A Broken Bargain
Discrimination, Fewer Benefits and More Taxes for LGBT Workers
The broken bargain for LGBT workers
The basic American bargain is that people who work hard and meet their responsibilities should be able to get ahead. This basic bargain is not just an idea—it is embedded in laws that promote equal access to jobs and that protect workers from unfair practices.
For workers who are lesbian, gay, bisexual and transgender (LGBT), this bargain is broken. Instead of having a fair chance to get ahead, LGBT workers and their families often are held back by bias, fewer workplace benefits, and higher taxes.
Employers who value diversity and who understand that it gives them a competitive advantage can take some steps to ease the burden of unfair treatment of LGBT workers and their families, but they can’t fix the broken bargain on their own. The reason: unequal treatment of LGBT workers under the law.
First, no federal law provides explicit nondiscrimination protections for LGBT workers, and fewer than half of states have laws that protect workers based on sexual orientation and gender identity/expression. Second, LGBT workers may do the same job as their coworkers, yet be denied equal access to worker and family benefits—as well as family tax relief.
The combination of job discrimination, fewer benefits and higher taxes leaves many LGBT workers in a vulnerable position that threatens their ability to provide for themselves and their families. If fairness and equality are part of America’s basic workplace bargain, this bargain is clearly broken for LGBT workers.
A portrait of the LGBT workforce
The U.S. workforce includes an estimated 5.4 million LGBT workers:
- LGBT workers are geographically dispersed. Same-sex couples live in 93% of all U.S counties. As many as 4.3 million LGBT people live in states with no state laws providing employment protections based on sexual orientation or gender identity/expression.
- LGBT workers are racially and ethnically diverse. One in three (33%) of LGBT respondents in a 2012 Gallup poll identified as people of color, compared to 27% of non-LGBT individuals. The LGBT workforce, like the overall U.S. workforce, also includes a significant number of immigrants.
- LGBT workers are raising children in significant numbers. New analyses show that 37% of LGBT adults have had a child, while a recent MAP analysis of three different data sources suggests that between 2.0 and 2.8 million American children are being raised by LGBT parents. This makes family benefits important to LGBT and non-LGBT workers alike.
- LGBT workers have varying levels of education. Recent polls show that Americans with lower education levels are more likely to identify as LGBT than college graduates and those who have post-graduate degrees. In contrast, census data show a higher probability that individuals in same-sex couples have at least a bachelor’s degree. Similarly, the 2011 National Transgender Discrimination Survey found that transgender respondents had much higher levels of educational attainment than the population as a whole.
- LGBT workers experience unemployment at an equal or higher rate than other workers. A 2009 state-level survey in California found that 14% of lesbian, gay and bisexual adults were unemployed, compared to 10% of heterosexual adults. Among transgender workers, unemployment rates are twice the rate of the population as a whole, with rates for transgender people of color reaching as high as four times the national unemployment rate.
- LGBT workers are at higher risk of poverty than other workers. Among the hardest-hit by the broken bargain for LGBT workers are those who are parents, together with their children. Married or partnered LGBT individuals raising children are twice as likely to have household incomes near the poverty line compared to married or partnered non-LGBT parents. In addition, transgender people are nearly four times more likely to have a household income under $10,000 per year than the population as a whole (15% vs. 4%).
Fixing the broken bargain for LGBT workers
This report organizes the inequities LGBT workers face into two overarching problems:
- Job discrimination without legal protection makes it harder for LGBT workers to find and keep a good job; and
- LGBT workers receive fewer benefits and pay more taxes, which puts LGBT workers and their families at risk.
Many of the access or equity gaps that affect LGBT workers also disproportionately affect low-income workers broadly, workers with unmarried heterosexual partners, workers of color, and workers who live with and support family members who are not a spouse or legal child, such as an uncle providing care for a nephew.
Fixing the broken bargain will require government and employers to address multiple barriers to equal and fair treatment for LGBT and other workers, as outlined below.
