Preemptive Economic Analysis in Employment Discrimination

Unintended wage and salary discrimination can occur for a protected class of employees. This paper develops a methodology that identifies wage and salary disparities prior to litigation, thus allowing the firm to mitigate pay discrepancies and reduce the probability of a lawsuit. This methodology subsequently becomes part of a first-line defense in alleged discrimination. A second benefit of the methodology is that a firm’s contract and affirmative action compliance programs are proactive in finding and remedying salary disparities. An economist may use this methodology to analyze the pay structure of all current employees in a firm, and verify that salaries are determined by plausible explanatory variables and are not based on  discriminatory variables such as race and gender.