the European Court of Justice has upheld (1997) the use in the public sector of affirmative-action programs for women, establishing a legal precedent for the nations of the European Union.

Affirmative action has been a divisive issue in the United States, particularly in relation to race. Espenshade and Chung (2005) compared the effects of affirmative action on racial and special groups at three highly selective private research universities. The researchers documented the implications of members of particular subgroups, and translated these differences into the metric of SAT points. The SAT (Scholastic Aptitude Test) is used to decide on college candidates’ admission, and scores ranged from 0 to 1600. Based on the researchers’ analysis, members of the following groups experienced a benefit or disadvantage comparable to a particular number of SAT points:

Blacks: +230

Hispanics: +185

Asians: –50

Recruited athletes: +200

Legacies (children of alumni): +160

The above estimates for African-Americans and Hispanic-Americans, but not legacy applicants, probably reflects their greater recruitment from poorer high schools which did not prepare them for college, which as a whole perform worse than their better-funded counterparts. Additional research studies are also controversial. Sander (2004) shows that half of all black law students rank near the bottom of their class after the first year of law school, and that black law students are more likely to drop out of law school and to fail the bar exam. Sander (2004) offers a tentative estimate that the production of new black lawyers in the United States would grow by eight percent if affirmative action programs at all law schools were ended, as less qualified black students would instead attend less prestigious schools where they would be more closely matched with their classmates, and thus perform better. Sander helped to develop a socioeconomically-based affirmative action plan for the University of California-Los Angels School of Law after the passage of Proposition 2009 in 1996, which prohibited the use of racial preferences by public universities in California. This change occurred after studies that showed that the graduation rate of blacks at UCLA was 41%, compared to 73% for whites.

Sowell’s (2004) research claims that affirmative policies have not worked. They encourage non-preferred groups to designate themselves as members of preferred groups [i.e. primary beneficiary of affirmative action] to take advantage of group preference policies; They tend to benefit primarily the most fortunate among the preferred group (e.g., wealthy blacks), often to the detriment of the least fortunate among the non-preferred groups (e.g., poor whites); They reduce the incentives of both the preferred and non-preferred to perform at their best — the former because doing so is unnecessary and the latter because it can prove futile — thereby resulting in net losses for society as a whole. Controversially, Sowell (2004) suggests they engender animosity toward preferred groups as well as on the part of preferred groups themselves, whose main problem in some cases has been their own inadequacy combined with their resentment of non-preferred groups who — without preferences — consistently outperform them.

Research also indicates that affirmative action is still needed for two related reasons. Research shows that almost all people have trouble detecting a pattern of discrimination unless they are faced with a flagrant example or have access to aggregated data documenting discrimination (Dixon and Rosenbaum, 2004). This inability to make accurate judgments about discrimination from isolated incidents or comparisons is just as true for fair-minded and intelligent people as it is for others. Aggregated data are needed, therefore, if decision makers are to avoid or correct imbalances before they become flagrant. According to LeFevre (2003) for example, a large proportion of minorities and women are locked into low-wage and low-prestige jobs. Additional data suggest that these two groups have been disproportionately affected by current trends in workforce downsizing; many service-oriented industries, for example, disproportionately employ women and minorities and are likely to continue downsizing through the year 2011. It is likely that the minorities and women who work in these industries will be hardest hit, which raises further questions of low pensions beyond employment (LeFevre 2003).

Future Implications of Employment Policy

The balance of economic efficiency and social equity is the ultimate debate in the field of employment policy. By meeting the needs of the employer; generating profits to establish and maintain economic efficiency; whilst maintaining a balance with the employee and creating social equity that benefits the worker so that he/she can fund and enjoy healthy living; proves to be a continuous revolving issue in westernized societies. At the same time, there are implications for workers who leave employment at retirement age. Phillipson (1998) supplements this by suggesting that the retirement experience is linked to the timing of economic reduction of wages and enforced withdrawal from work has made many older people in the US in a financially insecure position. The Bush administration speaks about the need for private pensions and constantly reinforces this point by talking about the effects of an ‘aging population’ will mean public finances could not fund a full pension and older people and families must be more ‘responsible’ with saving for pensions (Powell 2005). However, we have seen the effect of private pension schemes especially in United Kingdom: a report by the Office of Fair Trading (1997) found that up to $22 billion had been lost by pensioners in employment pension schemes which The Times in Great Britain claimed was ‘the greatest financial scandal of the century’. Comparatively, in the US, $2 billion of pensions schemes were lost by employees of Enron.

It could be suggest that the biggest issue affecting employment policy may not come from the nation state or their policy makers but by global forces. Globalization has affected these issues by creating economic conditions that either hinder or facilitate the implementation of employment policies– transcending the power of the nation state (Estes, Biggs and Phillipson, 2003). Phillipson (1998) studies the effects of globalization and summarizes the four major points of concern that effect employment policies. Firstly, international competition, from the newly industrialized countries, will cause unemployment growth and increased wage disparity for unskilled workers in industrialized countries. Imports from low-wage countries exert pressure on the manufacturing sector in industrialized countries and foreign direct investment (FDI) is attracted away from the industrialized nations, towards low-waged countries; secondly, economic liberalization will result in unemployment and wage inequality in developing countries. This happens as job losses in un-competitive industries outstrip job opportunities in new industries; thirdly, workers will be forced to accept worsening wages and conditions, as a global labor market results in a "race to the bottom" (Phillipson, 1998). Increased international competition creates a pressure to reduce the wages and conditions of workers; finally, globalization reduces the autonomy of the nation state. Capital is increasingly mobile and the ability of the state to regulate economic activity is reduced (Estes, Biggs and Phillipson, 2003).

What also results to Phillipson’s (1998) findings is that in industrialized countries an average of almost 70% of workers are employed in the service sector. As a result, workers are either forced to become more skilled and develop sought after trades or become part of this sector. Ultimately this is a result of changes and trends of employment, an evolving workforce and globalization that is represented by a more skilled and increasing highly diverse labor force, that are growing in non standard forms of employment (Phillipson, 1998).


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Sincronía Summer 2008