Discrimination without legal protection makes it harder to find and keep a good job
Barrier #1: Bias and Discrimination in Recruitment and Hiring. LGBT workers can put their job prospects at risk if they disclose that they are LGBT while looking for work.
Barrier #2: On-the-Job Inequality and Unfairness. An LGBT employee may be in a workplace that is blatantly hostile, one that condones anti-gay jokes and slurs, and/or one where employers look the other way and allow a discriminatory climate to flourish.
Barrier #3: Wage Gaps and Penalties. In addition to job and workplace discrimination, LGBT employees face wage disparities that make it harder for them to provide for themselves and their families.
Barrier #4: A Lack of Legal Protections. Only 21 states and the District of Columbia have laws prohibiting discrimination in employment based on sexual orientation. Transgender workers facing workplace discrimination may seek federal legal recourse by filing a complaint with the Equal Employment Opportunity Commission (EEOC), but only 16 states and the District of Columbia explicitly prohibit discrimination based on gender identity/expression.
Fewer benefits and more taxes put LGBT workers and their families at risk
Barrier #5: Unequal Access to Health Insurance Benefits. Under federal and most state laws, most employers can extend family health benefits to married opposite-sex couples yet deny same-sex couples the same coverage. When employers electively offer family coverage to LGBT workers, most of them have to pay thousands of dollars in extra taxes on the value of the family coverage, although heterosexual workers get the same benefits tax-free. In addition, exclusions in health insurance often deny transgender workers access to both basic healthcare and transition-related care.
Barrier #6: Denial of Family and Medical Leave. Because the federal government does not legally recognize the marriages of same-sex couples under the Defense of Marriage Act (DOMA), LGBT employees do not have equal access to federally mandated unpaid leave to provide care for same-sex spouses or partners. Only about one-fifth of states provide equal access to unpaid leave for same-sex couples under state leave laws. In addition, employers may deny transgender workers leave for transition-related care.
Barrier #7: Denial of Spousal Retirement Benefits. The same-sex spouses and partners of LGBT workers are systematically denied Social Security benefits designed to protect workers’ families during their retirement years. This may cost a retired same-sex couple up to $14,484 per year and a surviving same-sex spouse or partner up to $28,968 per year. An LGBT employee also may be unable to opt for continuing pension benefits for a same-sex spouse or partner under an employer-provided pension plan.
Barrier #8: Unequal Family Protections When a Worker Dies or is Disabled. When an LGBT worker dies or becomes disabled, the worker’s same-sex spouse—and in some cases, his or her children—will be denied Social Security disability and survivor benefits. A surviving family (spouse and two children) of a worker earning $40,000 could lose as much as $29,520 in annual benefits.
Barrier #9: A Higher Tax Burden for LGBT Families. State marriage and parenting laws, combined with the federal government’s lack of recognition of same-sex couples, mean that LGBT workers pay more taxes because they cannot file using the advantageous “married filing jointly” status. Consider an LGBT family with one working parent who has a taxable income of $60,000 a year and a stay-at-home parent who has no income. The inability to file a federal tax return as a married couple costs the LGBT family $2,902 in additional taxes. When working LGBT parents cannot form legal ties to their children, they also generally cannot claim important child-related deductions and credits such as the child tax credit, the child and dependent care expense credit, and multiple education-related deductions and credits potentially totaling thousands of dollars per year.
Barrier #10: Inability to Sponsor Families for Immigration. An LGBT worker is unable to sponsor a foreign-national spouse or partner or a partner’s children for the purposes of immigration. This means American LGBT workers may need to live abroad to avoid separation from their families, while highly skilled foreign national LGBT workers may decline to come to the United States if it means they must leave their families behind.
