EEOC Restarts Pay Data Collection: A Smoother Path Than Before?
The U.S. Equal Employment Opportunity Commission (EEOC) is considering a new round of employer pay data collection. The previously released 2017-2018 EEO-1 Component 2 data confirmed the existence of gender and ethnic pay gaps. Experts note that the new round may shift to individual-level data to reduce employer burden and benefit from the momentum of multiple state pay transparency laws.
Five years ago, the top U.S. workplace civil rights enforcement agency launched a high-level review of employer pay practices, an experiment designed to measure pay inequality nationwide.
The data collection effort, known as the U.S. Equal Employment Opportunity Commission's (EEOC) 2017 and 2018 EEO-1 Component 2, was not welcomed by all parties involved. Employers and management-side legal counsel questioned its utility, feasibility, and overall necessity—a controversy that may have partly contributed to the collection being a one-time event, as the EEOC did not continue it in subsequent years. Additionally, while the Commission was planning Component 2, the White House underwent a change in administration, and the Trump administration opposed the collection and initiated a stay on it. Ultimately, a federal judge lifted the stay, allowing the collection to proceed.
Now, the results of the EEOC Component 2 collection have been public for several months. The data, released in March, confirmed what researchers suspected at the time: pay gaps by gender, ethnicity, and race existed in the U.S. workforce in 2017 and 2018. Furthermore, the gaps were particularly pronounced among workers of different demographic groups in certain industries and occupational categories.
Gender composition of the U.S. workforce by industry
EEOC officials have since indicated they are ready to attempt pay data collection again. The U.S. labor and employment legal landscape has changed significantly since the EEOC's first—and arguably successful—attempt, but sources interviewed by HR Dive believe the agency's next round of pay data collection could differ substantially from its first attempt.
What Component 2 found
In a March 12 press release, the EEOC highlighted several findings from its Component 2. The final analysis included a data dashboard allowing users to compare by gender and race against overall averages for industries, occupational categories, and states.
For example, the EEOC found that in 2018, the median pay range for women was $30,600 to $38,900 per year, while for men it was $39,000 to $49,900. This gap narrowed slightly from 2017; the median pay range for men remained unchanged over the two years, but in 2017, the median pay range for women was $24,400 to $30,600.
Similarly, in every racial and ethnic category measured by the EEOC, women's median pay ranges were lower than men's. Black/African American women and American Indian/Alaska Native women were in the lowest median pay ranges among all groups.
HR Dive's analysis of the data shows that the highest pay bands in every industry measured by the EEOC were predominantly composed of male workers.
In the accommodation and food services category, for example, 57% of workers in the lowest pay band (annual earnings of $19,239 and below) in 2018 were women, while men made up 43%. However, in the industry's seven highest pay bands, men outnumbered women by at least 10 percentage points. The largest gap was in the highest pay band—annual earnings of $208,000 and above—where approximately 77% (more than two-thirds) of workers were men.
In many U.S. industries, women are overrepresented in the lowest pay bands, while men generally outnumber women in the highest pay bands
Even in industries where women vastly outnumber men, men dominate the highest pay bands. In healthcare and social assistance, for example, women made up 78% of the total workforce in 2018 but only 34% of the highest pay band.
Jessica Stender, policy director and deputy legal director at the nonprofit Equal Rights Advocates, said that while many of the agency's findings were not surprising to advocates, they do help reveal gaps that exist in nearly every industry measured. She added that the EEOC's report could also incentivize employers to take more proactive measures to eliminate race- and gender-based pay disparities.
"For many employers, this may have been an eye-opening experience," Stender said of employers that submitted pay data to the EEOC. "I think many employers may not have realized that pay disparities based on race or gender existed in their companies, and in many cases, these disparities were not intentional."
A process worth trying again?
After completing the Component 2 collection, the EEOC commissioned the National Academies of Sciences, Engineering, and Medicine to conduct a study evaluating the quality and utility of the data. The National Academies' report found that Component 2 data is a "potentially valuable resource," in part because they are the only federal source of pay data and demographic characteristics collected at the employer level.
