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'Paycheck Fairness' Will Lead to Fewer Paychecks, Less Fairness

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'Paycheck Fairness' Will Lead to Fewer Paychecks, Less Fairness

April 1, 2014

On April Fools' Day the Senate Committee on Health, Education, Labor and Pensions is holding a hearing on the Paycheck Fairness Act, sponsored by Senator Barbara Mikulski, who will reportedly chair the hearing.

The Paycheck Fairness Act, which mistakenly assumes that American women do not have paycheck fairness, lists 54 senators as cosponsors. Although it appears that the Democrats have consensus within their own caucus, they do not, because the list of cosponsors includes some who are no longer in Congress, and omits Angus King (ME), John Walsh (MT), and Bill Nelson (FL).

Senator Max Baucus is included, even though he is now Ambassador to China. Senator Frank Lautenberg is on the list, even though he is deceased. Senator William Cowan, who served for a short time as senator from Massachusetts, supports the measure. Residents of Massachusetts and New Jersey have the most bang for the buck because they each have three cosponsors, even though each state is only allowed two senators at one time.

The phony arithmetic in counting cosponsors, suitable for April Fools' Day, parallels the phony assumption of the bill, that women are systematically underpaid. The bill's introduction states, "Despite the enactment of the Equal Pay Act in 1963, many women continue to earn significantly lower pay than men for equal work."

This is a myth. Although average wages for women are lower than average wages for men, this is for many reasons. Women choose different occupations, sometimes less risky but more pleasant. Loggers' work may be of equal value to that of social workers, but companies have to pay people more to do logging because the work is dangerous and dirty.

About a quarter of employed women work part-time, and others take time off when they have children. When choice of job and time in the workforce are taken into account, studies show that women earn practically the same as men.

Women are better-educated than men. According to the Education Department, in 2010 women earned 62 percent of associate's degrees, 57 percent of bachelor's degrees, 63 percent of master's degrees, and 53 percent of doctoral degrees.

Under current law, employers cannot pay equally-situated men and women different salaries. First year computer programmers, men and women, are paid the same. So are first year medical residents. Even male and female senators on the Senate HELP committee are paid the same.

President Obama signed the Lilly Ledbetter Fair Pay Restoration Act in January 2009, and described it as "a simple fix to ensure fundamental fairness to American workers." The law amended Title VII of the Civil Rights Act to allow workers to argue that their current pay flows from discriminatory decisions made years back, even if the firm no longer exists, or a former boss has quit or is no longer alive.

The Paycheck Fairness Act, which did not pass even in 2009 and 2010 when Democrats controlled the House, Senate, and the White House, seeks equal pay for different jobs, which is manifestly unfair. Legislators did not pass it because by adding red tape and interfering in employers' hiring processes, the bill would slow hiring for both men and women.

What would the Act do?

The Paycheck Fairness Act would require the Equal Employment Opportunity Commission to collect data from employers on workers' pay, by race, sex, and national origin, in order to equalize wages of men and women in different job classifications.

It would only allow employers to justify differences in pay between men and women on the grounds of education, training and experience only if these factors were defensible on the grounds of "business necessity." To take one example, a supermarket manager could not be paid more for her college degree if the government ruled that a college degree was not instrumental in managing the supermarket.

The bill is a gift to trial lawyers, because it changes the law to make workers opt out rather than opt in to class action suits. Currently, if workers want to join class-action suits, they have to agree to take part. Under the bill, women would be included unless they opted out. This would enable the number of class-action suits to mushroom, a cost to employers and their employees but a boon to lawyers.

Penalties that the courts could levy on employers would be heavier. Currently, employers found guilty of discrimination owe workers back pay. Under the pending bill, they would have to pay punitive damages, of which a quarter or a third typically goes to plaintiffs' lawyers.

The bill would require the Equal Employment Opportunity Commission to analyze pay data and promulgate regulations to collect more, including information about the sex, race and national origin of employees, further burdening employers.

These provisions would encourage multinationals to expand overseas rather than in America. They would weigh down employers with bureaucracy and discourage hiring. All this at a time when jobs, or lack of them, top Americans' concerns.

Women are already protected against discrimination by the Equal Pay Act, but without the punitive damages so attractive to trial lawyers. They can sue within two or three years of receiving allegedly discriminatory pay, if they can show they are paid less for the same work, because the act does not require "discriminatory intent" for redress, just discrimination.

University of Maryland law professor Deborah Thompson Eisenberg, a witness at the April Fool's Day hearing, has written in a 2010 Southern Methodist University Law Review article that "the gender wage gap increases for women as they achieve higher levels of professional status."

One reason for this is that women tend to trade off career for family time, even before they have had children, as Facebook COO Sheryl Sandberg has written in her book Lean In. For instance, the Yale Law Women's Top Ten Family Friendly Firms Initiative ranks firms on the basis of "important family friendliness indicators such as the billable hour requirement, part-time and flex-time options, parental leave policies, and childcare availability..."

Family friendly is warm and fuzzy, but it pays less than 60 to 80 hour weeks. The focus on family is one reason that some women choose less-demanding and lower-paying jobs, resulting in the widening gender gap observed by Professor Eisenberg. But there is nothing wrong with a choice of more time at home and less at the office.

If enacted, the Paycheck Fairness Act would lead to fewer paychecks and less fairness. Americans should not be fooled on April Fools' Day.


Diana Furchtgott-Roth is a contributing editor at RealClearMarkets.  A former chief economist at the U.S. Department of Labor, she directs at the Manhattan Institute where she is a senior fellow. Follow her on Twitter: @FurchtgottRoth.  

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