When employers come up with salaries, there are two different ways they think about how much a worker should earn. Jacque Simon, the public policy director for the American Federation of Government Employees (AFGE), a union, puts it this way: Should a salary be tied to the job itself, or to the individual hired to fill it? In the first scenario, employers decide what they are willing to pay for someone to carry out a certain role. In the second, the employer focuses more on the individual and what they are worth to an organization.
Federal employers fit into the first category, using a rigid pay scale similar to ones favored by labor unions. Labor unions view structured pay scales as a means of preventing discrimination based on gender, as well as age, race, and other categories. “Once you give supervisors in the federal government the ability to vary pay by individual, rather than job, they are going to reward the people they like the best,” says Simon.
In the federal government, most white-collar jobs are governed by the General Schedule, which includes 15 general pay levels that vary based on the experience, skills, and education needed for a position. Each job opening is posted at one of these levels, so candidates can only negotiate within the minimum or maximum pay range (there are 10 steps within each level). The pay system, which was launched 1949, was designed to ensure that people with the same skills got paid the same salaries. Limiting salary negotiations benefits women because research shows that they are less likely to negotiate salaries, and are more likely to be penalized if they do. Also, giving hiring managers more discretion may introduce inadvertent biases when putting together an offer.
This has been effective, but it still leaves room for some discretion, not all of it good. For example, some federal agencies base salary offers on what an applicant made at his or her previous job, which contributes to disparities in pay, according to the Office of Personnel Management, the federal agency that oversees hiring and payroll. So, this year, the office urged agencies to consider an applicant’s previous salary as only one of many factors in drawing up offers, because that number may be, as is often the case for female job candidates who left the workforce for several years, artificially depressed. (Though senior government executives are not paid within the General Schedule system, their pay scale is somewhat a continuation of it, with more discretion in pay negotiations.)
As a test of the effectiveness of a rigid pay structure in making pay more equal, Simon, of AFGE, points to an experiment at the Department of Defense, which in 2006 replaced the General Schedule with a system that rewarded employees based on performance, as assessed by supervisors who set goals for each employee. The Federal Times, an independent weekly magazine for government managers, later analyzed pay data under the new system and found that white employees received higher average performance ratings, bonuses, and raises than employees of other races. In 2009, President Obama signed legislation eliminating the system.