California Sen. Kamala Harris has a plan to close the gender pay gap, and it’s founded on hitting companies on one of their most prized markers: their annual profits.
As Harris’s plan is structured, companies with 100 or more employees would be required to disclose pay data to the Equal Employment Opportunity Commission in order to demonstrate that they’ve closed the gender pay gap between men and women who perform comparable roles. Companies that aren’t able to show they’ve achieved this would be penalized a percentage of their profits.
Her plan aims to fix a pervasive problem: Right now, women are still paid 80 cents on the dollar for what men make, on average, and it’s even worse among women of color. Latina women make 53 cents on the dollar, Native American women make 58 cents, and black women make 61 cents, according to a release from Harris. Those gaps have major implications for women’s economic success and their long-term earning potential.
Harris’s plan is significant in that it flips the way those disparities are being addressed: As things stand, workers can report concerns about pay to the EEOC, or file a lawsuit if they have concerns about a potential gap. If Harris’s proposal were to take effect, companies would have to proactively provide data to the EEOC every two years in order to show that they’re paying men and women equally.
The plan shifts the responsibility of proving the gap — or lack thereof — from the individual to the corporation.
Critics of such data-sharing programs have argued that the process for collecting and disclosing this information could prove too burdensome for companies. While analyzing such data is likely to have costs, experts say that many businesses already have most workers’ pay data at the ready. Additionally, as a fact sheet from the National Women’s Law Center indicates, many companies have already taken it upon themselves to conduct these analyses.
Harris’s approach, which also bars companies from asking about a new employee’s salary history, acknowledges just how entrenched the wage gap is and how much work it will take to meaningfully address it, experts say.
“It seems to really be framing this as a systemic issue that will help women and workers and working families,” says Mary Gatta, a sociology professor at CUNY Guttman.
Much like the Paycheck Fairness Act in Congress, Harris’s proposal would hold corporations responsible for demonstrating that they’re compensating workers fairly — and change the way the US government currently treats this problem.
“This plan will finally put the burden of ensuring equal pay on the corporations responsible for gender pay gaps, not the employees being discriminated against,” Harris said in a statement.
America has tried to address the gender wage gap before, but legal loopholes are part of the reason it persists
The US has passed key laws intended to address the wage gap, and while they’ve certainly had an impact, legal loopholes have enabled the pay disparity between men and women to endure.
The Equal Pay Act, enacted in 1963, was part of a package of “New Frontier” measures approved during the presidency of John F. Kennedy, in order to address inequities in the workplace and broader society. But because of loopholes in the way this historic law was written, employers have been able to legally justify paying men and women differently by attributing the discrepancy to four reasons, including seniority, merit, production output, and “any other factor other than sex.”
While the first three reasons haven’t been a significant point of contention, the last option is so vague that companies have been able to use it to explain differences in pay that aren’t clearly tied to the qualifications of each worker. Using this logic, companies have argued that a male employee was paid more than a female one not because of his gender but because they needed to offer him a more competitive salary than the one he was making at his previous job, for example.
Such actions help hide discriminatory behavior and effectively exacerbate any wage gap that may have existed before employees have even started working at a company. The Lilly Ledbetter Fair Pay Act, which became law in 2009, gave workers more leeway to challenge pay disparities but did not address this core loophole in the original equal pay law.
Harris, one of six women running in the most diverse field of presidential candidates ever, is aiming to finally close those loopholes.
What Harris’s proposal would do
Harris’s plan has a few planks.
The first is the sweeping legislative proposal that would require corporations to certify that they are paying men and women equally, “after accounting for differences in job titles, experience, and performance.” Under that potential law, if companies aren’t able to do this, they would be fined 1 percent of their annual profits for every 1 percent of the wage gap that still exists.
This fine would be used both as a deterrent, aimed at getting companies to improve, and a funding source for a federal paid family leave program. And while large corporations may not feel the pain of such fees as much, a recurring penalty could be noticeable: If a company made more than $77 billion in profits in 2018, the fine on an annual basis would come out to $770 million for each lingering percentage of the wage gap.
Additionally, in order for companies to obtain “Equal Pay Certification” from the EEOC, they would have to commit to key changes aimed at making the workplace more equitable. Some of these requirements include agreeing not to ask workers about previous salary history, eliminating forced arbitration requirements on the issue of pay discrimination, and providing data about the percentage of women in leadership roles.
“The idea that there would be a fine for companies that don’t provide these documents is crucial,” Sunu Chandy, a legal director at the National Women’s Law Center, told Vox. Harris’s proposal would levy the penalty on companies that are not able to show that they’ve met the listed requirements.
Despite its expansive nature, however, the proposal does face some limitations: It would only apply to large companies, even though smaller businesses may have many of the same disparities. And for the law to go into effect, it would be highly dependent on Congress to help pass it, even though bipartisan support on this matter is sorely lacking on the Hill: While the Democrat-controlled House shepherded the Paycheck Fairness Act through earlier this year, for example, the Republican-majority Senate has not indicated any interest in taking it up.
Acknowledging the limits of congressional action, Harris has outlined executive action she could take as president. She would require any federal contractors to show that they were paying men and women equally, within two years of her taking office. Any that aren’t able to would not be allowed to compete for federal contracts over $500,000.
This proposal is the latest policy plan from Harris to address wage disparities; in another plan, she focused on closing the wage gap teachers face, and in a recent bill, she sought to narrow the gap between prosecutors and public defenders. This strategy could be an effective means to speak to concerns Americans have about stagnant wages amid rising living costs.
“Economic issues are clearly very important to Americans right now, and this is a great way to start speaking to them,” says Amanda Lenhart, the deputy director of New America’s Better Life Lab, which focuses on workplace policies.
Companies and other countries have already made similar moves to close their pay gaps
Harris’s plan is similar to one that Iceland implemented just last year and would mark an important development at the global level, bringing US policies more in line with those that have been established in many places around the world.
As part of Iceland’s policy, which was the first of its kind, companies needed to show that they’d closed their internal pay gaps or deal with daily fines. According to a BBC report, some of the early research on the Icelandic program showed that companies were keeping closer tabs on what they paid different employees after this law passed.
And Iceland is far from the only place that’s implemented pay transparency policies.
In the UK, France, Denmark, Germany, and Australia, to name just a few countries, there are already laws in place that require companies to provide additional disclosures about worker pay. And data shows that such policies work. According to a 2018 study by American and Danish economists, a 2006 Danish law mandating pay transparency from companies with 35 or more employees reduced the gender wage gap by 7 percent.
According to calculations from Harris’s campaign, these disparities amount to $400,000 in lost wages over the course of a woman’s career, and $1 million for Latina, Native American, and black women.
Harris’s plan could be a way to finally get closer to eliminating this gap — or, at the very least, draw more attention to it.