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6 Conclusions and Recommendations The panel was invited to make recommendations to assist the U.S. Equal Employment Opportunity Commission (EEOC) in formulating regu- lations on methods for measuring and collecting pay information by gender, race, and national origin from U.S. employers for the purpose of adminis- tering Section 709 of the Civil Rights Act of 1964 as amended, if a decision is made to proceed with such a data collection. We have considered cur- rently available and potential data sources, as well as methodologies and statistical techniques for the measurement and collection of such employer pay data. The panel’s recommendations are made with an appreciation that such a new data collection would be a significant undertaking for EEOC and that it could well generate an increased reporting burden on some employers, and so any new data collection would have to be fully justified. PURPOSE OF A NEW DATA COLLECTION Based on the literature we reviewed and the papers and presentations made to us by the staff of EEOC, the Office of Federal Contract Compli- ance Programs (OFCCP) in the U.S. Department of Labor, and the U.S. Department of Justice, the panel finds that there is no clearly articulated vision of how data on wages would be used in the conduct of the enforce- ment responsibilities of these agencies. As discussed in Chapter 1, the use of the employment data from the EEO-1 reports for the purpose of target- ing potentially noncompliant firms was highlighted by EEOC and OFCCP leadership as an objective of the collection of earnings data by gender, race, and national origin. Thus, targeting is broadly given as the objective 86

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CONCLUSIONS AND RECOMMENDATIONS 87 of collection of earnings data by both OFCCP and EEOC, but the specific mechanisms by which the data would be assembled, assessed, compared, and used in a targeting operation are not well developed by either agency. 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 earnings data should be integrated into the compliance programs that have to date been triggered mainly by a com- plaint process, which, in their absence, includes relatively few complaints about pay matters. With regard to existing studies of the cost-effectiveness of an instru- ment for collecting wage data, the panel concludes that they are inadequate to assess any new survey program. For example, unless the agencies have a comprehensive plan that includes the form of the data collection, it will not be possible to reliably determine the actual burden on employers and the costs and benefits of the collection. As discussed in Chapter 3, it is important to clearly understand the requirement and potential uses of data as a first step in determining their fitness for use, that is, the quality of the data. Although it is assumed that, if these data are collected, they could greatly enhance the enforcement process, until EEOC and its cooperating agencies gain experience with collecting, processing, and using earnings data in field investigations and in litigation, it will not be known if the data are of sufficient reliability to support enforcement. Other potential benefits of the possible collection of pay data remain to be fully articulated but are of interest. In addition to targeting, the collec- tion of earnings data could well be used in research on discrimination and pay equity. Analysts would be able to associate pay differentials by type of establishment, location, job category (occupation), and demographic detail, which cannot currently be done with existing data. For such use, however, systems for maintaining, retrieving, archiving, and processing the data in a protected environment would have to be developed. 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. PILOT STUDY With a comprehensive plan in hand, the next logical step would be to test it. Because of the current paucity of evidence about such a data col- lection, the panel concludes that reliable information about the costs and

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88 COLLECTING COMPENSATION DATA FROM EMPLOYERS benefits of the proposed collection would best be provided by an indepen- dent pilot study. The panel’s two-pronged approach to conducting a pilot study (to be done by an independent contractor) is outlined below and detailed in Appendix C. The first approach—a microdata pilot test—would collect a number of core demographic variables—using the categories on the Equal Employ- ment Opportunity (EEO)-1 form and adding an annual wage measure for individual employees. This approach would test targeting firms for enforce- ment purposes, as well as testing the collection of additional variables that could illuminate the relevant characteristics of targeted firms. For example, age and years-on-the-job variables could assist in controlling for the legiti- mate effect of these characteristics on wages. In developing the test, the public responses to the OFCCP ANPRM could well be instructive. The second approach—a simplified aggregated-data pilot test—would develop and test an enhanced EEO-1 report that would include all the summary data required for the computation of test statistics comparing wage data in existing EEO-1 occupations. This pilot would use grouped data techniques that would produce standardized wage rates and other measures of interest. Both approaches to the pilot study could test various earnings defini- tions. On the basis of our analysis, we conclude that the definition used in the Occupational Employment Statistics (OES) survey is the most feasible (see under heading Definition of Compensation). The tests could also assess the possibility of reducing employers’ response burden through building in compatibility with the electronic record-keeping systems that are now in use in larger companies. The quality of the data from the pilot tests would have to be as- sessed in light of the analysis plan that results from Recommendation 1. It would also be desirable for the quality of the data collected in the pilot to be verified by independent record checks of reporting establishments or by comparison of aggregated results with administrative databases (see Chapter 2), again using the criteria developed as part of the analysis plan in Recommendation 1. 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.

