The Retirement Process and the Fair Calculations in Civil Damages Act of 2016

Kevin E. Cahill presented “The Retirement Process and the Fair Calculations in Civil Damages Act of 2016” at the 92nd Annual Western Economics Association International Conference.

San Diego, CA
July 26, 2017

How would the Fair Calculations in Civil Damages Act of 2016 (the “Act”) impact economic damages calculations related to the retirement process? The Act covers discrimination based on race, ethnicity, gender, religion, or actual or perceived sexual orientation. This paper focuses on gender discrimination and explores how imposing gender-neutral worklife and earnings tables, per the Act, would impact earnings and pension calculations in cases involving economic damages. We compare damages calculations under three scenarios: 1) a gender-specific approach, 2) a gender-neutral approach (per the Act), and 3) a gender-specific approach that takes into account the unexplained portion of the male-female earnings gap. The latter approach serves as a “free of bias” benchmark under the assumption that the unexplained portion of the gender wage gap is due entirely to discrimination. Generally speaking, we find that the Act’s broad-brush attempt to correct for possible gender discrimination would introduce more distortions than it would resolve, and likely exacerbate the degree of discrimination in economic damages calculations. A more effective approach to address the possibility of gender discrimination is to allow forensic economists to take gender into account (or not) on a case-by-case basis.

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