Fixing the broken bargain is good for business and America’s prosperity
America’s most successful businesses are opposed to the current inequities for LGBT employees and are taking independent steps to try and fix the broken bargain. Nearly 9 out of 10 Fortune 500 companies (88%) provide nondiscrimination protections for their gay and lesbian employees. Additionally, in a 2013 brief submitted to the Supreme Court, 278 businesses and employers (including Amazon.com, Citigroup, Intel, Marriott, Nike, Pfizer, Twitter, Viacom and the Walt Disney Company) argued that current laws harm business by:
- Creating complex and difficult compliance burdens by requiring businesses to treat married LGBT employees as single for federal taxes, payroll taxes, and certain workplace benefits—but as married for all other purposes in states that recognize same-sex couples.
- Requiring employers to implement and enforce discriminatory treatment of employees in their own companies, even when doing so goes against core corporate values and basic business sense.
- Creating an environment that makes it harder for LGBT workers to perform at their best.
- Negatively impacting the employer’s ability to compete for and hire top talent.
The report offers detailed recommendations for action by the federal, state and local governments, as well as employers. The following is a summary of these recommendations:
Reducing barriers to finding and keeping good jobs
- Pass nondiscrimination laws and policies. Federal, state and local governments should pass nondiscrimination laws/ordinances that include explicit protections for LGBT workers on the basis of sexual orientation and gender identity/expression. Employers can also adopt nondiscrimination policies for their workplaces.
- Increase wage discrimination protections. The federal government should expand existing legal protections against wage discrimination to include protections for sexual orientation and gender identity/expression.
- Ensure effective and swift discrimination claims processing. For example, the federal government should address the backlog of discrimination cases before the EEOC, while private employers and unions should institute clear and effective grievance systems.
- Foster diverse and inclusive workplaces. Government and private employers should put in place policies and procedures that foster welcoming and inclusive workplaces and encourage diversity.
- Ensure transgender workers can update the gender marker on their identity documents. A physician’s letter, not proof of surgery, should be used as a standard for changing gender on identity documents.
- Increase data collection on LGBT workers. Federal, state, and local governments should increase data collection and research on LGBT workers including demographics, income, benefits, experiences of discrimination, and more.
Providing equal access to individual and family benefits
- Recognize the families of LGBT workers. States should allow same-sex couples to marry and ensure their parentage laws allow LGBT parents to be legally recognized as parents. The federal government should recognize married same-sex couples to allow equal access to worker benefits, Social Security, immigration, federal family tax relief and more.
- Advance equal access to individual and family health insurance benefits. The federal and state governments should amend health insurance laws to ensure coverage parity and nondiscrimination protections for transgender health plan enrollees. State and federal lawmakers also should ensure that LGBT families have health insurance on equal terms with other families, including eliminating unfair taxation of these benefits.
- Provide equal access to individual and family medical leave. Federal and state medical leave laws should allow transgender workers to take needed individual medical leave—and allow workers to take leave to care for a same-sex partner or spouse.
- Provide equal access to spousal retirement benefits. The federal government should broaden Social Security’s definition of spouse to allow a same-sex partner to access spousal and survivor benefits. Policymakers also should change federal law to ensure same-sex partners/spouses can access pension survivor benefits and are equally taxed on inherited retirement plans.
- Provide equitable economic protections when a worker dies or is disabled. A same-sex partner/spouse and his or her children should be able to access Social Security survivor and disability benefits in the same manner as the spouse and children of a non-LGBT worker.
- Revise the IRS tax code to provide equitable treatment for LGBT workers. The Internal Revenue Service (IRS) should create a designation of “permanent partner,” who would be treated as a spouse for the purposes of the tax code. The IRS also should allow not just legal parents but also those who act as parents to claim a “qualifying child” on their tax filing.
- Provide pathways to immigration and citizenship for binational LGBT families. Congress should pass legislation such as the Uniting American Families Act (UAFA), which would add the category “permanent partner” to the list of family members entitled to sponsor a foreign national for U.S. immigration.
To the extent that all levels of government (and more employers) adopt policies that ensure fair and equal treatment for LGBT workers, America will make great strides in its ongoing effort to build a fair and inclusive society where everyone’s contributions are valued equally.
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