Donald Tomaskovic-Devey, a sociology professor at the University of Massachusetts Amherst and a member of the National Academies panel that evaluated Component 2, said the EEOC's data differs from other federal pay information sources, such as the U.S. Census Bureau, because Component 2 provides workplace-level pay insights.
Tomaskovic-Devey told HR Dive that Census Bureau wage data is collected through surveys of individuals, linking pay to each individual's occupation and industry, but not to the company they work for. He added that such data is not actionable for HR departments because it does not allow employers to compare with competitors in the same industry. "If you have individual data that is not connected to the firm, HR people have no footing," Tomaskovic-Devey said.
However, with EEOC data, HR professionals can compare earnings distributions by race and gender within specific occupations and company types.
Tomaskovic-Devey said the EEOC could even take its analysis further by providing individualized reports to specific companies on how they compare to major competitors in terms of pay equity, or by identifying and rewarding highly equitable organizations or industries.
"I actually think it would be fantastic if HR and diversity and inclusion staff at large companies demanded more from the EEOC," Tomaskovic-Devey said. "In some ways, these two types of professionals have the responsibility to create equal opportunity, but often have few tools, and it's hard for them to be as metric-driven when the rest of the company is highly metric-driven."
Stender said the EEOC's findings could also enable employers that already have pay equity policies to address occupational segregation—the overconcentration of women and people of color in lower-paying jobs and industries. She added that if organizations find these groups are highly concentrated in lower-paying positions, they can develop a roadmap "to ensure better representation of all people and all genders at all levels of the company."
Changes the EEOC might make
Despite the numerous arguments in favor of a second Component 2 collection, employer advocates and the National Academies alike acknowledged that the EEOC could take steps to make future versions of the collection easier for employers to comply with.
For example, the National Academies found evidence that Component 2 required employers to aggregate their pay data into occupational and pay band categories set by the EEOC, which could be burdensome. The form also required respondents to group employees by annual salary, "but annual salary reflects different hourly rates for individual employees, and it is unclear how work hours should be allocated to calculate hourly rates," the National Academies said in its report.
Instead, collecting individual-level data from employers "may be less burdensome," according to the National Academies' report, especially because this form of analysis is more aligned with how employers already submit pay data to state unemployment insurance and state and federal tax systems.
"Any new data collection is difficult, but (Component 2) also didn't match (employers') payroll systems," Tomaskovic-Devey said. "The EEOC should ask businesses to do what they are already doing, rather than introducing something new that creates errors in data collection."
Since Component 2 ended, some states have begun to develop pay data collection requirements, including Illinois, which uses employer payroll data to complete its analysis.
The EEOC could implement similar requirements in its future data collections, and the agency might also allow employers to include information such as employee education level and tenure, which were not collected in Component 2.
"If they move to individual-level payroll data, employers should have the right to include any data they think is important, but at minimum they should be allowed to include the employee's tenure at the company," Tomaskovic-Devey said.
In a notice announcing its intent to resume pay data collection, the EEOC said the report's conclusions and recommendations would help guide the methodology of its future data collections. The Commission previously said it planned to propose new pay data collection regulations in January 2025, but an agency official told HR Dive that date is likely to be delayed.
Pay transparency momentum provides support
Like Illinois, California requires certain employers to submit pay and workforce demographic information to the state. Both states are also part of a broader labor and employment trend supporting pay transparency, having passed laws requiring employers to disclose pay ranges in job postings. Overall, at least 15 states and the District of Columbia have passed pay transparency laws.
Robert Hinckley Jr., managing shareholder at the law firm Buchalter, said other jurisdictions are likely to follow suit in the coming years, adding that the federal government might even consider a law requiring some form of Component 2-like pay data collection.
"From an employer's perspective, pay disparities will come under increasing scrutiny," Hinckley said. "I don't think the trend of pay transparency and mining wage data from employers is going away."
Stender noted that pay transparency momentum is so strong that some employers have begun voluntarily publishing public pay equity reports. With the growing number of pay transparency laws, she said, "employers need to understand that the train is not stopping when it comes to regulatory and public attention on this topic."