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CONCLUSIONS AND RECOMMENDATIONS 89 AGENCY CAPACITY AND BURDEN It is important to consider the administrative capacity for the collec- tion, analysis, and protection of pay data. The EEOC has a small data collection and analytical program, which has traditionally been focused nearly exclusively on collecting employment data and assessing employer compliance through the means of rather straightforward statistical tests. If EEOC undertakes a major new activity, it is not clear that it could administratively handle the work given available resources. If data on com- pensation is added to an existing form, or collected in a new instrument, the agency’s resources for both collection and analysis are likely to be severely strained. Thus, EEOC needs to consider its capacity to undertake any new collection. To take full advantage of new opportunities for analytics and compliance using more sophisticated measures enabled by the availability of detailed earnings data will surely require an enhancement of EEOC’s analytical and data processing capacity, as well as its capability to protect the confidentiality of the information. Recommendation 3:  The U.S. Equal Employment Opportunity Com- mission should enhance its capacity to summarize, analyze, and protect earnings data. MEASURES FOR COLLECTION OF PAY INFORMATION Several possible measures of pay information could be used for the pos- sible new data collection, ranging from pay bands (the measure now used on the EEO-4 form) to rates of pay (e.g., annual salaries, hourly wages, etc.). Though pay band collection is attractive in that it aligns with the way that human resource managers tend to look at compensation, the best data are collected from payroll records, and those data are most likely to be rates of pay or average annual earnings as computed using total wage and hours information. Rates of pay as a measure have the advantage of being more likely to provide valid measures of both central tendency and dispersion, important quality checks and analytical capabilities that pay band data cannot provide. Rates of pay collection would add rigor to the collection process and subsequent analysis. 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.

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90 COLLECTING COMPENSATION DATA FROM EMPLOYERS DEFINITION OF COMPENSATION A number of definitions of compensation are currently in use, ranging from comprehensive measures of total compensation to simple straight-time hourly pay. As noted above and in Chapter 3, we conclude that the best definition is that in the OES survey, and we urge that a test of collection of data from employers by gender, race and national origin be conducted as part of the pilot test program. As noted in Chapter 3, earnings in the OES survey are defined as straight-time, gross pay, exclusive of premium pay. The definition includes a base rate of pay, cost-of-living allowances, guaranteed pay, hazardous-duty pay, incentive pay (including commissions and production bonuses), and tips. The definition excludes overtime pay, severance pay, shift differentials, nonproduction bonuses, employer cost for supplementary benefits, and tuition reimbursements. Earnings data by occupation are collected in the OES survey with use of this definition from more than 1.2 million establishments in the United States with response rates of nearly 80 percent. Clearly, most of the firms that fall within the scope of the EEO statutes and are now required to com- plete an annual EEO-1 report have the ability to provide these data from their existing payroll and human resource systems. With the growth of highly sophisticated electronic systems, such as those represented in software-as-a-service applications, the ability to trans- fer data efficiently between the payroll and human resource systems is expected to expand in the future. By monitoring these quickly changing software developments and continuing its work with reporting employers, EEOC could capitalize on advances in electronic reporting. ACCESS TO PAY INFORMATION IN A PROTECTED ENVIRONMENT If the pilot tests and other developmental activities recommended in this report bear fruit and if EEOC begins collection of pay data from em- ployers, the data will comprise an important new source of information for research and analytical purposes, in addition to their intended use in enforcement. We expect that there will be great demand on the part of other federal agencies, researchers, analysts, compensation-setting bodies, and others for access to these powerful new data. EEOC would be well advised to start taking steps now to develop policies to provide access in a protected environment. Recommendation 5:  In anticipation of increased user demand for mi- crodata on pay information by demographic detail for research and

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CONCLUSIONS AND RECOMMENDATIONS 91 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 devel- opment of these applications. Though there have been no known breaches of the EEOC’s ability to protect EEO data, the consequences of a breach in the protection of data provided in confidence are, as other federal agencies have discovered, pain- ful and of lasting consequence. Thus, EEOC should consider providing the same protections to the organizations and individuals that become parties to data-sharing agreements as it now has with its own employees. 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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