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Summary For identifying the possibility of discriminatory practices, the U.S. agencies with responsibilities for enforcing equal employment opportunity (EEO) laws have long relied, along with other sources, on detailed infor- mation that is obtained from employers on employment in job groups by gender and race/ethnicity. The U.S. Equal Employment Opportunity Com- mission (EEOC), the Office of Federal Contract Compliance Programs (OFCCP) of the U.S. Department of Labor, and the Civil Rights Division of the U.S. Department of Justice (DOJ) have developed processes that use these employment data as well as other sources of information to target employers for further investigation and to perform statistical analysis that is used in enforcing the antidiscrimination laws. The limited data from employers do not include (with a few exceptions) ongoing measurement of possible discrimination in compensation. The proposed Paycheck Fairness Act of 2009 (H.R. 12) would have required EEOC to issue regulations mandating that employers provide the EEOC with information on pay by the race, gender, and national origin of employees. The legislation was not enacted. If the legislation had become law, the EEOC would have been required to confront issues regarding cur- rently available and potential data sources, methodological requirements, and appropriate statistical techniques for the measurement and collection of employer pay data. At the suggestion of a White House Task Force, EEOC asked the National Research Council through its Committee on National Statistics to convene a panel to review methods for measuring and collecting pay information by gender, race, and national origin from U.S. employers. The 1

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2 COLLECTING COMPENSATION DATA FROM EMPLOYERS Panel on Measuring and Collecting Pay Information from U.S. Employers by Gender, Race and National Origin considered suitable data collection instruments, procedures for reducing reporting burdens on employers, and issues of confidentiality protection and data access. The panel concludes that the collection of earnings data would be a significant undertaking for the EEOC and that there might well be an increased reporting burden on some employers. The panel also concludes that there is, at present, no clearly articulated vision of how the data on wages could be used in the conduct of the enforcement responsibilities of the relevant agencies. The main purpose for which the wage data would be collected, as articulated to the panel by EEOC and OFCCP representatives, is for targeting employers for investigation regarding their compliance with antidiscrimination laws But beyond this general statement of purpose, the specific mechanisms by which the data would be assembled, assessed, com- pared, and used in a targeting operation are not well developed by either agency. An Advance Notice of Proposed Rulemaking (ANPRM), issued in August 2011 by OFCCP, posed relevant questions in seeking public com- ment on the development and implementation of a new compensation data collection tool. The ANPRM contained a set of 15 questions encompassing all aspects of the new tool. Questions put forth included which type of wage data to collect, appropriate job categories, the possibility of submitting data on an establishment basis, electronic data submission, etc.1 Nonetheless, the panel found no evidence of a clearly articulated plan for using the earnings data if they are collected. The fundamental question that would need to be answered is how the earnings data should be inte- grated into the compliance programs, for which the triggers for the EEOC and DOJ have primarily been a complaint process that has generated rela- tively few complaints about pay matters. Furthermore, the panel concludes that existing studies of the cost- effectiveness of an instrument for collecting wage data and the resulting burden are inadequate to assess any new program. Unless the agencies have a comprehensive plan that includes the form of the data collection, it will not be possible to determine, with precision, the actual burden on employ- ers and the probable costs and benefits of the collection. Therefore, the first recommendation is to develop such a plan. Recommendation 1: In conjunction with the Office of Federal Contract Compliance Programs of the U.S. Department of Labor and the Civil Rights Division of the U.S. Department of Justice, the U.S. Equal Em- ployment Opportunity Commission should prepare a comprehensive plan for use of earnings data before initiating any data collection. 1  or F the full set of questions in the ANPRM, see 76 FR 49398–49401.

