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Why Trump suspended an Obama administration wage gap initiative

President Donald Trump
Nicholas Kamm | Getty Images
President Donald Trump

At a White House press conference last year, then Equal Employment Opportunity Commission (EEOC) chairwoman Jenny Yang stated that, "Pay discrimination goes undetected because of a lack of accurate information about what people are paid."

To address this issue, the Obama administration instructed employers to report information about employees pay, gender, race and ethnicity. But last month, the White House suspended this initiative indefinitely.

Trump supporters celebrated the decision, saying that it eliminates an undue burden placed on employers. Workers rights groups, on the other hand, said that the Trump administration had "surrendered to corporate special interests" and the National Women's Law Center said, "Make no mistake — it's an all-out attack on equal pay."

We took a look at what compliance with the Obama initiative would have asked of employers.

President Obama signs the Lilly Ledbetter Fair Pay Act in 2009.
Saul Loeb | Getty Images
President Obama signs the Lilly Ledbetter Fair Pay Act in 2009.

What was the original EEOC requirement?

Employers with at least 100 employees and government contractors with 50 employees have been required to fill out the EEO-1 since 1966. The EEOC has always required employers to report information about the gender and race of their employees. Later, the form evolved to include the type of work employees were doing.

What was the EEOC's 2016 action on pay data collection?

On September 29, 2016, the Obama administration announced an initiative that required companies with more than 100 employees, and federal contractors with more than 50, to categorize their employees by gender, race, type of work, and place them into one of 12 wage bands.

This means that a company with 120 employees would break down its workforce by gender, race, ethnicity and role and then indicate what wage bracket they were in. If a company has 50 white male workers who do similar work and make a similar amount, then they would group them together.

"Collecting this pay data would help fill a critical void we need to ensure American workers receive fair pay for their work," said Yang.

By making adjustments to the EEO-1 form — which employers were already required to complete annually — the White House hoped to "encourage and facilitate greater voluntary compliance by employers with existing federal pay laws," as well as help the government investigate "employers that are unlawfully shortchanging workers based on their gender, race or ethnicity."

A White House Fact Sheet from January of 2016 indicates that the first time that employers would have been required to submit this data was September 30, 2017.

Why did the Trump administration suspend this action?

On August 29th, Neomi Rao, Administrator of the Office of Information and Regulatory Affairs, sent a memo to Victoria Lipnic, Acting Chair of the EEOC, saying that changes made to the data collection process by the Obama administration would be reversed.

Rao wrote that the Office of Management and Budget "is concerned that some aspects of the revised collection of information lack practical utility, are unnecessarily burdensome and do not adequately address privacy and confidentiality issues."

In a statement shared with CNBC Make It, Lipnic said, "the burden on business and the utility of the information being collected were not properly taken into account. Whatever actions the EEOC takes next will do so."

Would the revised EEO-1 form have helped fight wage discrimination?

A major concern for Rao is that this new data would not be useful in fighting wage discrimination. Ivanka Trump concurred, telling the Wall Street Journal, "The proposed policy would not yield the intended results."

Since the Trump administration suspended the initiative before the information could be collected, it's difficult to know what results, intended or otherwise, the data might have indicated. It was originally hoped the data would have made it easier to determine whether companies were complying with compensation laws.

The government has on multiple occasions found companies guilty of shortchanging non-white and female employees. In fact, the Department of Labor is currently embroiled in a heated legal battle after alleging that Google was responsible for "extreme" gender pay discrimination.

The data from the Obama-era EEO-1 form would have made investigations like these easier for the Department of Labor, and data could also have been used as supporting evidence for employers who are, in fact, compensating workers fairly.

Was the revised EEO-1 form challenging to complete?

Reuters correspondent Daniel Wiessner notes that the number of fields on the EEO-1 form would have multiplied significantly under the pay data initiative. "Currently, employers must report about 130 different categories of wage data to the EEOC each year. Under the new rule, they would have been required to report more than 3,300 categories," he writes.

Excerpt from the EEO-1 form with pay data

Excerpt from the EEO-1 form without pay data

Indeed, the Obama-era EEO-1 form was three pages long, up from two. However, the number of fields doesn't give a clear indication of how long the form would have taken to complete. It was also possible for employers to submit the new EEO-1 electronically.

"I think we can safely assume all affected employers have access to electronic payroll records and an employee or contractor with specialized knowledge of how to manipulate those records," Gary Burtless, Senior Fellow at the Brookings Institute, told CNBC Make It. Since most large employers already have this information on hand, "It should not be very burdensome to produce the requested information."

He says it would be tough to guess precisely how long the process would have taken employers, "either in dollar terms or as a percentage of human resource management costs."

Were there privacy concerns?

The revised EEO-1 form did not require salary information about individual employees. True, if a company had only one female employee, it is possible that the information provided could be easily associated with a specific person. But given that only companies with over 100 employees were required to complete the form, this seems unlikely.

Some have expressed concerns about the security of the electronic data submission system, particularly as corporate concerns around cyber security have increased in recent years in the wake of large-scale attacks from international hackers and data thefts like the one that recently occurred at Equifax.

But the Trump administration's record on issues of cyber security thusfar is spotty. Recently, several members of the president's cyber security council resigned, stating that he "has given insufficient attention to the growing threats to the cyber security of the critical systems upon which all Americans depend."

Were there costs associated with the updated form? 

The U.S. Chamber of Commerce estimated that it would cost employers a total of $1.3 billion to report the additional information. As such, reverting to the two-page form "is a common-sense decision," Randy Johnson, Senior vice president for the U.S. Chamber of Commerce, said in a statement to the Los Angeles Times.

Fatima Goss Graves, president of the National Women's Law Center argues that this is not the case. She said in a statement that the White House's "action sends a clear message to employers: If you want to ignore pay inequities and sweep them under the rug, this administration has your back."

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