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SUMMARY 3 The second recommendation stems from the panel’s conclusion that existing evidence does not provide an adequate basis for determining the costs and benefits of the collection of wage data. Based on the data use plan, the panel recommends that a pilot study be conducted by an independent organization to provide much more reliable information about the costs and benefits of the proposed collection. Recommendation 2: After the U.S. Equal Employment Opportunity Commission, the Office of Federal Contract Compliance Programs, and the U.S. Department of Justice complete the comprehensive plan for use of earnings data, the agencies should initiate a pilot study to test the collection instrument and the plan for the use of the data. The pilot study should be conducted by an independent contractor charged with measuring the resulting data quality, fitness for use in the compre- hensive plan, cost, and respondent burden. The panel offers two approaches to the recommended pilot study. The first pilot test—a microdata pilot approach—proposes collecting a number of core demographic variables (using the categories on the EEO-1 form) and adding an annual wage measure in order to test targeting firms for enforcement purposes. In addition, the pilot would test the collection of additional variables that are relevant to a firm’s practices. For example, age and years-on-the-job variables could assist in controlling for the legitimate effect of these characteristics on wages. The second approach—a simplified aggregated-data pilot—would de- velop and test an enhanced EEO-1 report that would include all the sum- mary data required for the computation of test statistics comparing wage data within existing EEO-1 occupations. This pilot would use grouped data techniques that would produce standardized wage rates and other measures of interest. The end product would be a prototyped method for providing screening information about pay that is based on standardized information and audited test statistic formulas. Both approaches to the pilot studies could also test various earnings definitions, such as those used in the Bureau of Labor Statistics’ Occu- pational Employment Survey. The tests would assess the possibility of reducing employer response burden by using commercial electronic record- keeping systems in use in the larger companies. The quality of the data col- lected in the pilots would be independently verified by record checks or by comparison of aggregated results with administrative databases. More needs to be done administratively to prepare the ground prior to commencing any data collection. EEOC has a small and lightly resourced data collection and analytical program that has traditionally been focused nearly exclusively on collecting employment data, developing summary

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4 COLLECTING COMPENSATION DATA FROM EMPLOYERS statistics, and assessing individual employer compliance through the means of rather straightforward statistical tests. If data on compensation are added to an existing form, or collected in a new instrument, it is likely that the resources for both collection and analysis in the agency would be severely strained. Thus, it is important that EEOC (and its partner antidiscrimina- tion agencies) assess their capacity to undertake any new data collection and, when necessary, enhance their capacities to take full advantage of new opportunities for analytics and compliance, using the more sophisticated measures that will be possible. Recommendation 3: The U.S. Equal Employment Opportunity Com- mission should enhance its capacity to summarize, analyze, and protect earnings data. There are several possible means of collecting earnings information, ranging from pay bands (the clustering of pay levels method now used in the EEO-4 reports) to rates of pay. Pay band data are attractive in that they align with the way that human resource managers tend to look at com- pensation, but the best data are collected from payroll records, and those are most likely to be rates of pay or average earnings as computed with information on total wages and hours. Data on rates of pay have the ad- vantage of being more likely to provide valid measures of central tendency and dispersion, thereby affording an important quality check and analytical capability. Rates of pay collection would add rigor to the collection process. Recommendation 4: The U.S. Equal Employment Opportunity Com- mission should collect data on rates of pay, not actual earnings or pay bands, in a manner that permits the calculation of measures of both central tendency and dispersion. It is important to use a definition of compensation that is measurable, collectable, and, in the end, meaningful. There are a number of definitions that are currently in use, ranging from comprehensive measures of total compensation to simple straight-time hourly pay. The panel concludes that a measure such as that used in the Occupational Employment Survey would best illuminate earnings levels. This measure has the added benefit of being generally available because earnings data by occupation are now collected with use of this definition from more than 1.2 million establishments. Most of the firms that fall within the scope of the EEO statutes and are now required to complete an annual EEO-1 report have the ability to pro- vide these data from their existing payroll and human resource systems. The growing penetration of highly sophisticated software-as-a-service applica- tions into the marketplace will further enhance the ability of establishments

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SUMMARY 5 to provide earnings data by job group and gender, race, and national origin in the future. Finally, the sensitivity of the data that employers provide to EEOC will be heightened if earnings data are added to EEO data records, since employee compensation data are generally considered to be highly sensitive, even proprietary information, by most employers. Therefore, it will be im- portant for EEOC to develop more sophisticated techniques for protecting data that are provided in tabular and microdata form to the public. Recommendation 5: In anticipation of increased user demand for mi- crodata on pay information by demographic detail for research and analytical purposes if such data are collected by the U.S. Equal Employ- ment Opportunity Commission, the agency should consider implement- ing appropriate data protection techniques, such as data perturbation and the generation of synthetic data to protect the confidentiality of the data, and it should also consider supporting research for the develop- ment of these applications. In order to assure reporting employers that their data are indeed pro- tected from disclosure, it will be important to establish clear and legally enforceable protections for sharing the data that employers provide in confidence. The agencies should consider whether the protections, now in- sured through the mechanism of interagency memoranda-of-understanding, should be incorporated in legislation. Recommendation 6: The U.S. Equal Employment Opportunity Com- mission should seek legislation that would increase the ability of the agency to protect confidential data. The legislation should specifically authorize data-sharing agreements with other agencies with legislative authority to enforce antidiscrimination laws and should extend Title VII penalties to nonagency employees.

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